BILL NUMBER: AB 33 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 24, 2009
AMENDED IN ASSEMBLY FEBRUARY 10, 2009
INTRODUCED BY Assembly Member Nava
DECEMBER 1, 2008
An act relating to financial services. An
act to amend Sections 30, 31, 7500.3, 7502.1, 7502.2, 7522, 7582.2,
7742, 10003, 10004, 10005, 10071, 10082, 10131.3, 10146,
10147, 10149, 10150.6, 10151.5, 10153, 10159.2, 10175.2, 10176.1,
10177, 10225, 10231.2, 10232.1, 10232.2, 10232.4, 10232.25, 10236.2,
10239, 10249.3, 10249.8, 10249.9, 10451.5, 10470.1, 10471, 10471.5,
10472, 10501, 11000.1, 11000.2, 11001, 11003.4, 11010, 11011, 11012,
11018, 11018.1, 11018.2, 11018.7, 11212, 11225, 11232, 11243, 11302,
11314, 11315, 11315.5, 11316, 11317, 11318, 11325, 11326, 11327,
11328, 11340, 11341, 11344, 11350, 11352, 11360, 11361, 11400, 11401,
11406, 11407, 11408, 11409, 11412, 11422, 11502.5, 17511.1, 17537.2,
and 20009 of, and to repeal Sections 10050, 10051, 10052, 10053,
10073, 10075, 10076, 10077, 10078, 10079, 10080, 11301,
11310, 11313 of, the Business and Professions Code, to amend Sections
163, 500, 1001, 1101.1, 1300, 2207, 7813.5, 8011.5, 12504, 12532,
13205, 13406, 13408.5, 14025, 15679.2, 15911.21, 17656, 23000, 25004,
25005, 25014.6, 25100, 25102, 25243.5, 25247, 25254, 25600, 25602,
25604, 25606, 25607, 25612.5, 25614, 25702, 28033, 28505, 28715,
29200, 29503, 31004, 31210, 31408, 31503, 31513 of, and to repeal
Sections 25601, 25603, and 25620 of, the Corporations Code, to amend
Sections 112, 200, 201, 210, 210.5, 215, 262, 1856, 4057, 4805.055,
4970, 4990, 5104, 12003, 12100, 12104, 12307.4, 14003, 14200.1,
14200.2, 14381, 17002, 17006, 17210.2, 17214, 17303, 17311, 17312,
17320, 17331, 17423.1, 18002, 18002.5, 18339, 18427.9, 18596, 22005,
22159.5, 22160, 22304, 23001, 23070, 23071, 23072, 23073, 23074,
23102, 28000, 30002, 30005, 30217, 31055, 33045.5, 33785, 50003,
50303, 50307.1, 50602, 50702 of, and to add Sections 203 and 210.9
to, the Financial Code, and to amend Section 13975 of the
Government Code, relating to financial services.
LEGISLATIVE COUNSEL'S DIGEST
AB 33, as amended, Nava. Financial services.
Department of Financial Services.
Existing law establishes the Department of Financial Institutions,
the Department of Corporations, the Department of Real Estate, and
the Office of Real Estate Appraisers in the Business, Transportation
and Housing Agency.
Existing law provides for the licensing and regulation of, among
others, banks, credit unions, and other financial institutions by the
Commissioner of Financial Institutions. Existing law provides for
the licensing and regulation of, among others, residential mortgage
lenders and finance lenders by the Commissioner of Corporations.
Existing law provides for the licensing and regulation of, among
others, real estate brokers by the Real Estate Commissioner. Existing
law provides for the licensure and regulation of real estate
appraisers by the Director of the Office of Real Estate Appraisers.
This bill would declare the intent of the Legislature to
do the following: (1) abolish the Department of
Corporations (DOC), the Department of Financial Institutions (DFI),
the Department of Real Estate (DRE), and the Office of Real Estate
Appraisers (OREA), (2) create a new Department of Financial Services
(DFS), (3) designate the chief officer of DFS as the Commissioner of
Financial Services, (4) arrange for the consolidation and
transfer of various operations and procedures of
transfer the powers, duties, purposes, jurisdiction,
responsibilities, and functions of the Commissioner of Corporations,
the Commissioner of Financial Institutions, the Real Estate
Commissioner, and the Director of the Office of Real Estate
Appraisers and those respective departments and that
office to the Commissioner of Financial Services and DFS,
and (5) require DFS to regulate those persons, entities, and
transactions subject to regulation by, or subject to the jurisdiction
of, DOC, DFI, DRE, and OREA. The bill would make
legislative findings and declarations in that
this regard.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) The regulation and oversight of financial services in
California are divided among three four
regulators, the Department of Financial Institutions, the Department
of Real Estate, the Office of Real Estate Appraisers, and
the Department of Corporations.
(b) California is one of only a few states that separates the
regulation of financial services among different licensing agencies.
(c) This division of oversight is most apparent in the regulation
of home mortgage lending that is split among several licensing
schemes, including the California Finance Lenders Law, the California
Residential Mortgage Lending Act, the Real Estate Law, and laws
governing the operation of state and federally chartered banks or
credit unions.
(d) This partition of regulation dilutes consumer protection and
creates confusion and unnecessary administrative difficulties for
financial services entities.
(e) The current regulatory system creates licensing arbitrage,
with entities seeking out licenses from various regulators in order
to obtain an advantage.
SEC. 2. Section 30 of the Business and
Professions Code is amended to read:
30. (a) Notwithstanding any other provision of law, any board, as
defined in Section 22, and the State Bar and the Department of
Real Estate Financial Services shall at
the time of issuance of the license require that the licensee
provide its federal employer identification number, if the licensee
is a partnership, or his or her social security number for all
others.
(b) Any licensee failing to provide the federal identification
number or social security number shall be reported by the licensing
board to the Franchise Tax Board and, if failing to provide after
notification pursuant to paragraph (1) of subdivision (b) of Section
19528 of the Revenue and Taxation Code, shall be subject to the
penalty provided in paragraph (2) of subdivision (b) of Section 19528
of the Revenue and Taxation Code.
(c) In addition to the penalty specified in subdivision (b), a
licensing board may not process any application for an original
license unless the applicant or licensee provides its federal
employer identification number or social security number where
requested on the application.
(d) A licensing board shall, upon request of the Franchise Tax
Board, furnish to the Franchise Tax Board the following information
with respect to every licensee:
(1) Name.
(2) Address or addresses of record.
(3) Federal employer identification number if the entity is a
partnership or social security number for all others.
(4) Type of license.
(5) Effective date of license or a renewal.
(6) Expiration date of license.
(7) Whether license is active or inactive, if known.
(8) Whether license is new or a renewal.
(e) For the purposes of this section:
(1) "Licensee" means any entity, other than a corporation,
authorized by a license, certificate, registration, or other means to
engage in a business or profession regulated by this code or
referred to in Section 1000 or 3600.
(2) "License" includes a certificate, registration, or any other
authorization needed to engage in a business or profession regulated
by this code or referred to in Section 1000 or 3600.
(3) "Licensing board" means any board, as defined in Section 22,
the State Bar, and the Department of Real Estate
Financial Services .
(f) The reports required under this section shall be filed on
magnetic media or in other machine-readable form, according to
standards furnished by the Franchise Tax Board.
(g) Licensing boards shall provide to the Franchise Tax Board the
information required by this section at a time that the Franchise Tax
Board may require.
(h) Notwithstanding Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code, the social security
number and federal employer identification number furnished pursuant
to this section shall not be deemed to be a public record and shall
not be open to the public for inspection.
(i) Any deputy, agent, clerk, officer, or employee of any
licensing board described in subdivision (a), or any former officer
or employee or other individual who in the course of his or her
employment or duty has or has had access to the information required
to be furnished under this section, may not disclose or make known in
any manner that information, except as provided in this section to
the Franchise Tax Board or as provided in subdivision (k).
(j) It is the intent of the Legislature in enacting this section
to utilize the social security account number or federal employer
identification number for the purpose of establishing the
identification of persons affected by state tax laws and for purposes
of compliance with Section 17520 of the Family Code and, to that
end, the information furnished pursuant to this section shall be used
exclusively for those purposes.
(k) If the board utilizes a national examination to issue a
license, and if a reciprocity agreement or comity exists between the
State of California and the state requesting release of the social
security number, any deputy, agent, clerk, officer, or employee of
any licensing board described in subdivision (a) may release a social
security number to an examination or licensing entity, only for the
purpose of verification of licensure or examination status.
() For the purposes of enforcement of Section 17520 of the Family
Code, and notwithstanding any other provision of law, any board, as
defined in Section 22, and the State Bar and the Department of
Real Estate Financial Services shall at
the time of issuance of the license require that each licensee
provide the social security number of each individual listed on the
license and any person who qualifies for the license. For
the purposes of this subdivision, "licensee" means any entity that is
issued a license by any board, as defined in Section 22, the State
Bar, the Department of Real Estate Financial
Services , and the Department of Motor Vehicles.
SEC. 3. Section 31 of the Business and
Professions Code is amended to read:
31. (a) As used in this section, "board" means any entity listed
in Section 101, the entities referred to in Sections 1000 and 3600,
the State Bar, the Department of Real Estate
Financial Services , and any other state agency that issues a
license, certificate, or registration authorizing a person to engage
in a business or profession.
(b) Each applicant for the issuance or renewal of a license,
certificate, registration, or other means to engage in a business or
profession regulated by a board who is not in compliance with a
judgment or order for support shall be subject to Section 11350.6 of
the Welfare and Institutions Code.
(c) "Compliance with a judgment or order for support,"
support" has the meaning given in paragraph (4)
of subdivision (a) of Section 11350.6 of the Welfare and Institutions
Code.
SEC. 4. Section 7500.3 of the Business
and Professions Code is amended to read:
7500.3. A repossession agency shall not include any of the
following:
(a) Any bank subject to the jurisdiction of the Commissioner of
Financial Institutions Services of the
State of California under Division 1 (commencing with Section 99) of
the Financial Code or the Comptroller of the Currency of the United
States.
(b) Any person organized, chartered, or holding a license or
authorization certificate to make loans pursuant to the laws of this
state or the United States who is subject to supervision by any
official or agency of this state or the United States.
(c) An attorney at law in performing his or her duties as an
attorney at law.
(d) The legal owner of collateral that is subject to a security
agreement or a bona fide employee employed exclusively and regularly
by the legal owner of collateral that is subject to a security
agreement. With regard to collateral subject to registration under
the Vehicle Code, the legal owner shall be the legal owner listed on
the records of the Department of Motor Vehicles or the seller or
lessor named on a valid conditional sales contract or rental or lease
agreement if the seller or lessor is a licensed vehicle dealer as
defined in Section 285 of the Vehicle Code.
(e) An officer or employee of the United States of America, or of
this state or a political subdivision thereof, while the officer or
employee is engaged in the performance of his or her official duties.
(f) A qualified certificate holder or a registrant when performing
services for, or on behalf of, a licensee.
SEC. 5. Section 7502.1 of the Business
and Professions Code is amended to read:
7502.1. (a) Any person who violates any provision of this
chapter, or who conspires with another person to violate any
provision of this chapter, or who knowingly engages a nonexempt
unlicensed person to repossess collateral on his or her behalf is
guilty of a misdemeanor, and is punishable by a fine of five thousand
dollars ($5,000), or by imprisonment in the county jail for not more
than one year, or by both the fine and imprisonment.
(b) Within existing resources, the Commissioner of Financial
Institutions, the Commissioner of Corporations
Services , and the Director of Motor Vehicles may each
designate employees to investigate and report on violations of this
chapter by any of the licensees of their respective departments.
Those employees are authorized to actively cooperate with the bureau
in the investigation of those activities.
(c) A proceeding to impose the penalties specified in subdivision
(a) may be brought in any court of competent jurisdiction in the name
of the people of the State of California by the Attorney General or
by any district attorney or city attorney, or with the consent of the
district attorney, by the city prosecutor in any city or city and
county having a full-time city prosecutor, for the jurisdiction in
which the violation occurred. If the action is brought by a district
attorney, the penalty collected shall be paid to the treasurer of the
county in which the judgment is entered. If the action is brought by
a city attorney or city prosecutor, one-half of the penalty
collected shall be paid to the treasurer of the city in which the
judgment was entered and one-half to the treasurer of the county in
which the judgment was entered. If the action is brought by the
Attorney General, all of the penalty collected shall be deposited in
the Private Security Services Fund.
SEC. 6. Section 7502.2 of the Business
and Professions Code is amended to read:
7502.2. (a) Any financial institution that knowingly engages a
nonexempt unlicensed person to repossess collateral on its behalf is
guilty of a misdemeanor, and is punishable by a fine of five thousand
dollars ($5,000).
(b) Within existing resources, the Commissioner of Financial
Institutions and the Commissioner of Corporations
Services may each designate employees
to investigate and report on violations of this section by any of the
licensees of their respective departments
the Department of Financial Services . Those employees are
authorized to actively cooperate with the bureau in the investigation
of those activities.
(c) A proceeding to impose the fine specified in subdivision (a)
may be brought in any court of competent jurisdiction in the name of
the people of the State of California by the Attorney General or by
any district attorney or city attorney, or with the consent of the
district attorney, by the city prosecutor in any city or city and
county having a full-time city prosecutor, for the jurisdiction in
which the violation occurred. If the action is brought by a district
attorney, the penalty collected shall be paid to the treasurer of the
county in which the judgment is entered. If the action is brought by
a city attorney or city prosecutor, one-half of the penalty
collected shall be paid to the treasurer of the city in which the
judgment was entered and one-half to the treasurer of the county in
which the judgment was entered. If the action is brought by the
Attorney General, all of the penalty collected shall be deposited in
the Private Security Services Fund.
SEC. 7. Section 7522 of the Business
and Professions Code is amended to read:
7522. This chapter does not apply to:
(a) A person employed exclusively and regularly by any employer
who does not provide contract security services for other entities or
persons, in connection with the affairs of such employer only and
where there exists an employer-employee relationship if that person
at no time carries or uses any deadly weapon in the performance of
his or her duties. For purposes of this subdivision, "deadly weapon"
is defined to include any instrument or weapon of the kind commonly
known as a blackjack, slungshot, billy, sandclub, sandbag, metal
knuckles, any dirk, dagger, pistol, revolver, or any other firearm,
any knife having a blade longer than five inches, any razor with an
unguarded blade and any metal pipe or bar used or intended to be used
as a club.
(b) An officer or employee of the United States of America, or of
this state or a political subdivision thereof, while the officer or
employee is engaged in the performance of his or her official duties,
including uniformed peace officers employed part time by a public
agency pursuant to a written agreement between a chief of police or
sheriff and the public agency, provided the part-time employment does
not exceed 50 hours in any calendar month.
(c) A person engaged exclusively in the business of obtaining and
furnishing information as to the financial rating of persons.
(d) A charitable philanthropic society or association duly
incorporated under the laws of this state which is organized and
maintained for the public good and not for private profit.
(e) An attorney at law in performing his or her duties as an
attorney at law.
(f) Admitted insurers and agents and insurance brokers licensed by
the state, performing duties in connection with insurance transacted
by them.
(g) Any bank subject to the jurisdiction of the Commissioner of
Financial Institutions Services of the
State of California under Division 1 (commencing with Section 99) of
the Financial Code or the Comptroller of the Currency of
the United States.
(h) A person engaged solely in the business of securing
information about persons or property from public records.
(i) A peace officer of this state or a political subdivision
thereof while the peace officer is employed by a private employer to
engage in off-duty employment in accordance with Section 1126 of the
Government Code. However, nothing herein shall exempt a peace officer
who either contracts for his or her services or the services of
others as a private investigator or contracts for his or her services
as or is employed as an armed private investigator. For purposes of
this subdivision, "armed private investigator" means an individual
who carries or uses a firearm in the course and scope of that
contract or employment.
(j) A licensed insurance adjuster in performing his or her duties
within the scope of his or her license as an insurance adjuster.
(k) Any savings association subject to the jurisdiction of the
Commissioner of Financial Institutions
Services or the federal Office of Thrift
Supervision.
() Any secured creditor engaged in the repossession of the
creditor's collateral and any lessor engaged in the repossession of
leased property in which it claims an interest.
(m) The act of serving process by an individual who is registered
as a process server pursuant to Section 22350.
(n) (1) A person or business engaged in conducting objective
observations of consumer purchases of products or services in the
public environments of a business establishment by the use of a
preestablished questionnaire, provided that person or business entity
does not engage in any other activity that requires licensure
pursuant to this chapter. The questionnaire may include objective
comments.
(2) If a preestablished questionnaire is used as a basis, but not
the sole basis, for disciplining or discharging an employee, or for
conducting an interview with the employee that might result in the
employee being terminated, the employer shall provide the employee
with a copy of that questionnaire using the same procedures that an
employer is required to follow under Section 2930 of the Labor Code
for providing an employee with a copy of a shopping investigator's
report. This subdivision does not exempt from this chapter a person
or business described in paragraph (1) if a preestablished
questionnaire of that person or business is used as the sole basis
for evaluating an employee's work performance.
(o) Any joint labor-management committee established pursuant to
the federal Labor Management Cooperation Act of 1978 (Section 175a of
Title 29 of the United States Code), or its employees, where either
the committee or employee is performing a function authorized by the
Labor Management Cooperation Act of 1978, which includes, but is not
limited, to monitoring public works projects to ensure that employers
are complying with federal and state public works laws.
SEC. 8. Section 7582.2 of the Business
and Professions Code is amended to read:
7582.2. This chapter does not apply to the following:
(a) A person who does not meet the requirements to be a
proprietary private security officer, as defined in Section 7574.1,
and is employed exclusively and regularly by any employer who does
not provide contract security services for other entities or persons,
in connection with the affairs of the employer only and where there
exists an employer-employee relationship if that person at no time
carries or uses any deadly weapon in the performance of his or her
duties. For purposes of this subdivision, "deadly weapon" is defined
to include any instrument or weapon of the kind commonly known as a
blackjack, slungshot, billy, sandclub, sandbag, metal knuckles, any
dirk, dagger, pistol, revolver, or any other firearm, any knife
having a blade longer than five inches, any razor with an unguarded
blade and any metal pipe or bar used or intended to be used as a
club.
(b) An officer or employee of the United States of America, or of
this state or a political subdivision thereof, while the officer or
employee is engaged in the performance of his or her official duties,
including uniformed peace officers employed part time by a public
agency pursuant to a written agreement between a chief of police or
sheriff and the public agency, provided the part-time employment does
not exceed 50 hours in any calendar month.
(c) A person engaged exclusively in the business of obtaining and
furnishing information as to the financial rating of persons.
(d) A charitable philanthropic society or association duly
incorporated under the laws of this state that is organized and
maintained for the public good and not for private profit.
(e) Patrol special police officers appointed by the police
commission of any city, county, or city and county under the express
terms of its charter who also under the express terms of the charter
(1) are subject to suspension or dismissal after a hearing on charges
duly filed with the commission after a fair and impartial trial, (2)
must be not less than 18 years of age nor more than 40 years of age,
(3) must possess physical qualifications prescribed by the
commission, and (4) are designated by the police commission as the
owners of a certain beat or territory as may be fixed from time to
time by the police commission.
(f) An attorney at law in performing his or her duties as an
attorney at law.
(g) A collection agency or an employee thereof while acting within
the scope of his or her employment, while making an investigation
incidental to the business of the agency, including an investigation
of the location of a debtor or his or her property where the contract
with an assignor creditor is for the collection of claims owed or
due or asserted to be owed or due or the equivalent thereof.
(h) Admitted insurers and agents and insurance brokers licensed by
the state, performing duties in connection with insurance transacted
by them.
(i) Any bank subject to the jurisdiction of the Commissioner of
Financial Institutions Services of the
State of California under Division 1 (commencing with Section 99) of
the Financial Code or the Comptroller of the Currency of
the United States.
(j) A person engaged solely in the business of securing
information about persons or property from public records.
(k) A peace officer of this state or a political subdivision
thereof while the peace officer is employed by a private employer to
engage in off-duty employment in accordance with Section 1126 of the
Government Code. However, nothing herein shall exempt such peace
officer who either contracts for his or her services or the services
of others as a private patrol operator or contracts for his or her
services as or is employed as an armed private security officer. For
purposes of this subdivision, "armed security officer" means an
individual who carries or uses a firearm in the course and scope of
that contract or employment.
() A retired peace officer of the state or political subdivision
thereof when the retired peace officer is employed by a private
employer in employment approved by the chief law enforcement officer
of the jurisdiction where the employment takes place, provided that
the retired officer is in a uniform of a public law enforcement
agency, has registered with the bureau on a form approved by the
director, and has met any training requirements or their equivalent
as established for security personnel under Section 7583.5. This
officer may not carry a loaded or concealed firearm unless he or she
is exempted under the provisions of subdivision (a) of Section 12027
of the Penal Code or paragraph (1) of subdivision (b) of Section
12031 of the Penal Code or has met the requirements set forth in
Section 12033 of the Penal Code. However, nothing herein shall exempt
the retired peace officer who contracts for his or her services or
the services of others as a private patrol operator.
(m) A licensed insurance adjuster in performing his or her duties
within the scope of his or her license as an insurance adjuster.
(n) Any savings association subject to the jurisdiction of the
Commissioner of Financial Institutions
Services or the federal Office of Thrift
Supervision.
(o) Any secured creditor engaged in the repossession of the
creditor's collateral and any lessor engaged in the repossession of
leased property in which it claims an interest.
(p) A peace officer in his or her official police uniform acting
in accordance with subdivisions (c) and (d) of Section 70 of the
Penal Code.
(q) An unarmed, uniformed security person employed exclusively and
regularly by a motion picture studio facility employer who does not
provide contract security services for other entities or persons in
connection with the affairs of that employer only and where there
exists an employer-employee relationship if that person at no time
carries or uses any deadly weapon, as defined in subdivision (a), in
the performance of his or her duties, which may include, but are not
limited to, the following business purposes:
(1) The screening and monitoring access of employees of the same
employer.
(2) The screening and monitoring access of prearranged and
preauthorized invited guests.
(3) The screening and monitoring of vendors and suppliers.
(4) Patrolling the private property facilities for the safety and
welfare of all who have been legitimately authorized to have access
to the facility.
(r) The changes made to this section by the act adding this
subdivision during the 2005-06 2005-06
Regular Session of the Legislature shall apply as follows:
(1) On and after July 1, 2006, to a person hired as a security
officer on and after January 1, 2006.
(2) On and after January 1, 2007, to a person hired as a security
officer before January 1, 2006.
SEC. 9. Section 7742 of the Business
and Professions Code is amended to read:
7742. Nothing in this article shall apply to any arrangement,
contract , or plan for the issuance of securities now or
hereafter authorized under a permit of the Commissioner of
Corporations Financial Services of this state.
SEC. 10. Section 10003 of the Business
and Professions Code is amended to read:
10003. "Commissioner" refers to the Real Estate
Commissioner of Financial Services. All references to
"commissioner" shall be deemed to refer to the Commissioner of
Financial Services .
SEC. 11. Section 10004 of the Business
and Professions Code is amended to read:
10004. "Department" means the Department of Real Estate
Financial Services in the Business and
Transportation Agency. All references to the "department" shall
be deemed to refer to the Department of Financial Services.
SEC. 12. Section 10005 of the Business
and Professions Code is amended to read:
10005. Whenever the terms "division," "State Real Estate
Division," or "Real Estate Division" are used in this division, they
mean the Department of Real Estate Financial
Services .
Whenever the terms " State Real Estate Division" or " Real Estate
Division" are used in any other law, they mean the Department of
Real Estate Financial Services .
SEC. 13. Section 10050 of the Business
and Professions Code is repealed.
10050. There is in the Business and Transportation Agency a
Department of Real Estate, the chief officer of which department is
named the Real Estate Commissioner.
It shall be the principal responsibility of the commissioner to
enforce all laws in this part (commencing with Section 10000) and
Chapter 1 (commencing with Section 11000) of Part 2 of this division
in a manner which achieves the maximum protection for the purchasers
of real property and those persons dealing with real estate
licensees.
SEC. 14. Section 10051 of the Business
and Professions Code is repealed.
10051. The
commissioner shall be appointed by the Governor.
SEC. 15. Section 10052 of the Business
and Professions Code is repealed.
10052. The commissioner shall have been for five years a real
estate broker actively engaged in business as such in California, or
shall possess related experience associated with real estate activity
in California for five years within the last 10 years.
SEC. 16. Section 10053 of the Business
and Professions Code is repealed.
10053. The commissioner shall receive an annual salary as
provided in Chapter 6 (commencing with Section 11550) of Part 1 of
Division 3 of Title 2 of the Government Code, to be paid monthly out
of the State Treasury upon a warrant of the Controller, and shall be
allowed his actual and necessary expenses in the discharge of his
duties.
SEC. 17. Section 10071 of the Business
and Professions Code is amended to read:
10071. The commissioner shall enforce the provisions of this part
and of Chapter 1 of Part 2. He or she has full power to
regulate and control the issuance and revocation, both temporary and
permanent, of all licenses to be issued under the provisions of this
part, and to perform all other acts and duties provided in this part
and Chapter 1 of Part 2 and necessary for their enforcement.
SEC. 18. Section 10073 of the Business
and Professions Code is repealed.
10073. The commissioner shall employ such deputies, clerks and
employees as he may need to discharge in proper manner the duties
imposed upon him by law.
SEC. 19. Section 10075 of the Business
and Professions Code is repealed.
10075. Deputies, clerks and employees shall perform such duties
as the commissioner shall assign to them.
Subject to the powers of the State Personnel Board and the
Director of Finance, the commissioner shall fix the compensation of
such deputies, clerks and employees, which compensation shall be paid
monthly on a certificate of the commissioner, and on the warrant of
the Controller out of the State Treasury.
SEC. 20. Section 10076 of the Business
and Professions Code is repealed.
10076. Each deputy shall, after his appointment, take and
subscribe to the constitutional oath of office and file the same in
the office of the Secretary of State.
SEC. 21. Section 10077 of the Business
and Professions Code is repealed.
10077. The commissioner shall have his principal office in the
City of Sacramento, and may establish branch offices in the City and
County of San Francisco, the City of Los Angeles and in such other
cities as the commissioner may deem necessary, subject to the
approval of the Department of Finance.
SEC. 22. Section 10078 of the Business
and Professions Code is repealed.
10078. The commissioner shall adopt a seal with the words "Real
Estate Commissioner State of California" and such other device as the
commissioner may desire engraved thereon, by which he shall
authenticate the proceedings of his office.
Copies of all records and papers in the office of the commissioner
certified under the hand and seal of the commissioner shall be
received in evidence in all cases equally and with like effect as the
originals.
SEC. 23. Section 10079 of the Business
and Professions Code is repealed.
10079. The Attorney General shall render to the commissioner
opinions upon all questions of law relating to the construction or
interpretation of this part or Chapter 1 of Part 2 or arising in the
administration thereof that may be submitted to him by the
commissioner. The Attorney General shall act as the attorney for the
commissioner in all actions and proceedings brought by or against him
under or pursuant to any of the provisions of this part or of
Chapter 1 of Part 2.
SEC. 24. Section 10080 of the Business
and Professions Code is repealed.
10080. The commissioner may adopt, amend, or repeal rules and
regulations that are reasonably necessary for the enforcement of the
provisions of this part and of Chapter 1 (commencing with Section
11000) of Part 2 of this division. The rules and regulations shall be
adopted, amended, or repealed in accordance with the provisions of
the Administrative Procedure Act.
SEC. 25. Section 10082 of the Business
and Professions Code is amended to read:
10082. The commissioner may publish or cause to be published at
appropriate intervals a directory or list of licensed brokers and
salesmen sales persons and
may publish therewith such matter as he or she may deem
pertinent to this part and Chapter 1 (commencin
(commencing with Section 11000) of Part 2. He
The commissioner shall furnish one copy of
such the directory to each licensed
broker upon his or her request and the payment of an
appropriate charge based upon cost of publication. Such
The directory may contain copies of the Real
Estate Law, Chapter 1 (commencing with Section 11000) of Part 2 of
Division 4 of the Business and Professions Code, and the Rules and
Regulations of the Real Estate Commissioner
of Financial Services .
SEC. 26. Section 10131.3 of the
Business and Professions Code is amended to read:
10131.3. A real estate broker within the meaning of this part is
also a person who, for another or others, for compensation or in
expectation of compensation, issues or sells, solicits prospective
sellers or purchasers of, solicits or obtains listings of, or
negotiates the purchase, sale, or exchange of securities as specified
in Section 25206 of the Corporations Code.
The provisions of this section do not apply to a broker-dealer or
agent of a broker-dealer licensed by the Commissioner of
Corporations Financial Services under the
provisions of the Corporate Securities Law of 1968.
SEC. 27. Section 10146 of the Business
and Professions Code is amended to read:
10146. Any real estate broker who contracts for or collects an
advance fee from any other person, hereinafter referred to as the
"principal," shall deposit any such amount or amounts, when collected
in a trust account with a bank or other recognized depository. Such
funds are trust funds and not the funds of the agent. Amounts may be
withdrawn therefrom for the benefit of the agent only when actually
expended for the benefit of the principal or five days after the
verified accounts mentioned hereinafter have been mailed to the
principal. Upon request of the commissioner, a broker shall furnish
to the commissioner an authorization for examination of financial
records of the trust account in accordance with the procedures set
forth in Section 7473 of the Government Code.
The commissioner may issue such rules and regulations as he
or she deems necessary to regulate the method of accounting,
and to accomplish the purpose of the provisions of this code relating
to advance fees including, but not limited to, establishing forms
for and determining information to be included in such accountings.
Each principal shall be furnished a verified copy of such accountings
at the end of each calendar quarter and when the contract has been
completely performed by the licensee. The Real Estate
Commissioner of Financial Services shall be
furnished a verified copy of any account or all accounts on his
or her demand therefor.
Where advance fees actually paid by or on behalf of any principal
are not handled in accordance with the preceding paragraph, it shall
be presumed that the agent has violated Sections 506 and 506a of the
Penal Code. The principal may recover treble damages for amounts so
misapplied and shall be entitled to reasonable attorneys'
attorney's fees in any action brought to recover
the same.
SEC. 28. Section 10147 of the Business
and Professions Code is amended to read:
10147. (a) On or before January 1, 1993, the Seismic Safety
Commission shall develop, adopt, and publish a Commercial Property
Owner's Guide to Earthquake Safety for distribution to licensees for
purposes of Section 2079.9 of the Civil Code and, upon request, to
any member of the general public.
(b) In developing the guide, the Seismic Safety Commission shall
consult with the Office of Emergency Services
California Emergency Management Agency , the Division of Mines
and Geology of the Department of Conservation, the Department of
Real Estate Financial Services , and
other interested agencies and persons.
(c) The commission shall, to the extent possible, rely on
currently available data to develop the guide. To the extent
necessary, the commission may contract for the development and
production of the guide. The commission shall update the contents of
the guide whenever it determines that information within the guide is
sufficiently inaccurate or incomplete so as to reduce the
effectiveness of the guide. The commission shall charge a fee to
cover the costs of production, distribution, development, and
updating the guide.
(d) The guide shall include, but need not be limited to, all of
the following:
(1) Maps and information on geologic and seismic hazard conditions
in the state.
(2) Explanations of typical structural and nonstructural
earthquake hazards.
(3) Recommendations for mitigating the hazards of an earthquake,
including references and explanations of what constitutes "adequate
wall anchorage" as defined in Section 8893.1 of the Government Code.
(4) A statement that there are no guarantees of safety or damage
prevention that can be made with respect to a major earthquake and
that only precautions, such as retrofitting, can be taken to reduce
the risk of various types of earthquake damage. For purposes of
preparing the statement, the commission shall confer with insurers
and design professional associations.
(5) Notice of the obligation to post a sign as required by Section
8875.8 of the Government Code.
SEC. 29. Section 10149 of the Business
and Professions Code is amended to read:
10149. (a) On or before July 1, 1992, the Seismic Safety
Commission shall develop, adopt, and publish a Homeowner's Guide to
Earthquake Safety for distribution to licensees for purposes of
Section 2079.8 of the Civil Code and, upon request, to any member of
the general public.
(b) In developing the guide, the Seismic Safety Commission shall
consult with the Office of Emergency Services
California Emergency Management Agency , the Division of Mines
and Geology of the Department of Conservation, the Department of
Real Estate Financial Services , and
other interested agencies and persons.
(c) The commission shall, to the extent possible, rely on
currently available data to develop the guide. To the extent
necessary, the commission may contract for the development and
production of the guide. The commission shall update the contents of
the guide whenever it determines that information within the guide is
sufficiently inaccurate or incomplete so as to reduce the
effectiveness of the guide. The commission shall charge a fee to
cover the costs of production, distribution, development, and
updating the guide.
(d) The guide shall include, but need not be limited to, all of
the following:
(1) Maps and information on geologic and seismic hazard conditions
for all areas of the state.
(2) Explanations of the related structural and nonstructural
hazards.
(3) Recommendations for mitigating the hazards of an earthquake.
(4) A statement that there are no guarantees of safety or damage
prevention that can be made with respect to a major earthquake and
that only precautions, such as retrofitting, can be taken to reduce
the risk of various types of earthquake damage. For purposes of
preparing the statement, the commission shall confer with insurers
and design professional associations.
SEC. 30. Section 10150.6 of the
Business and Professions Code is amended to read:
10150.6. The Real Estate Commissioner of
Financial Services shall not grant an original real estate
broker's license to any person who has not held a real estate
salesman's license for at least two years and qualified for renewal
real estate salesman salesperson
status, within the five-year period immediately prior to the date of
his or her application for the broker's license, and
during such time was not actively engaged in the business of real
estate salesman salesperson , except
that an applicant for a real estate broker's license having at least
the equivalent of two years' general real estate experience or
graduation from a four-year college or university course, which
course included specialization in real estate, files a written
petition with the Department of Real Estate
Financial Services setting forth his or her
qualifications and experience, and the commissioner approves, he
or she may be issued a real estate broker's license
immediately upon passing the examination and satisfying the other
requirements of this article.
SEC. 31. Section 10151.5 of the
Business and Professions Code is amended to read:
10151.5. (a) An applicant who is not a resident of this state
shall be eligible for a real estate license provided (1) the
applicant qualifies for licensure under this chapter, including
Section 10162, and (2) the state or other jurisdiction that is the
place of residence of the applicant permits a resident of California
to qualify for and obtain a real estate license in that jurisdiction.
(b) A foreign corporation shall be exempt from the eligibility
requirement set forth in clause (2) of subdivision (a) if, and for so
long as, at least one of the officers of the corporation who is
designated and licensed as a real estate broker pursuant to Section
10158 or 10211 is a resident of this state.
(c) Every nonresident applicant for a real estate license shall,
along with his or her application, file with the Real Estate
Commissioner of Financial Services an
irrevocable consent that if in any action commenced against him or
her in this state, personal service of process upon him or her cannot
be made in this state after the exercise of due diligence, a valid
service may thereupon be made upon the applicant by delivering the
process to the Department of Real Estate
Financial Services .
SEC. 32. Section 10153 of the Business
and Professions Code is amended to read:
10153. In addition to the proof of honesty and truthfulness
required of any applicant for a real estate license, the commissioner
shall ascertain by written examination that the applicant, and in
case of a corporation applicant for a real estate broker's license
that each officer, or agent thereof through whom it proposes to act
as a real estate licensee, has all of the following:
(a) An appropriate knowledge of the English language, including
reading, writing, and spelling and of arithmetical computations
common to real estate and business opportunity practices.
(b) An understanding of the principles of real estate and business
opportunity conveyancing, the general purposes and general legal
effect of agency contracts, deposit receipts, deeds, mortgages, deeds
of trust, chattel mortgages, bills of sale, land contracts of sale
and leases, and of the principles of business and land economics and
appraisals.
(c) A general and fair understanding of the obligations between
principal and agent, of the principles of real estate and business
opportunity practice and the canons of business ethics pertaining
thereto, of the provisions of this part, of Chapter 1 (commencing
with Section 11000) of Part 2, and of the regulations of the
Real Estate Commissioner of Financial Services
as contained in Title 10 of the California Administrative Code.
SEC. 33. Section 10159.2 of the
Business and Professions Code is amended to read:
10159.2. (a) The officer designated by a corporate broker
licensee pursuant to Section 10211 shall be responsible for the
supervision and control of the activities conducted on behalf of the
corporation by its officers and employees as necessary to secure full
compliance with the provisions of this division, including the
supervision of salespersons licensed to the corporation in the
performance of acts for which a real estate license is required.
(b) A corporate broker licensee that has procured additional
licenses in accordance with Section 10158 through officers other than
the officer designated pursuant to Section 10211 may, by appropriate
resolution of its board of directors, assign supervisory
responsibility over salespersons licensed to the corporation to its
broker-officers.
(c) A certified copy of any resolution of the board of directors
assigning supervisory responsibility over real estate salespersons
licensed to the corporation shall be filed with the Real
Estate Commissioner of Financial Services within
five days after the adoption or modification thereof.
SEC. 34. Section 10175.2 of the
Business and Professions Code is amended to read:
10175.2. (a) If the Real Estate Commissioner
of Financial Services determines that the public interest
and public welfare will be adequately served by permitting a real
estate licensee to pay a monetary penalty to the department in lieu
of an actual license suspension, the commissioner may, on the
petition of the licensee, stay the execution of all or some part of
the suspension on the condition that the licensee pay a monetary
penalty and the further condition that the licensee incur no other
cause for disciplinary action within a period of time specified by
the commissioner.
(b) The commissioner may exercise the discretion granted under
subdivision (a) either with respect to a suspension ordered by a
decision after a contested hearing on an accusation against the
licensee or by stipulation with the licensee after the filing of an
accusation, but prior to the rendering of a decision based upon the
accusation. In either case, the terms and conditions of the
disciplinary action against the licensee shall be made part of a
formal decision of the commissioner.
(c) If a licensee fails to pay the monetary penalty in accordance
with the terms and conditions of the decision of the commissioner,
the commissioner may, without a hearing, order the immediate
execution of all or any part of the stayed suspension in which event
the licensee shall not be entitled to any repayment nor credit,
prorated or otherwise, for money paid to the department under the
terms of the decision.
(d) The amount of the monetary penalty payable under this section
shall not exceed two hundred fifty dollars ($250) for each day of
suspension stayed nor a total of ten thousand dollars ($10,000) per
decision regardless of the number of days of suspension stayed under
the decision.
(e) Any monetary penalty received by the department pursuant to
this section shall be credited to the Recovery Account of the Real
Estate Fund.
SEC. 35. Section 10176.1 of the
Business and Professions Code is amended to read:
10176.1. (a) (1) Whenever the commissioner takes any enforcement
or disciplinary action against a licensee, and the enforcement or
disciplinary action is related to escrow services provided pursuant
to paragraph (4) of subdivision (a) of Section 17006 of the Financial
Code, upon the action becoming final the commissioner shall notify
the Insurance Commissioner and the Commissioner of
Corporations of the action or actions taken. The purpose of
this notification is to alert the departments that enforcement or
disciplinary action has been taken, if the licensee seeks or obtains
employment with entities regulated by the departments.
(2) The commissioner shall provide the Insurance Commissioner
and the Commissioner of Corporations , in addition
to the notification of the action taken, with a copy of the written
accusation, statement of issues, or order issued or filed in the
matter and, at the request of the Insurance Commissioner or
the Commissioner of Corporations , with any underlying
factual material relevant to the enforcement or disciplinary action.
Any confidential information provided by the commissioner to the
Insurance Commissioner or the Commissioner of Corporations
shall not be made public pursuant to this section.
Notwithstanding any other provision of law, the disclosure of any
underlying factual material to the Insurance Commissioner or
the Commissioner of Corporations shall not operate as a
waiver of confidentiality or any privilege that the commissioner may
assert.
(b) The commissioner shall establish and maintain, on the
Internet Web site maintained by the Department of Real
Estate Financial Services , a database of its
licensees, including those who have been subject to any enforcement
or disciplinary action that triggers the notification requirements of
this section. The database shall also contain a direct link to the
databases, described in Section 17423.1 of the Financial Code and
Section 12414.31 of the Insurance Code and required to be maintained
on the Internet Web sites site
of the Department of Corporations and the
Department of Insurance , respectively, of persons
who have been subject to enforcement or disciplinary action for
malfeasance or misconduct related to the escrow industry by the
Insurance Commissioner and the Commissioner of Corporations
.
(c) There shall be no liability on the part of, and no cause of
action of any nature shall arise against, the State of California,
the Department of Real Estate Financial
Services , the Real Estate Commissioner
of Financial Services , any other state agency, or any
officer, agent, employee, consultant, or contractor of the state, for
the release of any false or unauthorized information pursuant to
this section, unless the release of that information was done with
knowledge and malice, or for the failure to release any information
pursuant to this section.
SEC. 36. Section 10177 of the Business
and Professions Code is amended to read:
10177. The commissioner may suspend or revoke the license of a
real estate licensee, or may deny the issuance of a license to an
applicant, who has done any of the following, or may suspend or
revoke the license of a corporation, or deny the issuance of a
license to a corporation, if an officer, director, or person owning
or controlling 10 percent or more of the corporation's stock has done
any of the following:
(a) Procured, or attempted to procure, a real estate license or
license renewal, for himself or herself or a salesperson, by fraud,
misrepresentation, or deceit, or by making a material misstatement of
fact in an application for a real estate license, license renewal,
or reinstatement.
(b) Entered a plea of guilty or nolo contendere to, or been found
guilty of, or been convicted of, a felony, or a crime substantially
related to the qualifications, functions, or duties of a real estate
licensee, and the time for appeal has elapsed or the judgment of
conviction has been affirmed on appeal, irrespective of an order
granting probation following that conviction, suspending the
imposition of sentence, or of a subsequent order under Section 1203.4
of the Penal Code allowing that licensee to withdraw his or her plea
of guilty and to enter a plea of not guilty, or dismissing the
accusation or information.
(c) Knowingly authorized, directed, connived at, or aided in the
publication, advertisement, distribution, or circulation of a
material false statement or representation concerning his or her
designation or certification of special education, credential, trade
organization membership, or business, or concerning a business
opportunity or a land or subdivision, as defined in Chapter 1
(commencing with Section 11000) of Part 2, offered for sale.
(d) Willfully disregarded or violated the Real Estate Law (Part 1
(commencing with Section 10000)) or Chapter 1 (commencing with
Section 11000) of Part 2 or the rules and regulations of the
commissioner for the administration and enforcement of the Real
Estate Law and Chapter 1 (commencing with Section 11000) of Part 2.
(e) Willfully used the term "realtor" or a trade name or insignia
of membership in a real estate organization of which the licensee is
not a member.
(f) Acted or conducted himself or herself in a manner that would
have warranted the denial of his or her application for a real estate
license, or has either had a license denied or had a license issued
by another agency of this state, another state, or the federal
government revoked or suspended for acts that, if done by a real
estate licensee, would be grounds for the suspension or revocation of
a California real estate license, if the action of denial,
revocation, or suspension by the other agency or entity was taken
only after giving the licensee or applicant fair notice of the
charges, an opportunity for a hearing, and other due process
protections comparable to the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340), Chapter 4 (commencing with
Section 11370), and Chapter 5 (commencing with Section 11500) of Part
1 of Division 3 of Title 2 of the Government Code), and only upon an
express finding of a violation of law by the agency or entity.
(g) Demonstrated negligence or incompetence in performing an act
for which he or she is required to hold a license.
(h) As a broker licensee, failed to exercise reasonable
supervision over the activities of his or her salespersons, or, as
the officer designated by a corporate broker licensee, failed to
exercise reasonable supervision and control of the activities of the
corporation for which a real estate license is required.
(i) Has used his or her employment by a governmental agency in a
capacity giving access to records, other than public records, in a
manner that violates the confidential nature of the
records.
(j) Engaged in any other conduct, whether of the same or a
different character than specified in this section, which constitutes
fraud or dishonest dealing.
(k) Violated any of the terms, conditions, restrictions, and
limitations contained in an order granting a restricted license.
(l) (1) Solicited or induced the sale, lease, or listing for sale
or lease of residential property on the ground, wholly or in part, of
loss of value, increase in crime, or decline of the quality of the
schools due to the present or prospective entry into the neighborhood
of a person or persons having a characteristic listed in subdivision
(a) or (d) of Section 12955 of the Government Code, as those
characteristics are defined in Sections 12926, 12926.1, subdivision
(m), and paragraph (1) of subdivision (p) of Section 12955, and
Section 12955.2 of the Government Code.
(2) Notwithstanding paragraph (1), with respect to familial
status, paragraph (1) shall not be construed to apply to housing for
older persons, as defined in Section 12955.9 of the Government Code.
With respect to familial status, nothing in paragraph (1) shall be
construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and
799.5 of the Civil Code, relating to housing for senior citizens.
Subdivision (d) of Section 51 and Section 1360 of the Civil Code and
subdivisions (n), (o), and (p) of Section 12955 of the Government
Code shall apply to paragraph (1).
(m) Violated the Franchise Investment Law (Division 5 (commencing
with Section 31000) of Title 4 of the Corporations Code) or
regulations of the Commissioner of Corporations
Financial Services pertaining thereto.
(n) Violated the Corporate Securities Law of 1968 (Division 1
(commencing with Section 25000) of Title 4 of the Corporations Code)
or the regulations of the Commissioner of Corporations
Financial Services pertaining thereto.
(o) Failed to disclose to the buyer of real property, in a
transaction in which the licensee is an agent for the buyer, the
nature and extent of a licensee's direct or indirect ownership
interest in that real property. The direct or indirect ownership
interest in the property by a person related to the licensee by blood
or marriage, by an entity in which the licensee has an ownership
interest, or by any other person with whom the licensee has a special
relationship shall be disclosed to the buyer.
(p) Violated Article 6 (commencing with Section 10237).
If a real estate broker that is a corporation has not done any of
the foregoing acts, either directly or through its employees, agents,
officers, directors, or persons owning or controlling 10 percent or
more of the corporation's stock, the commissioner may not deny the
issuance of a real estate license to, or suspend or revoke the real
estate license of, the corporation, provided that any offending
officer, director, or stockholder, who has done any of the foregoing
acts individually and not on behalf of the corporation, has been
completely disassociated from any affiliation or ownership in the
corporation.
SEC. 37. Section 10225 of the Business
and Professions Code is amended to re ad:
10225. An application for a permit to sell real property
securities secured by liens on real property situated outside the
State of California shall be accompanied by the filing fee together
with an amount equivalent to twenty-five cents ($0.25) a mile for
each mile going and returning, or where public transportation is
available the actual round trip fare pertaining thereto, estimated by
the commissioner to be traveled from the office of the Department of
Real Estate Financial Services where
the application is filed to the location of the property, and the
amount estimated to be necessary to cover the expense of the
inspection and appraisal of the property, not to exceed seventy-five
dollars ($75) a day for each day actually spent in the inspection and
appraisal of the property or properties.
SEC. 38. Section 10231.2 of the
Business and Professions Code is amended to read:
10231.2. (a) A real estate broker who, through express or implied
representations that the broker or any salesperson acting on the
broker's behalf is engaging in acts for which a real estate license
is required by subdivision (d) or (e) of Section 10131, proposes to
solicit and accept funds, or to cause the solicitation and acceptance
of funds, to be applied to a purchase or loan transaction in which
the broker will directly or indirectly obtain the use or benefit of
the funds other than for commissions, fees, and costs and expenses as
provided by law for the broker's services as an agent, shall, prior
to the making of any representation, solicitation, or presentation of
the statement described in subdivision (b), submit the following to
the Department of Real Estate Financial
Services :
(1) A true copy of the statement described in subdivision (b)
complete except for the signature of the prospective lender or
purchaser.
(2) A statement that the submittal is being made to the department
pursuant to Section 10231.2.
(b) A broker making a solicitation pursuant to subdivision (a)
shall deliver, or cause to be delivered, to the person solicited, the
applicable completed statement described in Section 10232.5 not less
than 24 hours before the earlier of the acceptance of any funds from
that person by or on behalf of the broker or the execution of any
instrument obligating the person to make the loan or purchase. The
statement shall be signed by the prospective lender or purchaser and
by the real estate broker or, on the broker's behalf, by a real
estate salesperson licensed to the broker. When so executed, an exact
copy of the executed statement shall be given to the prospective
lender or purchaser, and the broker shall retain a true copy of the
executed statement for a period of four years.
(c) None of the provisions of subdivision (a) or (b) shall apply
in the case of an offering of a security authorized pursuant to
applicable provisions of the Corporate Securities Law of 1968
(Division 1 (commencing with Section 25000 of Title 4 of the
Corporations Code).
(d) In the case of a solicitation by a corporate real estate
broker, the provisions of subdivisions (a) and (b) shall apply if the
funds solicited are intended for the direct or indirect use or
benefit of an officer or director of the corporation or of a person
with a 10 percent or greater ownership interest in the corporation.
SEC. 39. Section 10232.1 of the
Business and Professions Code is amended to read:
10232.1. (a) A real estate broker, prior to the use of any
proposed advertisement in connection with the conduct of activities
described in subdivisions (d) and (e) of Section 10131 and Section
10131.1, may submit a true copy thereof to the Department of
Real Estate Financial Services for approval. The
submission shall be accompanied by a fee of not more than forty
dollars ($40). The commissioner shall by regulation prescribe the
amount of the fee. If disapproval of the proposed advertisement is
not communicated by the department to the broker within 15 calendar
days after receipt of the copy of the proposed advertisement by the
department, the proposed advertisement shall be deemed approved, but
the department shall not be precluded from disapproving a later
publication or other use of the same or similar advertising.
The commissioner shall adopt regulations pertaining to the
submittal and clearance of that advertising and establishing criteria
for approval to ensure that the public will be protected against
false or misleading representations.
Except as provided in subdivision (b), "advertisement" includes
dissemination in any newspaper, circular, form letter, brochure or
similar publication, display, sign, radio broadcast or telecast,
which concerns (1) the use, terms, rates, conditions, or the amount
of any loan or sale referred to in subdivisions (d) and (e) of
Section 10131 or Section 10131.1 or (2) the security, solvency, or
stability of any person carrying on the activities described in those
sections.
(b) "Advertisement" does not include a letter or brochure that
meets both of the following criteria:
(1) It is restricted in distribution to other real estate brokers
and to persons for whom the broker has previously acted as an agent
in arranging a loan secured by real property or in the purchase,
sale, or exchange of a deed of trust or real property sales contract.
(2) It is restricted in content to the identification and a
description of the terms of loans, mortgages, deeds of trust, real
property sales contracts, or any combination thereof offered for
funding or purchase through the broker as agent.
(c) Subdivision (a) is not applicable to advertising that is used
exclusively in connection with an offering authorized by permit
issued pursuant to the applicable provisions of the Corporate
Securities Law of 1968 (Division 1 (commencing with Section 25000 of
Title 4 of the Corporations Code).
(d) All advertising approvals shall be for a period of five years
after the date of approval. The approval period applies to all
advertising, including that which was previously submitted on a
mandatory basis.
SEC. 40. Section 10232.2 of the
Business and Professions Code is amended to read:
10232.2. A real estate broker who meets the criteria of
subdivision (a) of Section 10232 shall annually file the reports
referred to in subdivisions (a) and (c) with the Department of
Real Estate Financial Services within
90 days after the end of the broker's fiscal year or within any
additional time as the Real Estate Commissioner
of Financial Services may allow for filing for good cause:
(a) The report of a review by a licensed California independent
public accountant of trust fund financial statements, conducted in
accordance with generally accepted accounting practices, which shall
include within its scope the following information for the fiscal
year relative to the business activities of the broker described in
subdivisions (d) and (e) of Section 10131:
(1) The receipt and disposition of all funds of others to be
applied to the making of loans and the purchasing of promissory notes
or real property sales contracts.
(2) The receipt and disposition of all funds of others in
connection with the servicing by the broker of the accounts of owners
of promissory notes and real property sales contracts including
installment payments and loan or contract payoffs by obligors.
(3) A statement as of the end of the fiscal year which shall
include an itemized trust fund accounting of the broker and
confirmation that the trust funds are on deposit in an account or
accounts maintained by the broker in a financial institution.
(b) A broker who meets the criteria of Section 10232, but who, in
carrying on the activities described in subdivisions (d) and (e) of
Section 10131, has not during a fiscal year, accepted for the benefit
of a person to whom the broker is a trustee, any payment or
remittance in a form convertible to cash by the broker, need not
comply with the provisions of subdivision (a). In lieu thereof, the
broker shall submit to the commissioner within 30 days after the end
of the broker's fiscal year or, within any additional time as the
commissioner may allow for a filing for good cause, a notarized
statement under penalty of perjury on a form provided by the
department attesting to the fact that the broker did not receive any
trust funds in cash or convertible to cash during the fiscal year.
(c) A report of all of the following aspects of the business
conducted by the broker while engaging in activities described in
subdivisions (d) and (e) of Section 10131 and in Section 10131.1:
(1) Number and aggregate dollar amount of loan, trust deed sales
and real property sales contract transactions negotiated.
(2) Number and aggregate dollar amount of promissory notes and
contracts serviced by the broker or an affiliate of the broker.
(3) Number and aggregate dollar amount of late payment charges,
prepayment penalties and other fees or charges collected and retained
by the broker under servicing agreements with beneficiaries and
obligees.
(4) Default and foreclosure experience in connection with
promissory notes and contracts subject to servicing agreements
between the broker and beneficiaries or obligees.
(5) Commissions received by the broker for services performed as
agent in negotiating loans and sales of promissory notes and real
property sales contracts.
(6) Aggregate costs and expenses as referred to in Section 10241
paid by borrowers to the broker.
(d) The commissioner shall adopt regulations prescribing the form
and content of the report referred to in subdivision (c) with
appropriate categories to afford a better understanding of the
business conducted by the broker.
(e) If the broker fails to file either of the reports required
under subdivisions (a) and (c) within the time permitted herein, the
commissioner may cause an examination and report to be made and may
charge the broker one and one-half times the cost of making the
examination and report. In determining the hourly cost incurred by
the commissioner for conducting an examination and preparing the
report, the commissioner may use the estimated average hourly cost
for all department audit staff performing audits of real estate
brokers. If a broker fails to pay the above amount within 60 days of
the mailing of a notice of billing, the commissioner may suspend the
broker's license or deny renewal of the broker's license. The
suspension or denial shall remain in effect until the above amount is
paid or the broker's right to renew a license has expired. The
commissioner may maintain an action for the recovery of the above
amount in any court of competent jurisdiction.
(f) The reports referred to in subdivisions (a) and (c) are
exempted from any requirement of public disclosure by paragraph (2)
of subdivision (d) of Section 6254 of the Government Code. The
commissioner shall annually make and file as a public record, a
composite of the annual reports and any comments thereon which are
deemed to be in the public interest.
SEC. 41. Section 10232.4 of the Business
and Professions Code is amended to read:
10232.4. (a) In making a solicitation to a particular person and
in negotiating with that person to make a loan secured by real
property or to purchase a real property sales contract or a note
secured by a deed of trust, a real estate broker shall deliver to the
person solicited the applicable completed statement described in
Section 10232.5 as early as practicable before he or she becomes
obligated to make the loan or purchase and, except as provided in
subdivision (c), before the receipt by or on behalf of the broker of
any funds from that person. The statement shall be signed by the
prospective lender or purchaser and by the real estate broker, or by
a real estate salesperson licensed to the broker, on the broker's
behalf. When so executed, an exact copy shall be given to the
prospective lender or purchaser, and the broker shall retain a true
copy of the executed statement for a period of three years.
(b) The requirement of delivery of a disclosure statement pursuant
to subdivision (a) shall not apply with respect to the following
persons:
(1) The prospective purchaser of a security offered under
authority of a permit issued pursuant to applicable provisions of the
Corporate Securities Law of 1968 (Division 1 (commencing with
Section 25000) of Title 4 of the Corporations Code) that require that
each prospective purchaser of a security be given a prospectus or
other form of disclosure statement approved by the department issuing
the permit.
(2) The seller of real property who agrees to take back a
promissory note of the purchaser as a method of financing all or a
part of the purchase of the property.
(3) The prospective purchaser of a security offered pursuant to
and in accordance with a regulation duly adopted by the Commissioner
of Corporations Financial Services
granting an exemption from qualification under the Corporate
Securities Law of 1968 for the offering if one of the conditions of
the exemption is that each prospective purchaser of the security be
given a disclosure statement prescribed by the regulation before the
prospective purchaser becomes obligated to purchase the security.
(4) A prospective lender or purchaser, if that lender or purchaser
is any of the following:
(A) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or corporate or
other instrumentality of any one or more of the foregoing, including
the Federal National Mortgage Association, the Government National
Mortgage Association, the Federal Home Loan Mortgage Corporation, the
Federal Housing Administration, and the Veteran's Administration.
(B) Any bank or subsidiary thereof, bank holding company or
subsidiary thereof, trust company, savings bank or savings and loan
association or subsidiary thereof, savings bank or savings
association holding company or subsidiary thereof, credit union,
industrial bank or industrial loan company, finance lender, or
insurance company doing business under the authority of, and in
accordance with, the laws of this state, any other state, or of the
United States relating to banks, trust companies, savings banks or
savings associations, credit unions, industrial banks or industrial
loan companies, commercial finance lenders, or insurance companies,
as evidenced by a license, certificate, or charter issued by the
United States or any state, district, territory, or commonwealth of
the United States.
(C) Trustees of pension, profitsharing, or welfare fund, if the
pension, profitsharing, or welfare fund has a net worth of not less
than fifteen million dollars ($15,000,000).
(D) Any corporation with outstanding securities registered under
Section 12 of the Securities Exchange Act of 1934 or any wholly owned
subsidiary of that corporation.
(E) Any syndication or other combination of any of the entities
specified in subparagraph (A), (B), (C), or (D) which is organized to
purchase the promissory note.
(F) A licensed real estate broker engaging in the business of
selling all or part of the loan, note, or contract to a lender or
purchaser to whom no disclosure is required pursuant to this
subdivision.
(G) A licensed residential mortgage lender or servicer when acting
under the authority of that license.
(c) When the broker has custody of funds of a prospective lender
or purchaser which were received and are being maintained with the
express permission of the owner and in accordance with law, and the
broker retains the funds in an escrow depository or a trust fund
account pending receipt of the owner's express written instructions
to disburse the funds for a loan or purchase, the broker shall cause
the disclosure statement to be delivered to the owner and shall
obtain the owner's written consent to the proposed disbursement
before making the disbursement. Unless the broker has a written
agreement with the owner as provided in Section 10231.1, the broker
shall transmit to the owner not later than 25 days after receipt, all
funds then in the broker's custody for which the owner has not given
written instructions authorizing disbursement.
SEC. 42. Section 10232.25 of the
Business and Professions Code is amended to read:
10232.25. (a) A real estate broker who meets the criteria of
subdivision (a) of Section 10232 shall, within 30 days after the end
of each of the first three fiscal quarters of the broker's fiscal
year, or within any additional time as the Real Estate
Commissioner of Financial Services may allow for
good cause, file with the commissioner a trust funds status report
as of the last day of the fiscal quarter which shall include the
following:
(1) A representation that the form and content of the trust
account records of the broker are in compliance with the regulations
of the commissioner.
(2) A representation that the broker's trust fund bank account is
maintained in compliance with the regulations of the commissioner.
(3) A statement of the broker's aggregate accountability for trust
funds.
(4) A report of trust funds in the broker's custody consisting of
the trust account bank statements as of the bank's accounting date
immediately preceding the end of the fiscal quarter and a schedule of
withdrawals and deposits adjusting the account to its true balance
as of the end of the fiscal quarter.
(5) A statement explaining any difference in amount between the
broker's total accountability under paragraph (3) above and the
adjusted trust account bank balance under paragraph (4) above.
(b) Each report made pursuant to subdivision (a) shall include the
following:
(1) The name, address, and position or capacity of the person who
prepared the report.
(2) A declaration under penalty of perjury by the broker that the
information and representations in the report are true, complete, and
correct to the best of the broker's knowledge and belief. The
declaration in a report submitted on behalf of a corporate broker
shall be signed by a broker-officer through whom the corporation is
licensed as a real estate broker and by the chief executive officer
of the corporation if he or she is not the signing broker-officer.
(c) If a broker fails to file a report required under subdivision
(a) within the time permitted, the commissioner may cause an
examination and report to be made and may charge the broker one and
one-half times the cost of making the examination and report. In
determining the hourly cost incurred by the commissioner for
conducting an examination and preparing the report, the commissioner
may use the estimated average hourly cost for all department audit
staff performing audits of real estate brokers. If a broker fails to
pay the above amount within 60 days of the mailing of a notice of
billing, the commissioner may suspend the broker's license or deny
renewal of the broker's license. The suspension or denial shall
remain in effect until the above amount is paid or the broker's right
to renew a license has expired. The commissioner may maintain an
action for the recovery of the above amount in any court of competent
jurisdiction.
(d) A broker who meets the criteria of Section 10232, but who, in
carrying on the activities described in subdivisions (d) and (e) of
Section 10131, did not during a fiscal quarter, accept for the
benefit of a person to whom the broker is trustee, any payment or
remittance in a form convertible to cash by the broker, need not
comply with the provisions of subdivision (a). In lieu thereof, the
broker shall submit to the commissioner within 30 days after the end
of the fiscal quarter or within any additional time as the
commissioner may allow for good cause, a statement under penalty of
perjury on a form provided by the department attesting to the fact
that the broker did not receive any trust funds in cash or
convertible to cash during the fiscal quarter.
(e) Any real estate broker who engages in any of the activities
specified in subdivision (d) or (e) of Section 10131, but who is not
required by this section to file trust funds status reports with the
commissioner and who is not exempt therefrom under subdivision (d),
shall complete trust funds status reports in accordance with either
(1) the requirements of subdivisions (a) and (b) applicable to trust
funds status reports filed with the commissioner, or (2) the
requirements established by the lender or note owner, if the lender
or note owner does all of the following: (i) requires monthly
reconciliations of trust account balances; (ii) requires annual,
CPA-audited financial statements; and (iii) maintains a contractual
right to audit the trust accounts held by the broker on behalf of the
lender or note owner.
The broker shall retain all trust funds status reports prepared
under this subdivision on file at the broker's offices, where they
shall be subject to inspection by representatives of the commissioner
upon 24 hours' notice.
SEC. 43. Section 10236.2 of the
Business and Professions Code is amended to read:
10236.2. (a) A real estate broker who satisfies the criteria of
subdivision (a) or (b) of Section 10232 and who fails to notify the
Department of Real Estate Financial Services
, in writing, of that fact within 30 days thereafter as
required by subdivision (e) of Section 10232 shall be assessed a
penalty of fifty dollars ($50) per day for each additional day
written notification has not been received up to and including the
30th day after the first day of the assessment penalty. On and after
the 31st day the penalty is one hundred dollars ($100) per day, not
to exceed a total penalty of ten thousand dollars ($10,000),
regardless of the number of days, until the department receives the
written notification.
(b) The commissioner may suspend or revoke the license of any real
estate broker who fails to pay a penalty imposed under this section.
In addition, the commissioner may bring an action in an appropriate
court of this state to collect payment of the penalty.
(c) All penalties paid or collected under this section shall be
deposited into the Recovery Account of the Real Estate Fund.
SEC. 44. Section 10239 of the Business
and Professions Code , as added by Section 2 of Chapter
901 of the Statutes of 2003, is amended to read:
10239. The jurisdiction of the Commissioner of
Corporations Financial Services under the
Corporate Securities Law of 1968 shall be neither limited nor
expanded by this article. Nothing in this article shall be construed
to supersede or restrict the application of the Corporate Securities
Law of 1968. A transaction under this article shall not be construed
to be a transaction involving the issuance of securities subject to
authorization by the Real Estate Commissioner
of Financial Services under subdivision (e) of Section 25100
of the Corporations Code.
SEC. 45. Section 10249.3 of the
Business and Professions Code is amended to read:
10249.3. (a) The commissioner may by regulation prescribe filing
fees in connection with registrations with the department pursuant to
the provisions of this article that
are lower than the maximum fees specified in subdivision
(b) if the commissioner determines that the lower fees are sufficient
to offset the costs and expenses incurred in the administration of
this article. The commissioner shall hold at least one hearing each
calendar year to determine if lower fees than those specified in
subdivision (b) should be prescribed.
(b) The filing fee for an application for a registration with the
department pursuant to the provisions of this article shall not
exceed the following for each subdivision or phase of the subdivision
in which interests are to be offered for sale or lease:
(1) An application for an original registration: One hundred
dollars ($100).
(2) An application for a renewal registration: One hundred dollars
($100).
(3) An application for an amended registration: One hundred
dollars ($100).
(c) All fees collected by the Department of Real Estate
Financial Services under authority of this
article shall be deposited into the Real Estate Fund under Chapter 6
(commencing with Section 10450) of Part 1. All fees received by the
department pursuant to the provisions of this article shall be deemed
earned upon receipt. No part of any fee is refundable unless the
commissioner determines that it was paid as a result of mistake or
inadvertence.
SEC. 46. Section 10249.8 of the
Business and Professions Code is amended to read:
10249.8. (a) Notwithstanding any provision to the contrary in
Section 10249 or 11000, it is unlawful for a person, in this state,
to sell or lease or offer for sale or lease lots, parcels, or
interests in a subdivision, as defined in Section 10249.1, entirely
located outside of this state but within the United States, unless
any printed material, literature, advertising, or invitation in this
state relating to that sale, lease, or offer clearly and
conspicuously contains the following disclaimer in at least 10-point
type:
WARNING: THE CALIFORNIA DEPARTMENT OF REAL ESTATE
DEPARTMENT OF FINANCIAL SERVICES HAS NOT
INSPECTED, EXAMINED, OR QUALIFIED THIS OFFERING.
(b) If an offer on property described in subdivision (a) is not
initially made in writing, the disclaimer set forth in subdivision
(c) shall be received by the offeree in writing prior to a visit to a
location, sales presentation, or contact with a person representing
the offeror, when the visit or contact was scheduled or arranged by
the offeror or its representative. The deposit of the disclaimer in
the United States mail, addressed to the offeree and with first-class
postage prepaid, at least five days prior to the scheduled or
arranged visit or contact, shall be deemed to constitute delivery for
purposes of this section.
(c) If a California resident is presented with an agreement or
contract to lease or purchase any property described in subdivision
(a), where an offer to lease or purchase that property was made to
that resident in California, a copy of the disclaimer set forth in
this subdivision shall be inserted in at least 10-point type at the
top of the first page of that agreement or contract and shall be
initialed by that California resident.
WARNING: THE CALIFORNIA DEPARTMENT OF REAL ESTATE
DEPARTMENT OF FINANCIAL SERVICES HAS NOT
QUALIFIED, INSPECTED, OR EXAMINED THIS OFFERING, INCLUDING, BUT NOT
LIMITED TO, THE CONDITION OF TITLE, THE STATUS OF BLANKET LIENS ON
THE PROJECT (IF ANY), ARRANGEMENTS TO ASSURE PROJECT COMPLETION,
ESCROW PRACTICES, CONTROL OVER PROJECT MANAGEMENT, RACIALLY
DISCRIMINATORY PRACTICES (IF ANY), TERMS, CONDITIONS, AND PRICE OF
THE OFFER, CONTROL OVER ANNUAL ASSESSMENTS (IF ANY), OR THE
AVAILABILITY OF WATER, SERVICES, UTILITIES, OR IMPROVEMENTS. IT MAY
BE ADVISABLE FOR YOU TO CONSULT AN ATTORNEY OR OTHER KNOWLEDGEABLE
PROFESSIONAL WHO IS FAMILIAR WITH REAL ESTATE AND DEVELOPMENT LAW IN
THE STATE WHERE THIS SUBDIVISION IS SITUATED.
SEC. 47. Section 10249.9 of the
Business and Professions Code is amended to read:
10249.9. (a) Notwithstanding any provision to the contrary in
Section 10249 or 11000, it is unlawful for a person, in this state,
to sell or lease or offer for sale or lease a lot, parcel, or
interest in a subdivision, located outside the United States, unless
the printed material, literature, advertising, or invitation in this
state relating to that sale, lease, or offer clearly and
conspicuously contains the following disclaimer in at least 10-point
capital type:
WARNING: THE CALIFORNIA DEPARTMENT OF REAL ESTATE
DEPARTMENT OF FINANCIAL SERVICES HAS NOT
EXAMINED THIS OFFERING, INCLUDING, BUT NOT LIMITED TO, THE CONDITION
OF TITLE, THE STATUS OF BLANKET LIENS ON THE PROJECT (IF ANY),
ARRANGEMENTS TO ASSURE PROJECT COMPLETION, ESCROW PRACTICES, CONTROL
OVER PROJECT MANAGEMENT, RACIALLY DISCRIMINATORY PRACTICES (IF ANY),
TERMS, CONDITIONS, AND PRICE OF THE OFFER, CONTROL OVER ANNUAL
ASSESSMENTS (IF ANY), OR THE AVAILABILITY OF WATER, SERVICES,
UTILITIES, OR IMPROVEMENTS. IT MAY BE ADVISABLE FOR YOU TO CONSULT AN
ATTORNEY OR OTHER KNOWLEDGEABLE PROFESSIONAL WHO IS FAMILIAR WITH
REAL ESTATE AND DEVELOPMENT LAW IN THE COUNTRY WHERE THIS SUBDIVISION
IS SITUATED.
(b) If an offer on property described in subdivision (a) is not
initially made in writing, the foregoing disclaimer shall be received
by the offeree in writing prior to a visit to a location, sales
presentation, or contact with a person representing the offeror, when
the visit or contact was scheduled or arranged by the offeror or its
representative. The deposit of the disclaimer in the United States
mail, addressed to the offeree and with first-class postage prepaid,
at least five days prior to the scheduled or arranged visit or
contact, shall be deemed to constitute delivery for purposes of this
section.
(c) If any California resident is presented with an agreement or
contract to lease or purchase a property described in subdivision
(a), where an offer to lease or purchase that property was made to
that resident in California, a copy of the disclaimer set forth in
subdivision (a) shall be inserted in at least 10-point type at the
top of the first page of that agreement or contract and shall be
initialed by that California resident.
SEC. 48. Section 10451.5 of the
Business and Professions Code is amended to read:
10451.5. (a) All money paid into the State Treasury and credited
to the Education and Research Account in the Real Estate Fund
pursuant to Section 10450.6 is available for appropriation by the
Legislature to be used by the commissioner in carrying out the
provisions of this part and Chapter 1 (commencing with Section 11000)
of Part 2, in the advancement of education and research in real
estate at the University of California, state colleges and community
colleges, or in contracting for a particular research project in the
field of real estate for the state with any university in the State
of California accredited by the Western Association of Schools and
Colleges, or with any corporation or association qualified to perform
such research.
(b) If the balance in the Education and Research Account is more
than four hundred thousand dollars ($400,000), the Real
Estate Commissioner of Financial Services may
authorize the transfer of all or part of such surplus amount to the
Real Estate Fund and may authorize the return to the Education and
Research Account of all or part of any amount previously transferred
to the Real Estate Fund.
(c) Notwithstanding the provisions of subdivision (b), if at any
time the amount of funds credited to the Real Estate Fund, including
any amounts credited to the separate accounts for Education and
Research and Recovery, is less than 25 percent of the department's
authorized expenditures for the following fiscal year, the
commissioner may transfer any or all of the funds credited to the
Education and Research Account to the Real Estate Fund. The
commissioner may authorize the return to the Education and Research
Account of all or part of any amount previously transferred to the
Real Estate Fund.
SEC. 49. Section 10470.1 of the
Business and Professions Code is amended to read:
10470.1. (a) In addition to the amount paid into the Recovery
Account as set forth in Section 10450.6, the Real Estate
Commissioner of Financial Services may authorize
the transfer from the Real Estate Fund to the Recovery Account of
any amounts as are deemed necessary.
(b) If the balance remaining in the Recovery Account contains more
than four hundred thousand dollars ($400,000), the commissioner may
authorize the transfer of all or part of the surplus amount into the
Real Estate Fund.
(c) The commissioner may authorize the return to the Recovery
Account of all or any amount previously transferred to the Real
Estate Fund under this section.
SEC. 50. Section 10471 of the Business
and Professions Code is amended to read:
10471. (a) When an aggrieved person obtains (1) a final judgment
in a court of competent jurisdiction, including, but not limited to,
a criminal restitution order issued pursuant to subdivision (f) of
Section 1202.4 of the Penal Code or Section 3663 of Title 18 of the
United States Code, or (2) an arbitration award that includes
findings of fact and conclusions of law rendered in accordance with
the rules established by the American Arbitration Association or
another recognized arbitration body, and in accordance with Sections
1281 to 1294.2, inclusive, of the Code of Civil Procedure where
applicable, and where the arbitration award has been confirmed and
reduced to judgment pursuant to Section 1287.4 of the Code of Civil
Procedure, against a defendant based upon the defendant's fraud,
misrepresentation, or deceit, made with intent to defraud, or
conversion of trust funds, arising directly out of any transaction in
which the defendant, while licensed under this part, performed acts
for which a real estate license was required, the aggrieved person
may, upon the judgment becoming final, file an application with the
Department of Real Estate Financial Services
for payment from the Recovery Account, within the limitations
specified in Section 10474, of the amount unpaid on the judgment that
represents an actual and direct loss to the claimant in the
transaction. As used in this chapter, "court of competent
jurisdiction" includes the federal courts, but does not include the
courts of another state.
(b) The application shall be delivered in person or by certified
mail to an office of the department not later than one year after the
judgment has become final.
(c) The application shall be made on a form prescribed by the
department, verified by the claimant, and shall include the
following:
(1) The name and address of the claimant.
(2) If the claimant is represented by an attorney, the name,
business address, and telephone number of the attorney.
(3) The identification of the judgment, the amount of the claim
and an explanation of its computation.
(4) A detailed narrative statement of the facts in explanation of
the allegations of the complaint upon which the underlying judgment
is based.
(5) (A) Except as provided in subparagraph (B), a statement by the
claimant, signed under penalty of perjury, that the complaint upon
which the underlying judgment is based was prosecuted conscientiously
and in good faith. As used in this section, "conscientiously and in
good faith" means that no party potentially liable to the claimant in
the underlying transaction was intentionally and without good cause
omitted from the complaint, that no party named in the complaint who
otherwise reasonably appeared capable of responding in damages was
dismissed from the complaint intentionally and without good cause,
and that the claimant employed no other procedural means contrary to
the diligent prosecution of the complaint in order to seek to qualify
for the Recovery Account.
(B) For the purpose of an application based on a criminal
restitution order, all of the following statements by the claimant:
(i) The claimant has not intentionally and without good cause
failed to pursue any person potentially liable to the claimant in the
underlying transaction other than a defendant who is the subject of
a criminal restitution order.
(ii) The claimant has not intentionally and without good cause
failed to pursue in a civil action for damages all persons
potentially liable to the claimant in the underlying transaction who
otherwise reasonably appeared capable of responding in damages other
than a defendant who is the subject of a criminal restitution order.
(iii) The claimant employed no other procedural means contrary to
the diligent prosecution of the complaint in order to seek to qualify
for the Recovery Account.
(6) The name and address of the judgment debtor or, if not known,
the names and addresses of persons who may know the judgment debtor's
present whereabouts.
(7) The following representations and information from the
claimant:
(A) That he or she is not a spouse of the judgment debtor nor a
personal representative of the spouse.
(B) That he or she has complied with all of the requirements of
this chapter.
(C) That the judgment underlying the claim meets the requirements
of subdivision (a).
(D) A description of searches and inquiries conducted by or on
behalf of the claimant with respect to the judgment debtor's assets
liable to be sold or applied to satisfaction of the judgment, an
itemized valuation of the assets discovered, and the results of
actions by the claimant to have the assets applied to satisfaction of
the judgment.
(E) That he or she has diligently pursued collection efforts
against all judgment debtors and all other persons liable to the
claimant in the transaction that is the basis for the underlying
judgment.
(F) That the underlying judgment and debt have not been discharged
in bankruptcy, or, in the case of a bankruptcy proceeding that is
open at or after the time of the filing of the application, that the
judgment and debt have been declared to be nondischargeable.
(G) That the application was mailed or delivered to the department
no later than one year after the underlying judgment became final.
(d) If the claimant is basing his or her application upon a
judgment against a salesperson, and the claimant has not obtained a
judgment against that salesperson's employing broker, if any, or has
not diligently pursued the assets of that broker, the application
shall be denied for failure to diligently pursue the assets of all
other persons liable to the claimant in the transaction unless the
claimant can demonstrate, by clear and convincing evidence, either
that the salesperson was not employed by a broker at the time of the
transaction, or that the salesperson's employing broker would not
have been liable to the claimant because the salesperson was acting
outside the scope of his or her employment by the broker in the
transaction.
(e) The application form shall include detailed instructions with
respect to documentary evidence, pleadings, court rulings, the
products of discovery in the underlying litigation, and a notice to
the applicant of his or her obligation to protect the underlying
judgment from discharge in bankruptcy, to be appended to the
application.
(f) An application for payment from the Recovery Account that is
based on a criminal restitution order shall comply with all of the
requirements of this chapter. For the purpose of an application based
on a criminal restitution order, the following terms have the
following meanings:
(1) "Judgment" means the criminal restitution order.
(2) "Complaint" means the facts of the underlying transaction upon
which the criminal restitution order is based.
(3) "Judgment debtor" means any defendant who is the subject of
the criminal restitution order.
The amendments to this section made at the July 1997-98 Regular
Session shall become operative July 1, 2000.
SEC. 51. Section 10471.5 of the
Business and Professions Code is amended to read:
10471.5. (a) The commissioner shall give notice of a decision
rendered with respect to the application to the claimant and to a
judgment debtor who has filed a timely response to the application in
accordance with Section 10471.1.
(b) If the application is denied, the notice to the claimant and
judgment debtor shall include the following:
"Claimant's application has been denied. If the claimant wishes to
pursue the application in court, the claimant must file the
application as follows in a superior court of this state not later
than six months after receipt of this notice, pursuant to Section
10472 of the Business and Professions Code. If the underlying
judgment is a California state court judgment, the application shall
be filed in the court in which the underlying judgment was entered.
If the underlying judgment is a federal court judgment, the
application shall be filed in the superior court of any county within
California that would have been a proper venue if the underlying
lawsuit had been filed in a California state court, or in the
Superior Court of the County of Sacramento."
(c) If the decision of the commissioner is to make a payment to
the claimant out of the Recovery Account, the following notice shall
be given to the judgment debtor along with a copy of the decision of
the commissioner:
"The decision of the Real Estate Commissioner
of Financial Services on the application of ____ is to pay
$____ from the Recovery Account. A copy of that decision is
enclosed.
"Pursuant to Section 10475 of the Business and Professions Code,
all of your licenses and license rights under the Real Estate Law
will be suspended effective on the date of the payment, and you will
not be eligible for reinstatement of any license issued under
authority of the Real Estate Law until you have reimbursed the
Recovery Account for this payment plus interest at the prevailing
legal rate."
"If you desire a judicial review of the suspension of your
licenses and license rights, you may petition the superior court for
a writ of mandamus. If the underlying judgment is a California state
court judgment, the petition shall be filed in the court in which the
judgment was entered. If the underlying judgment is a federal court
judgment, the petition shall be filed in the superior court of any
county within California that would have been a proper venue if the
underlying lawsuit had been filed in a California state court, or in
the Superior Court of the County of Sacramento. To be timely, the
petition must be filed with the court within 30 days of receipt of
this notice."
SEC. 52. Section 10472 of the Business
and Professions Code is amended to read:
10472. (a) A claimant against whom the commissioner has rendered
a decision denying an application pursuant to Section 10471 may,
within six months after the mailing of the notice of the denial, file
a verified application in superior court for an Order Directing
Payment Out of the Recovery Account based upon the grounds set forth
in the application to the commissioner. If the underlying judgment is
a California state court judgment, the application shall be filed in
the court in which the underlying judgment was entered. If the
underlying judgment is a federal court judgment, the application
shall be filed in the superior court of any county within California
that would have been a proper venue if the underlying lawsuit had
been filed in a California state court, or in the Superior Court of
the County of Sacramento.
(b) A copy of the verified application shall be served upon the
commissioner and upon the judgment debtor. A certificate or affidavit
of service shall be filed by the claimant with the court. Service on
the commissioner may be made by certified mail addressed to the
headquarters office of the department. Service upon a judgment debtor
may be made in accordance with Section 10471.1. The notice served
upon the judgment debtor shall read as follows:
"NOTICE: An application has been filed with the court for a
payment from the Recovery Account that was previously denied by the
Real Estate Commissioner of Financial
Services .
"If the Department of Real Estate
Financial Services makes a payment from the Recovery Account
pursuant to court order, all of your licenses and license rights
under the Real Estate Law will be automatically suspended until the
Recovery Account has been reimbursed for the amount paid plus
interest at the prevailing rate.
"If you wish to defend in court against this application, you must
file a written response with the court within 30 days after having
been served with a copy of the application. If you do not file a
written response, you will have waived your right to defend against
the application."
SEC. 53. Section 10501 of the Business
and Professions Code is amended to read:
10501. (a) The Real Estate Commissioner
of Financial Services may file a complaint for any violation of
Section 10500 or 10500.5 before any court of competent jurisdiction,
and the commissioner and the commissioner's counsel, deputies or
assistants may assist in presenting the law or facts at the trial.
(b) It is the duty of the district attorney of the county in which
a violation of Section 10500 or 10500.5 occurs to prosecute the
violation.
(c) A natural person convicted of a violation of Section 10500 or
10500.5 shall be punished by a fine of not to exceed five hundred
dollars ($500) or by imprisonment in the county jail for a term not
to exceed six months, or by both such fine and imprisonment, in the
discretion of the court. A corporation convicted of a violation of
Section 10500 or 10500.5 shall be punished by a fine of not to exceed
five thousand dollars ($5,000).
SEC. 54. Section 11000.1 of the
Business and Professions Code is amended to read:
11000.1. (a) "Subdivided lands" and "subdivision," as defined by
Sections 11000 and 11004.5, also include improved or unimproved land
or lands, a lot or lots, or a parcel or parcels, of any size, in
which, for the purpose of sale or lease or financing, whether
immediate or future, five or more undivided interests are created or
are proposed to be created.
(b) This section does not apply to the creation or proposed
creation of undivided interests in land if any one of the following
conditions exists:
(1) The undivided interests are held or to be held by persons
related one to the other by blood or marriage.
(2) The undivided interests are to be purchased and owned solely
by persons who present evidence satisfactory to the Real
Estate Commissioner of Financial Services that
they are knowledgeable and experienced investors who comprehend the
nature and extent of the risks involved in the ownership of these
interests. The Real Estate Commissioner of
Financial Services shall grant an exemption from this part if
the undivided interests are to be purchased by no more than 10
persons, each of whom furnishes a signed statement to the
commissioner that he or she (A) is fully informed concerning the real
property to be acquired and his or her interest in that property
including the risks involved in ownership of undivided interests, (B)
is purchasing the interest or interests for his or her own account
and with no present intention to resell or otherwise dispose of the
interest for value, and (C) expressly waives protections afforded to
a purchaser by this part.
(3) The undivided interests are created as the result of a
foreclosure sale.
(4) The undivided interests are created by a valid order or decree
of a court.
(5) The offering and sale of the undivided interests have been
expressly qualified by the issuance of a permit from the Commissioner
of Corporations Financial Services
pursuant to the Corporate Securities Law of 1968 (Division 1
(commencing with Section 25000) of Title 4 of the Corporations Code).
SEC. 55. Section 11000.2 of the
Business and Professions Code is amended to read:
11000.2. (a) A person who has made an offer to purchase an
interest in an undivided-interest subdivision specified in
subdivision (a) of, and not exempted by subdivision (b) of, Section
11000.1 shall have the right to rescind any contract resulting from
the acceptance of that offer until midnight of the third calendar day
following the day on which the prospective purchaser executed the
offer to purchase.
(b) The owner of a subdivision subject to this section or his or
her agent shall, in accordance with regulations adopted by the
Real Estate Commissioner of Financial
Services , clearly and conspicuously disclose to all
prospective purchasers of undivided interests the right of rescission
provided for in subdivision (a), and shall furnish to each offeror a
form, as prescribed by regulations of the commissioner, for the
exercise of the right of rescission.
(c) Any certificate bearing the signature of the purchaser of an
interest in an undivided-interest subdivision subject to this section
which contains an adequate description of the interest or interests
sold and a statement by the purchaser that he or she has not
exercised the right of rescission within the time limit set forth in
subdivision (a) shall constitute conclusive evidence that the right
of rescission has not been exercised in any matter involving the
rights of a third party who has acted in good faith in reliance upon
representations in the certificate.
SEC. 56. Section 11001 of the Business
and Professions Code is amended to read:
11001. The Real Estate Commissioner of
Financial Services (hereafter referred to in this chapter as
the commissioner) may adopt, amend, or repeal such rules and
regulations as are reasonably necessary for the enforcement of this
chapter. He or she may issue any order, permit, decision,
demand , or requirement to effect this purpose. Such
rules, regulations, and orders shall be adopted pursuant to the
provisions of the Administrative Procedure Act.
SEC. 57. Section 11003.4 of the
Business and Professions Code is amended to read:
11003.4. (a) A "limited-equity housing cooperative" is a
corporation which meets the criteria of Section 11003.2 and which
also meets the criteria of Section 33007.5 of the Health and Safety
Code. Except as provided in subdivision (b), a limited-equity housing
cooperative shall be subject to all the requirements of this chapter
pertaining to stock cooperatives.
(b) A
limited-equity housing cooperative shall be exempt from the
requirements of this chapter if the limited-equity housing
cooperative complies with all the following conditions:
(1) The United States Department of Housing and Urban Development,
the Farmers Home Administration, the National Consumers Cooperative
Bank, the California Housing Finance Agency, or the Department of
Housing and Community Development, alone or in any combination with
each other, or with the city, county, or redevelopment agency in
which the cooperative is located, directly finances or subsidizes at
least 50 percent of the total construction or development cost or one
hundred thousand dollars ($100,000), whichever is less; or the real
property to be occupied by the cooperative was sold by the Department
of Transportation for the development of the cooperative and has a
regulatory agreement approved by the Department of Housing and
Community Development for the term of the permanent financing,
notwithstanding the source of the permanent subsidy or financing.
(2) No more than 20 percent of the total development cost of a
limited-equity mobilehome park, and no more than 10 percent of the
total development cost of other limited-equity housing cooperatives,
is provided by purchasers of membership shares.
(3) A regulatory agreement which covers the cooperative for a term
of at least as long as the duration of the permanent financing or
subsidy, notwithstanding the source of the permanent subsidy or
financing has been duly executed between the recipient of the
financing and either (A) one of the federal or state agencies
specified in paragraph (1) or (B) a local public agency which is
providing financing for the project under a regulatory agreement
meeting standards of the Department of Housing and Community
Development. The regulatory agreement shall make provision for at
least all of the following:
(A) Assurances for completion of the common areas and facilities
to be owned or leased by the limited-equity housing cooperative,
unless a construction agreement between the same parties contains
written assurances for completion.
(B) Governing instruments for the organization and operation of
the housing cooperative by the members.
(C) The ongoing fiscal management of the project by the
cooperative, including an adequate budget, reserves, and provisions
for maintenance and management.
(D) Distribution of a membership information report to any
prospective purchaser of a membership share, prior to purchase of
that share. The membership information report shall contain full
disclosure of the financial obligations and responsibilities of
cooperative membership, the resale of shares, the financing of the
cooperative including any arrangements made with any partners,
membership share accounts, occupancy restrictions, management
arrangements, and any other information pertinent to the benefits,
risks, and obligations of cooperative ownership.
(4) The federal, state, or local public agency which executes the
regulatory agreement shall satisfy itself that the bylaws, articles
of incorporation, occupancy agreement, subscription agreement, any
lease of the regulated premises, any arrangement with partners, and
arrangement for membership share accounts provide adequate protection
of the rights of cooperative members.
(5) The federal or state agency shall receive from the attorney
for the recipient of the financing or subsidy a legal opinion that
the cooperative meets the requirements of Section 33007.5 of the
Health and Safety Code and the exemption provided by this section.
(c) Any limited-equity cooperative which meets the requirements
for exemption pursuant to subdivision (b) may elect to be subject to
all provisions of this chapter.
(d) The developer of the cooperative shall notify the Department
of Real Estate Financial Services , on
a form provided by the department, that an exemption is claimed under
this section. The Department of Real Estate
Financial Services shall retain this form for at least four
years for statistical purposes.
SEC. 58. Section 11010 of the Business
and Professions Code is amended to read:
11010. (a) Except as otherwise provided pursuant to subdivision
(c) or elsewhere in this chapter, any person who intends to offer
subdivided lands within this state for sale or lease shall file with
the Department of Real Estate Financial
Services an application for a public report consisting of a
notice of intention and a completed questionnaire on a form prepared
by the department.
(b) The notice of intention shall contain the following
information about the subdivided lands and the proposed offering:
(1) The name and address of the owner.
(2) The name and address of the subdivider.
(3) The legal description and area of lands.
(4) A true statement of the condition of the title to the land,
particularly including all encumbrances thereon.
(5) A true statement of the terms and conditions on which it is
intended to dispose of the land, together with copies of any
contracts intended to be used.
(6) A true statement of the provisions, if any, that have been
made for public utilities in the proposed subdivision, including
water, electricity, gas, telephone, and sewerage facilities. For
subdivided lands that were subject to the imposition of a condition
pursuant to subdivision (b) of Section 66473.7 of the Government
Code, the true statement of the provisions made for water shall be
satisfied by submitting a copy of the written verification of the
available water supply obtained pursuant to Section 66473.7 of the
Government Code.
(7) A true statement of the use or uses for which the proposed
subdivision will be offered.
(8) A true statement of the provisions, if any, limiting the use
or occupancy of the parcels in the subdivision.
(9) A true statement of the amount of indebtedness that is a lien
upon the subdivision or any part thereof, and that was incurred to
pay for the construction of any onsite or offsite improvement, or any
community or recreational facility.
(10) A true statement or reasonable estimate, if applicable, of
the amount of any indebtedness which has been or is proposed to be
incurred by an existing or proposed special district, entity, taxing
area, assessment district, or community facilities district within
the boundaries of which, the subdivision, or any part thereof, is
located, and that is to pay for the construction or installation of
any improvement or to furnish community or recreational facilities to
that subdivision, and which amounts are to be obtained by ad valorem
tax or assessment, or by a special assessment or tax upon the
subdivision, or any part thereof.
(11) A notice pursuant to Section 1102.6c of the Civil Code.
(12) (A) As to each school district serving the subdivision, a
statement from the appropriate district that indicates the location
of each high school, junior high school, and elementary school
serving the subdivision, or documentation that a statement to that
effect has been requested from the appropriate school district.
(B) In the event that, as of the date the notice of intention and
application for issuance of a public report are otherwise deemed to
be qualitatively and substantially complete pursuant to Section
11010.2, the statement described in subparagraph (A) has not been
provided by any school district serving the subdivision, the person
who filed the notice of intention and application for issuance of a
public report shall immediately provide the department with the name,
address, and telephone number of that district.
(13) (A) The location of all existing airports, and of all
proposed airports shown on the general plan of any city or county,
located within two statute miles of the subdivision. If the property
is located within an airport influence area, the following statement
shall be included in the notice of intention:
NOTICE OF AIRPORT IN VICINITY
This property is presently located in
the vicinity of
an
airport, within what is known as an airport
influence area. For
that
reason, the property may be subject to some of
the annoyances
or
inconveniences associated with proximity to
airport
operations
(for example: noise, vibration, or odors).
Individual
sensitivities
to those annoyances can vary from person to
person. You may wish to consider what airport
annoyances, if any, are associated with
the
property before you complete your purchase and
determine whether
they
are acceptable to you.
(B) For purposes of this section, an "airport influence area,"
also known as an "airport referral area," is the area in which
current or future airport-related noise, overflight, safety, or
airspace protection factors may significantly affect land uses or
necessitate restrictions on those uses as determined by an airport
land use commission.
(14) A true statement, if applicable, referencing any soils or
geologic report or soils and geologic reports that have been prepared
specifically for the subdivision.
(15) A true statement of whether or not fill is used, or is
proposed to be used, in the subdivision and a statement giving the
name and the location of the public agency where information
concerning soil conditions in the subdivision is available.
(16) On or after July 1, 2005, as to property located within the
jurisdiction of the San Francisco Bay Conservation and Development
Commission, a statement that the property is so located and the
following notice:
NOTICE OF SAN FRANCISCO BAY CONSERVATION AND DEVELOPMENT COMMISSION
JURISDICTION
This property is located within the jurisdiction of the San
Francisco Bay Conservation and Development Commission. Use and
development of property within the commission's jurisdiction may be
subject to special regulations, restrictions, and permit
requirements. You may wish to investigate and determine whether they
are acceptable to you and your intended use of the property before
you complete your transaction.
(17) If the property is presently located within one mile of a
parcel of real property designated as "Prime Farmland," "Farmland of
Statewide Importance," "Unique Farmland," "Farmland of Local
Importance," or "Grazing Land" on the most current "Important
Farmland Map" issued by the California Department of Conservation,
Division of Land Resource Protection, utilizing solely the
county-level GIS map data, if any, available on the Farmland Mapping
and Monitoring Program Website. If the residential property is within
one mile of a designated farmland area, the report shall contain the
following notice:
NOTICE OF RIGHT TO FARM
This property is located within one mile of a farm or ranch land
designated on the current county-level GIS "Important Farmland Map,"
issued by the California Department of Conservation, Division of Land
Resource Protection. Accordingly, the property may be subject to
inconveniences or discomforts resulting from agricultural operations
that are a normal and necessary aspect of living in a community with
a strong rural character and a healthy agricultural sector. Customary
agricultural practices in farm operations may include, but are not
limited to, noise, odors, dust, light, insects, the operation of
pumps and machinery, the storage and disposal of manure, bee
pollination, and the ground or aerial application of fertilizers,
pesticides, and herbicides. These agricultural practices may occur at
any time during the 24-hour day. Individual sensitivities to those
practices can vary from person to person. You may wish to consider
the impacts of such agricultural practices before you complete your
purchase. Please be advised that you may be barred from obtaining
legal remedies against agricultural practices conducted in a manner
consistent with proper and accepted customs and standards pursuant to
Section 3482.5 of the Civil Code or any pertinent local ordinance.
(18) Any other information that the owner, his or her agent, or
the subdivider may desire to present.
(c) The commissioner may, by regulation, or on the basis of the
particular circumstances of a proposed offering, waive the
requirement of the submission of a completed questionnaire if the
commissioner determines that prospective purchasers or lessees of the
subdivision interests to be offered will be adequately protected
through the issuance of a public report based solely upon information
contained in the notice of intention.
SEC. 59. Section 11011 of the Business
and Professions Code is amended to read:
11011. (a) The commissioner may by regulation prescribe filing
fees in connection with applications to the Department of
Real Estate Financial Services pursuant to this
chapter that are lower than the maximum fees specified in subdivision
(b) if the commissioner determines that the lower fees are
sufficient to offset the costs and expenses incurred in the
administration of this chapter. The commissioner shall hold at least
one hearing each calendar year to determine if lower fees than those
specified in subdivision (b) should be prescribed.
(b) The filing fee for an application for a public report to be
issued under authority of this chapter shall not exceed the following
for each subdivision or phase of a subdivision in which interests
are to be offered for sale or lease:
(1) A notice of intention without a completed questionnaire: One
hundred fifty dollars ($150).
(2) An original public report for subdivision interests described
in Section 11004.5: One thousand seven hundred dollars ($1,700) plus
ten dollars ($10) for each subdivision interest to be offered.
(3) An original public report for subdivision interests other than
those described in Section 11004.5: Six hundred dollars ($600) plus
ten dollars ($10) for each subdivision interest to be offered.
(4) A conditional public report for subdivision interests
described in Section 11004.5: Five hundred dollars ($500).
(5) A conditional public report for subdivision interests other
than those described in Section 11004.5: Five hundred dollars ($500).
(6) A preliminary public report for subdivision interests
described in Section 11004.5: Five hundred dollars ($500).
(7) A preliminary public report for subdivision interests other
than those described in Section 11004.5: Five hundred dollars ($500).
(8) A renewal public report for subdivision interests described in
Section 11004.5: Six hundred dollars ($600).
(9) A renewal public report for subdivision interests other than
those described in Section 11004.5: Six hundred dollars ($600).
(10) An amended public report for subdivision interests described
in Section 11004.5: Five hundred dollars ($500) plus ten dollars
($10) for each subdivision interest to be offered under the amended
public report for which a fee has not previously been paid.
(11) An amended public report to offer subdivision interests other
than those described in Section 11004.5: Five hundred dollars ($500)
plus ten dollars ($10) for each subdivision interest to be offered
under the amended public report for which a fee has not previously
been paid.
(c) The filing fee to review a declaration as described in Section
11010.10 shall not exceed two hundred dollars ($200).
(d) The actual subdivision fees established by regulation under
authority of this section and Section 10249.3 shall not exceed the
amount reasonably required by the department to administer this part
and Article 8 (commencing with Section 10249) of Chapter 3 of Part 1.
(e) All fees collected by the department under authority of this
chapter shall be deposited into the Real Estate Fund under Chapter 6
(commencing with Section 10450) of Part 1. All fees received by the
department pursuant to this chapter shall be deemed earned upon
receipt. No part of any fee is refundable unless the commissioner
determines that it was paid as the result of a mistake or
inadvertence.
This section shall remain in effect unless it is superseded
pursuant to Section 10226 or subdivision (a) of Section 10226.5,
whichever is applicable.
SEC. 60. Section 11012 of the Business
and Professions Code is amended to read:
11012. It is unlawful for the owner, his or her agent,
or subdivider, of the project, after it is submitted to the
Department of Real Estate Financial Services
, to materially change the setup of such offering without first
notifying the Department of Real Estate
Financial Services in writing of such intended change. This
section only applies to those changes of which the owner, his or
her agent, or subdivider has knowledge or constructive
knowledge.
SEC. 61. Section 11018 of the Business
and Professions Code is amended to read:
11018. The Real Estate Commissioner of
Financial Services shall make an examination of any
subdivision, and shall, unless there are grounds for denial, issue to
the subdivider a public report authorizing the sale or lease in this
state of the lots or parcels within the subdivision. The report
shall contain the data obtained in accordance with Section 11010 and
which the commissioner determines are necessary to implement the
purposes of this article. The commissioner may publish the report.
The grounds for denial are:
(a) Failure to comply with any of the provisions in this chapter
or the regulations of the commissioner pertaining thereto.
(b) The sale or lease would constitute misrepresentation to or
deceit or fraud of the purchasers or lessees.
(c) Inability to deliver title or other interest contracted for.
(d) Inability to demonstrate that adequate financial arrangements
have been made for all offsite improvements included in the offering.
(e) Inability to demonstrate that adequate financial arrangements
have been made for any community, recreational or other facilities
included in the offering.
(f) Failure to make a showing that the parcels can be used for the
purpose for which they are offered; and in the case of a subdivision
being offered for residential purposes failure to make a showing
that vehicular access and a source of potable domestic water either
is available or will be available.
(g) Failure to provide in the contract or other writing the use or
uses for which the parcels are offered, together with any covenants
or conditions relative thereto.
(h) Agreements or bylaws to provide for management or other
services pertaining to common facilities in the offering, which fail
to comply with the regulations of the commissioner.
(i) Failure to demonstrate that adequate financial arrangements
have been made for any guaranty or warranty included in the offering.
SEC. 62. Section 11018.1 of the
Business and Professions Code is amended to read:
11018.1. (a) A copy of the public report of the commissioner,
when issued, shall be given to the prospective purchaser by the
owner, subdivider or agent prior to the execution of a binding
contract or agreement for the sale or lease of any lot or parcel in a
subdivision. The requirement of this section extends to lots or
parcels offered by the subdivider after repossession. A receipt shall
be taken from the prospective purchaser in a form and manner as set
forth in regulations of the Real Estate
Commissioner of Financial Services .
(b) A copy of the public report shall be given by the owner,
subdivider or agent at any time, upon oral or written request, to any
member of the public. A copy of the public report and a statement
advising that a copy of the public report may be obtained from the
owner, subdivider or agent at any time, upon oral or written request,
shall be posted in a conspicuous place at any office where sales or
leases or offers to sell or lease lots within the subdivision are
regularly made.
(c) At the same time that a public report is required to be given
by the owner, subdivider, or agent pursuant to subdivision (a) with
respect to a common interest development, as defined, in subdivision
(c) of Section 1351 of the Civil Code, the owner, subdivider, or
agent shall give the prospective purchaser a copy of the following
statement:
"Common Interest Development General Information
The project described in the attached Subdivision Public Report is
known as a common-interest development. Read the public report
carefully for more information about the type of development. The
development includes common areas and facilities which will be owned
or operated by an owners' association. Purchase of a lot or unit
automatically entitles and obligates you as a member of the
association and, in most cases, includes a beneficial interest in the
areas and facilities. Since membership in the association is
mandatory, you should be aware of the following information before
you purchase:
Your ownership in this development and your rights and remedies as
a member of its association will be controlled by governing
instruments which generally include a Declaration of Restrictions
(also known as CC&R's), Articles of Incorporation (or association)
and bylaws. The provisions of these documents are intended to be, and
in most cases are, enforceable in a court of law. Study these
documents carefully before entering into a contract to purchase a
subdivision interest.
In order to provide funds for operation and maintenance of the
common facilities, the association will levy assessments against your
lot or unit. If you are delinquent in the payment of assessments,
the association may enforce payment through court proceedings or your
lot or unit may be liened and sold through the exercise of a power
of sale. The anticipated income and expenses of the association,
including the amount that you may expect to pay through assessments,
are outlined in the proposed budget. Ask to see a copy of the budget
if the subdivider has not already made it available for your
examination.
A homeowner association provides a vehicle for the ownership and
use of recreational and other common facilities which were designed
to attract you to buy in this development. The association also
provides a means to accomplish architectural control and to provide a
base for homeowner interaction on a variety of issues. The purchaser
of an interest in a common-interest development should contemplate
active participation in the affairs of the association. He or she
should be willing to serve on the board of directors or on committees
created by the board. In short, "they" in a common interest
development is "you." Unless you serve as a member of the governing
board or on a committee appointed by the board, your control of the
operation of the common areas and facilities is limited to your vote
as a member of the association. There are actions that can be taken
by the governing body without a vote of the members of the
association which can have a significant impact upon the quality of
life for association members.
Until there is a sufficient number of purchasers of lots or units
in a common interest development to elect a majority of the governing
body, it is likely that the subdivider will effectively control the
affairs of the association. It is frequently necessary and equitable
that the subdivider do so during the early stages of development. It
is vitally important to the owners of individual subdivision
interests that the transition from subdivider to resident-owner
control be accomplished in an orderly manner and in a spirit of
cooperation.
When contemplating the purchase of a dwelling in a common interest
development, you should consider factors beyond the attractiveness
of the dwelling units themselves. Study the governing instruments and
give careful thought to whether you will be able to exist happily in
an atmosphere of cooperative living where the interests of the group
must be taken into account as well as the interests of the
individual. Remember that managing a common interest development is
very much like governing a small community ... the management can
serve you well, but you will have to work for its success."
Failure to provide the statement in accordance with this
subdivision shall not be deemed a violation subject to Section 10185.
SEC. 63. Section 11018.2 of the
Business and Professions Code is amended to read:
11018.2. No person shall sell or lease, or offer for sale or
lease in this state any lots or parcels in a subdivision without
first obtaining a public report from the Real Estate
Commissioner of Financial Services . This
section shall not apply to subdivisions for which a notice of
intention is not required under the provisions of this chapter.
SEC. 64. Sect ion 11018.7 of the
Business and Professions Code is amended to read:
11018.7. (a) No amendment or modification of provisions in the
declaration of restrictions, bylaws, articles of incorporation or
other instruments controlling or otherwise affecting rights to
ownership, possession, or use of interests in subdivisions as defined
in Sections 11000.1 and 11004.5 which would materially change those
rights of an owner, either directly or as a member of an association
of owners, is valid without the prior written consent of the
Real Estate Commissioner of Financial Services
during the period of time when the subdivider or his or her successor
in interest holds or directly controls as many as one-fourth of the
votes that may be cast to effect that change.
(b) The commissioner shall not grant his or her consent to the
submission of the proposed change to a vote of owners or members if
he or she finds that the change if effected would create a new
condition or circumstance that would form the basis for denial of a
public report under Sections 11018 or 11018.5.
An application for consent may be filed by any interested person
on a form prescribed by the commissioner. A filing fee to be fixed by
regulation, but not to exceed twenty-five dollars ($25), shall
accompany each application.
There shall be no official meeting of owners or members nor any
written solicitation of them for the purpose of effectuating a change
referred to herein except in accordance with a procedure approved by
the commissioner after the application for consent has been filed
with him or her; provided, however, that the governing body of the
owners association may meet and vote on the question of submission of
the proposed change to the commissioner.
SEC. 65. Section 11212 of the Business
and Professions Code is amended to read:
11212. As used in this chapter, the
following definitions apply:
(a) "Accommodation" means any apartment, condominium or
cooperative unit, cabin, lodge, hotel or motel room, or other private
or commercial structure containing toilet facilities therein that is
designed and available, pursuant to applicable law, for use and
occupancy as a residence by one or more individuals, or any unit or
berth on a commercial passenger ship, which is included in the
offering of a time-share plan.
(b) "Advertisement" means any written, oral, or electronic
communication that is directed to or targeted to persons within the
state or such a communication made from this state or relating to a
time-share plan located in this state and contains a promotion,
inducement, or offer to sell a time-share plan, including, but not
limited to, brochures, pamphlets, radio and television scripts,
electronic media, telephone and direct mail solicitations, and other
means of promotion.
(c) "Association" means the organized body consisting of the
purchasers of time-share interests in a time-share plan.
(d) "Assessment" means the share of funds required for the payment
of common expenses which is assessed from time to time against each
purchaser by the managing entity.
(e) "Commissioner" means the Real Estate
Commissioner of Financial Services .
(f) "Component site" means a specific geographic location where
accommodations that are part of a multisite time-share plan are
located. Separate phases of a time-share property in a specific
geographic location and under common management shall not be deemed a
component site.
(g) "Conspicuous type" means either of the following:
(1) Type in upper and lower case letters two point sizes larger
than the nearest nonconspicuous type, exclusive of headings, on the
page on which it appears but in at least 10-point type.
(2) Conspicuous type may be utilized in contracts for purchase or
public permits only where required by law or as authorized by the
commissioner.
(h) "Department" means the Department of Real Estate
Financial Services .
(i) "Developer" means and includes any person who creates a
time-share plan or is in the business of selling time-share
interests, other than those employees or agents of the developer who
sell time-share interests on the developer's behalf, or employs
agents to do the same, or any person who succeeds to the interest of
a developer by sale, lease, assignment, mortgage, or other transfer,
but the term includes only those persons who offer time-share
interests for disposition in the ordinary course of business.
(j) "Dispose" or "disposition" means a voluntary transfer or
assignment of any legal or equitable interest in a time-share plan,
other than the transfer, assignment, or release of a security
interest.
(k) "Exchange company" means any person owning or operating, or
both owning and operating, an exchange program.
() "Exchange program" means any method, arrangement, or procedure
for the voluntary exchange of time-share interests or other property
interests. The term does not include the assignment of the right to
use and occupy accommodations to owners of time-share interests
within a single site time-share plan. Any method, arrangement, or
procedure that otherwise meets this definition in which the purchaser'
s total contractual financial obligation exceeds three thousand
dollars ($3,000) per any individual, recurring time-share period,
shall be regulated as a time-share plan in accordance with this
chapter. For purposes of determining the purchaser's total
contractual financial obligation, amounts to be paid as a result of
renewals and options to renew shall be included in the term except
for the following: (1) amounts to be paid as a result of any optional
renewal that a purchaser, in his or her sole discretion may elect to
exercise, (2) amounts to be paid as a result of any automatic
renewal in which the purchaser has a right to terminate during the
renewal period at any time and receive a pro rata refund for the
remaining unexpired renewal term, or (3) amounts to be paid as a
result of an automatic renewal in which the purchaser receives a
written notice no less than 30 nor more than 90 days prior to the
date of renewal informing the purchaser of the right to terminate
prior to the date of renewal. Notwithstanding these exceptions, if
the contractual financial obligation exceeds three thousand dollars
($3,000) for any three-year period of any renewal term, amounts to be
paid as a result of that renewal shall be included in determining
the purchaser's total contractual financial obligation.
(m) "Incidental benefit" is an accommodation, product, service,
discount, or other benefit, other than an exchange program, that is
offered to a prospective purchaser of a time-share interest prior to
the end of the rescission period set forth in Section 11238, the
continuing availability of which for the use and enjoyment of owners
of time-share interests in the time-share plan is limited to a term
of not more than three years, subject to renewal or extension. The
term shall not include an offer of the use of the accommodation,
product, service, discount, or other benefit on a free or discounted
one-time basis.
(n) "Managing entity" means the person who undertakes the duties,
responsibilities, and obligations of the management of a time-share
plan.
(o) "Offer" means any inducement, solicitation, or other attempt,
whether by marketing, advertisement, oral or written presentation, or
any other means, to encourage a person to acquire a time-share
interest in a time-share plan, other than as security for an
obligation.
(p) "Person" means a natural person, corporation, limited
liability company, partnership, joint venture, association, estate,
trust, government, governmental subdivision or agency, or other legal
entity, or any combination thereof.
(q) "Promotion" means a plan or device, including one involving
the possibility of a prospective purchaser receiving a vacation,
discount vacation, gift, or prize, used by a developer, or an agent,
independent contractor, or employee of any of the same on behalf of
the developer, in connection with the offering and sale of time-share
interests in a time-share plan.
(r) "Public report" means a preliminary public report, conditional
public report, final public report, or other such disclosure
document authorized for use in connection with the offering of
time-share interests pursuant to this chapter.
(s) "Purchaser" means any person, other than a developer, who by
means of a voluntary transfer for consideration acquires a legal or
equitable interest in a time-share plan other than as security for an
obligation.
(t) "Purchase contract" means a document pursuant to which a
developer becomes legally obligated to sell, and a purchaser becomes
legally obligated to buy, a time-share interest.
(u) "Reservation system" means the method, arrangement, or
procedure by which a purchaser, in order to reserve the use or
occupancy of any accommodation of a multisite time-share plan for one
or more time-share periods, is required to compete with other
purchasers in the same multisite time-share plan, regardless of
whether the reservation system is operated and maintained by the
multisite time-share plan managing entity, an exchange company, or
any other person. If a purchaser is required to use an exchange
program as the purchaser's principal means of obtaining the right to
use and occupy accommodations in a multisite time-share plan, that
arrangement shall be deemed a reservation system. When an exchange
company utilizes a mechanism for the exchange of use of time-share
periods among members of an exchange program, that utilization is not
a reservation system of a multisite time-share plan.
(v) "Short-term product" means the right to use accommodations on
a one-time or recurring basis for a period or periods not to exceed
30 days per stay and for a term of three years or less, and that
includes an agreement that all or a portion of the consideration paid
by a person for the short-term product will be applied to or
credited against the price of a future purchase of a time-share
interest or that the cost of a future purchase of a time-share
interest will be fixed or locked-in at a specified price.
(w) "Time-share instrument" means one or more documents, by
whatever name denominated, creating or governing the operation of a
time-share plan and includes the declaration dedicating
accommodations to the time-share plan.
(x) "Time-share interest" means and includes either of the
following:
(1) A "time-share estate," which is the right to occupy a
time-share property, coupled with a freehold estate or an estate for
years with a future interest in a time-share property or a specified
portion thereof.
(2) A "time-share use," which is the right to occupy a time-share
property, which right is neither coupled with a freehold interest,
nor coupled with an estate for years with a future interest, in a
time-share property.
(y) "Time-share period" means the period or periods of time when
the purchaser of a time-share plan is afforded the opportunity to use
the accommodations of a time-share plan.
(z) "Time-share plan" means any arrangement, plan, scheme, or
similar device, other than an exchange program, whether by membership
agreement, sale, lease, deed, license, right to use agreement, or by
any other means, whereby a purchaser, in exchange for consideration,
receives ownership rights in or the right to use accommodations for
a period of time less than a full year during any given year, on a
recurring basis for more than one year, but not necessarily for
consecutive years. A time-share plan may be either of the following:
(1) A "single site time-share plan," which is the right to use
accommodations at a single time-share property.
(2) A "multisite time-share plan," which includes either of the
following:
(A) A "specific time-share interest," which is the right to use
accommodations at a specific time-share property, together with use
rights in accommodations at one or more other component sites created
by or acquired through the time-share plan's reservation system.
(B) A "nonspecific time-share interest," which is the right to use
accommodations at more than one component site created by or
acquired through the time-share plan's reservation system, but
including no specific right to use any particular accommodations.
(aa) "Time-share property" means one or more accommodations
subject to the same time-share instrument, together with any other
property or rights to property appurtenant to those accommodations.
SEC. 66. Section 11225 of the Business
and Professions Code is amended to read:
11225. A person shall not be required to register a time-share
plan with the commissioner pursuant to this chapter if any of the
following applies:
(a) The person is an owner of a time-share interest who has
acquired the time-share interest for the person's own use and
occupancy and who later offers it for resale.
(b) The person is a managing entity or an association that is not
otherwise a developer of a time-share plan in its own right, solely
while acting as an association or under a contract with an
association to offer or sell a time-share interest transferred to the
association through foreclosure, deed in lieu of foreclosure, or
gratuitous transfer, if these acts are performed in the regular
course of, or as an incident to, the management of the association
for its own account in the time-share plan. Notwithstanding the
exemption from registration, the association or managing entity shall
provide each purchaser of a time-share interest covered by this
subdivision a copy of the time-share instruments, a copy of the
then-current budget, a written statement of the then-current
assessment amounts, and shall provide the purchaser the opportunity
to rescind the purchase within seven days after receipt of these
documents. Immediately prior to the space reserved in the contract
for the signature of the purchaser, the association or managing
entity shall disclose, in conspicuous type, substantially the
following notice of cancellation:
YOU MAY CANCEL THIS CONTRACT WITHOUT ANY PENALTY OR OBLIGATION WITHIN
SEVEN CALENDAR DAYS OF RECEIPT OF THE PUBLIC REPORT OR AFTER THE
DATE YOU SIGN THIS CONTRACT, WHICHEVER DATE IS LATER. IF YOU DECIDE
TO CANCEL THIS CONTRACT, YOU MUST NOTIFY THE ASSOCIATION (OR MANAGING
ENTITY) IN WRITING OF YOUR INTENT TO CANCEL. YOUR NOTICE OF
CANCELLATION SHALL BE EFFECTIVE UPON THE DATE SENT AND SHALL BE SENT
TO (NAME OF ASSOCIATION OR MANAGING ENTITY) AT (ADDRESS OF
ASSOCIATION OR MANAGING ENTITY). YOUR NOTICE OF CANCELLATION MAY ALSO
BE SENT BY FACSIMILE TO (FACSIMILE NUMBER OF THE ASSOCIATION OR
MANAGING ENTITY) OR BY HAND-DELIVERY. ANY ATTEMPT TO OBTAIN A WAIVER
OF YOUR CANCELLATION RIGHT IS VOID AND OF NO EFFECT.
(c) The person is conveyed, assigned, or transferred more than
seven time-share interests from a developer in a single voluntary or
involuntary transaction and subsequently conveys, assigns, or
transfers all of the time-share interests received from the developer
to a single purchaser in a single transaction.
(d) (1) The developer is offering or disposing of a time-share
interest to a purchaser who has previously acquired a time-share
interest from the same developer if the developer has a time-share
plan registered under this chapter, which was originally approved by
the commissioner within the preceding seven years, and the developer
complies in all respects with the provisions of Section 11245, and,
further, provides the purchaser with (A) a cancellation period of at
least seven days, (B) all the time-share disclosure documents that
are required to be provided to purchasers as if the sale occurred in
the state or jurisdiction where the time-share property is located,
and (C) the following disclaimer in conspicuous type:
WARNING: THE CALIFORNIA DEPARTMENT OF REAL ESTATE
FINANCIAL SERVICES HAS NOT EXAMINED THIS OFFERING,
INCLUDING, BUT NOT LIMITED TO, THE CONDITION OF TITLE, THE STATUS OF
BLANKET LIENS ON THE PROJECT (IF ANY), ARRANGEMENTS TO ASSURE PROJECT
COMPLETION, ESCROW PRACTICES, CONTROL OVER PROJECT MANAGEMENT,
RACIALLY DISCRIMINATORY PRACTICES (IF ANY), TERMS, CONDITIONS, AND
PRICE OF THE OFFER, CONTROL OVER ANNUAL ASSESSMENTS (IF ANY), OR THE
AVAILABILITY OF WATER, SERVICES, UTILITIES, OR IMPROVEMENTS. IT MAY
BE ADVISABLE FOR YOU TO CONSULT AN ATTORNEY OR OTHER KNOWLEDGEABLE
PROFESSIONAL WHO IS FAMILIAR WITH REAL ESTATE AND DEVELOPMENT LAW IN
THE STATE WHERE THIS TIME-SHARE PROPERTY IS SITUATED.
(2) By making such an offering or disposition, the person is
deemed to consent to the jurisdiction of the commissioner in the
event of a dispute with the purchaser in connection with the offering
or disposition.
(e) It is a single site time-share plan located outside of the
boundaries of the United States or component site of a specific
time-share interest multisite time-share plan located wholly outside
of the boundaries of the United States, or a nonspecific time-share
interest multisite time-share plan in which all component sites are
located wholly outside of the boundaries of the United States.
However, it is unlawful and a violation of this chapter for a person,
in this state, to sell or lease or offer for sale or lease a
time-share interest in such a time-share plan, located outside the
United States, unless the printed material, literature, advertising,
or invitation in this state relating to that sale, lease, or offer
clearly and conspicuously contains the following disclaimer in
capital letters of at least 10-point type:
WARNING: THE CALIFORNIA DEPARTMENT OF REAL ESTATE
FINANCIAL SERVICES HAS NOT EXAMINED THIS OFFERING,
INCLUDING, BUT NOT LIMITED TO, THE CONDITION OF TITLE, THE STATUS OF
BLANKET LIENS ON THE PROJECT (IF ANY), ARRANGEMENTS TO ASSURE PROJECT
COMPLETION, ESCROW PRACTICES, CONTROL OVER PROJECT MANAGEMENT,
RACIALLY DISCRIMINATORY PRACTICES (IF ANY), TERMS, CONDITIONS, AND
PRICE OF THE OFFER, CONTROL OVER ANNUAL ASSESSMENTS (IF ANY), OR THE
AVAILABILITY OF WATER, SERVICES, UTILITIES, OR IMPROVEMENTS. IT MAY
BE ADVISABLE FOR YOU TO CONSULT AN ATTORNEY OR OTHER KNOWLEDGEABLE
PROFESSIONAL WHO IS FAMILIAR WITH REAL ESTATE AND DEVELOPMENT LAW IN
THE COUNTRY WHERE THIS TIME-SHARE PROPERTY IS SITUATED.
(1) If an offer of time-share interest in a time-share plan
described in subdivision (e) is not initially made in writing, the
foregoing disclaimer shall be received by the offeree in writing
prior to a visit to a location, sales presentation, or contact with a
person representing the offeror, when the visit or contact was
scheduled or arranged by the offeror or its representative. The
deposit of the disclaimer in the United States mail, addressed to the
offeree and with first-class postage prepaid, at least five days
prior to the scheduled or arranged visit or contact, shall be deemed
to constitute delivery for purposes of this section.
(2) If any California resident is presented with an agreement or
purchase contract to lease or purchase a time-share interest as
described in subdivision (e), where an offer to lease or purchase
that time-share interest was made to that resident in California, a
copy of the disclaimer set forth in subdivision (e) shall be inserted
in at least 10-point type at the top of the first page of that
agreement or purchase contract and shall be initialed by that
California resident.
(3) Nothing contained in this subdivision shall be deemed to
exempt from registration in this state a nonspecific time-share
interest multisite time-share plan in which any component site in the
time-share plan is located in the United States.
SEC. 67. Section 11232 of the Business
and Professions Code is amended to read:
11232. (a) The commissioner may by regulation prescribe filing
fees in connection with applications to the Department of
Real Estate Financial Services for a public
report pursuant to the provisions of this chapter that are lower than
the maximum fees specified in subdivision (b) if the commissioner
determines that the lower fees are sufficient to offset the costs and
expenses incurred in the administration of this chapter. The
commissioner shall hold at least one hearing each calendar year to
determine if lower fees than those specified in subdivision (b)
should be prescribed.
(b) The filing fees for an application for a public report to be
issued under authority of this chapter shall not exceed the following
for each time-share plan, location, or phase of the time-share plan
in which interests are to be offered for sale or lease:
(1) One thousand seven hundred dollars ($1,700) plus ten dollars
($10) for each time-share interest to be offered for an original
public report application.
(2) Six hundred dollars ($600) plus ten dollars ($10) for each
time-share plan interest to be offered that was not permitted to be
offered under the public report to be renewed for a renewal public
report or permit application.
(3) Five hundred dollars ($500) plus ten dollars ($10) for each
time-share interest to be offered under the amended public report for
which a fee has not previously been paid for an amended public
report application.
(4) Five hundred dollars ($500) for a conditional public report
application.
(c) Fees collected by the commissioner under authority of this
chapter shall be deposited into the Real Estate Fund pursuant to
Chapter 6 (commencing with Section 10450) of Part 1. Fees received by
the commissioner pursuant to this article shall be deemed earned
upon receipt. No part of any fee is refundable unless the
commissioner determines that it was paid as a result of mistake or
inadvertency. This section shall remain in effect unless it is
superseded pursuant to Section 10266 or subdivision (a) of Section
10266.5, whichever is applicable.
SEC. 68. Section 11243 of the Business
and Professions Code is amended to read:
11243. The developer shall comply with the following escrow
requirements:
(a) A developer of a time-share plan shall deposit into an escrow
account in an acceptable escrow depository 100 percent of all funds
that are received during the purchaser's rescission period. An
acceptable escrow depository includes, when qualified to do business
in this state, escrow agents licensed by the Commissioner of
Corporations Financial Services , banks, trust
companies, savings and loan associations, title insurers, and
underwritten title companies. The deposit of these funds shall be
evidenced by an executed escrow agreement between the escrow agent
and the developer, that shall include provisions that state the
following:
(1) Funds may be disbursed to the developer by the escrow agent
from the escrow account only after expiration of the purchaser's
rescission period and in accordance with the purchase contract,
subject to subdivision (b).
(2) If a prospective purchaser properly cancels the purchase
contract pursuant to its terms, the funds shall be paid to the
prospective purchaser or paid to the developer if the prospective
purchaser's funds have been previously refunded by the developer.
(b) If a developer contracts to sell a time-share interest and the
construction of any property in which the time-share interest is
located has not been completed, the developer, upon expiration of the
rescission period, shall continue to maintain in an escrow account
all funds received by or on behalf of the developer from the
prospective purchaser under his or her purchase contract. The
commissioner shall establish, by regulation, the types of
documentation which shall be required for evidence of completion,
including, but not limited to, a certificate of occupancy, a
certificate of substantial completion, or an inspection by the State
Fire Marshal designee or an equivalent public safety inspection
agency in the applicable jurisdiction. Unless the developer submits
financial assurances, in accordance with subdivision (c), funds shall
not be released from escrow until a certificate of occupancy, or its
equivalent, has been obtained and the rescission period has passed,
and the time-share interest can be transferred free and clear of
blanket encumbrances, including mechanics' liens. Funds to be
released from escrow shall be released as follows:
(1) If a prospective purchaser properly cancels the purchase
contract pursuant to its terms, the funds shall be paid to the
prospective purchaser or paid to the developer if the prospective
purchaser's funds have been previously refunded by the developer.
(2) If a prospective purchaser defaults in the performance of the
prospective purchaser's obligations under the purchase contract, the
funds shall be paid to the developer.
(3) If the funds of a prospective purchaser have not been
previously disbursed in accordance with the provisions of this
subdivision, they may be disbursed to the developer by the escrow
agent upon the issuance of acceptable evidence of completion of
construction.
(c) In lieu of the provisions in subdivisions (a) and (b), the
commissioner may accept from the developer a surety bond, escrow
bond, irrevocable letter of credit, or other financial assurance or
arrangement acceptable to the commissioner. Any acceptable financial
assurance shall be in an amount equal to or in excess of the lesser
of (1) the funds that would otherwise be placed in escrow, or (2) in
an amount equal to the cost to complete the incomplete property in
which the time-share interest is located. However, in no event shall
the amount be less than the amount of funds that would otherwise be
placed in escrow pursuant to paragraph (1) of subdivision (a).
(d) The developer shall provide escrow account information to the
commissioner and shall execute in writing an authorization consenting
to an audit or examination of the account by the commissioner on
forms provided by the commissioner. The developer shall comply with
the reconciliation and records requirements established by regulation
by the commissioner. The developer shall make documents related to
the escrow account or escrow obligation available to the commissioner
upon the department's request. The escrow agent shall maintain any
disputed funds in the escrow account until either of the following
occurs:
(1) Receipt of written direction agreed to by signature of all
parties.
(2) Deposit of the funds with a court of competent jurisdiction in
which a civil action regarding the funds has been filed.
SEC. 69. Section 11301 of the Business
and Professions Code is repealed.
11301. There is hereby created within the Business,
Transportation and Housing Agency an Office of Real Estate Appraisers
to administer and enforce this part.
SEC. 70. Section 11302 of the Business
and Professions Code is amended to read:
11302. For the purpose of applying this part, the following
terms, unless otherwise expressly indicated, shall mean and have the
following definitions:
(a) "Agency" means the Business, Transportation and Housing
Agency.
(b) "Appraisal" means a written statement independently and
impartially prepared by a qualified appraiser setting forth an
opinion in a federally related transaction as to the market value of
an adequately described property as of a specific date, supported by
the presentation and analysis of relevant market information.
The term "appraisal" does not include an opinion given by a real
estate licensee or engineer or land surveyor in the ordinary course
of his or her business in connection with a function for which a
license is required under Chapter 7 (commencing with Section 6700) or
Chapter 15 (commencing with Section 8700) of Division 3, or Chapter
3 (commencing with Section 10130) or Chapter 7 (commencing with
Section 10500) and the opinion shall not be referred to as an
appraisal. This part does not apply to a probate referee acting
pursuant to Sections 400 to 408, inclusive, of the Probate Code
unless the appraised transaction is federally related.
(c) "Appraisal Foundation" means the Appraisal Foundation that was
incorporated as an Illinois not-for-profit corporation on November
30, 1987.
(d) "Appraisal Subcommittee" means the Appraisal Subcommittee of
the Federal Financial Institutions Examination Council.
(e) "Director" means the Director of the Office of Real Estate
Appraisers.
(e) "Commissioner" means the Commissioner of Financial
Services. All references to "commissioner" shall be deemed to refer
to the Commissioner of Financial Services.
(f) "Department" means the Department of Financial Services. All
references to the "department" shall be deemed to refer to the
Department of Financial Services.
(f)
(g) "Federal financial institutions regulatory agency"
means the Federal Reserve Board, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency, Office of
Thrift Supervision, Federal Home Loan Bank System, National Credit
Union Administration, the Resolution Trust Corporation, and any other
agency determined by the director com
missioner to have jurisdiction over transactions subject
to this part.
(g)
(h) "Federally related real estate appraisal activity"
means the act or process of making or performing an appraisal on real
estate or real property in a federally related transaction and
preparing an appraisal as a result of that activity.
(h)
(i) "Federally related transaction" means any real
estate-related financial transaction which a federal financial
institutions regulatory agency engages in, contracts for or regulates
and which requires the services of a state licensed real estate
appraiser regulated by this part. This term also includes any
transaction identified as such by a federal financial institutions
regulatory agency.
(i)
(j) "License" means any license, certificate, permit,
registration, or other means issued by the office
department authorizing the person to whom it is issued to
act pursuant to this part within this state.
(j)
(k) "Licensure" means the procedures and requirements a
person shall comply with in order to qualify for issuance of a
license and includes the issuance of the license.
(k) "Office" means the Office of Real Estate Appraisers.
() "Secretary" means the Secretary of the Business, Transportation
and Housing Agency.
(m)
(l) "State licensed real estate appraiser" is a person
who is issued and holds a current valid license under this part.
(n)
(m) "Uniform Standards of Professional Appraisal
Practice" are the standards of professional appraisal practice
established by the Appraisal Foundation.
(o)
(n) "Course provider" means a person or entity that
provides educational courses related to professional appraisal
practice.
SEC. 71. Section 11310 of the Business
and Professions Code is repealed.
11310. The Governor shall appoint, subject to confirmation by the
Senate, the Director of the Office of Real Estate Appraisers who
shall, in consultation with the Governor and secretary, administer
the licensing and certification program for real estate appraisers.
In making the appointment, consideration shall be given to the
qualifications of an individual that demonstrate knowledge of the
real estate appraisal profession.
(a) The director shall serve at the pleasure of the Governor. The
salary for the director shall be fixed and determined by the
secretary with approval of the Department of Personnel
Administration.
(b) The director shall not be actively engaged in the appraisal
business or any other affected industry for the term of appointment,
and thereafter the director shall be subject to Section 87406 of the
Government Code.
(c) The director, in consultation with the secretary and in
accordance with the State Civil Service Act, may appoint and fix the
compensation of legal, clerical, technical, investigation, and
auditing personnel as may be necessary to carry out this part. All
personnel shall perform their respective duties under the supervision
and direction of the director.
(d) The director may appoint not more than four deputy directors
as he or she deems appropriate. The deputy directors shall perform
their respective duties under the supervision and direction of the
director.
(e) Every power granted to or duty imposed upon the director under
this part may be exercised or performed in the name of the director
by the deputy directors, subject to conditions and limitations as the
director may prescribe.
SEC. 72. Section 11313 of the Business
and Professions Code is repealed.
11313. The office is under the supervision and control of the
secretary. The duty of enforcing and administering this part is
vested in the director and he or she is responsible to the secretary
therefor. The director shall adopt and enforce rules and regulations
as are determined reasonably necessary to carry out the purposes of
this part. Those rules and regulations shall be adopted pursuant to
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code.
SEC. 73. Section 11314 of the Business
and Professions Code is amended to read:
11314. The office department is
required to include in its regulations requirements for licensure and
discipline of real estate appraisers that ensure protection of the
public interest and comply in all respects with Title XI of the
Financial Institutions Reform, Recovery , and Enforcement
Act of 1989, Public Law 101-73 and any subsequent amendments thereto.
Requirements for each level of licensure shall, at a minimum, meet
the criteria established by the Appraiser Qualification Board of the
Appraisal Foundation.
SEC. 74. Section 11315 of the Business
and Professions Code is amended to read:
11315. (a) The director commissioner
may issue to a licensee, applicant for licensure, person who
acts in a capacity that requires a license under this part, course
provider, applicant for course provider accreditation, or a person
who, or entity that, acts in a capacity that requires course provider
accreditation a citation that may contain an order to pay an
administrative fine assessed by the office
department if the person or entity is in violation of this part
or any regulations adopted to carry out its purposes.
(b) A citation shall be written and describe with particularity
the nature of the violation, including a specific reference to the
provision of law determined to have been violated.
(c) If appropriate, the citation may contain an order of abatement
fixing a reasonable time for abatement of the violation.
(d) (1) If appropriate, the citation may contain an order to
enroll in and successfully complete additional basic or continuing
education courses.
(2) When a citation imposes an education course or courses, the
completion of the course or courses by the licensee shall be subject
to the following conditions:
(A) The citation imposing the education requirement may specify
the specific course content, the number of hours to be completed, the
date by which the course is to be completed, and the method by which
satisfaction of the order is to be reported to the office
department .
(B) An education course imposed by citation may not be credited
towards the licensee's continuing education requirements pursuant to
Section 11360.
(C) Only courses accredited by the office
department shall be accepted for purposes of fulfilling
education imposed by citation.
(D) Any failure to satisfactorily complete or timely report an
education course to the office department
by the date specified in the citation shall result in the
automatic suspension of the licensee's real estate appraiser license
as of that date.
(E) Reinstatement of a license suspended pursuant to subparagraph
(D) shall be made only if all of the following events occur:
(i) Satisfactory verification of the completion of the education
course or courses imposed by the citation.
(ii) Completion and filing of a reinstatement application.
(iii) Payment of all applicable fees, fines, or penalties.
(e) In no event shall an administrative fine assessed by the
office department by citation or order
exceed ten thousand dollars ($10,000) per violation. In assessing a
fine, the office department shall give
due consideration to the appropriateness of the amount of the fine
with respect to factors such as the gravity of the violation, the
good faith of the person who committed the violation, and the history
of previous violations.
(f) A citation or fine assessment issued pursuant to a citation
shall inform the person cited that, if he or she desires a hearing to
contest the finding of a violation, he or she must request a hearing
by written notice to the office department
within 30 days of the date of issuance of the citation or
assessment. Hearings shall be held pursuant to Chapter 5 (commencing
with Section 11500) of Part 1 of Division 3 of Title 2 of the
Government Code. The citation or fine assessment shall also inform
the person cited that failure to respond to the citation or fine
assessment shall result in any order or administrative fine imposed
becoming final, and that any order or administrative fine shall
constitute an enforceable civil judgment in addition to any other
penalty or remedy available pursuant to law.
(g) (1) If a licensee, applicant for licensure, person who acts in
a capacity that requires a license under this part, course provider,
applicant for course provider accreditation, or a person who, or
entity that, acts in a capacity that requires course provider
accreditation fails to pay a fine, penalty, or required installment
payment on the fine or penalty by the date when it is due, the
director commissioner shall charge him
or her interest and a penalty of 10 percent of the fine or
installment payment amount. Interest shall be charged at the pooled
money investment rate.
(2) Failure of a licensee, applicant for licensure, person who
acts in a capacity that requires a license under this part, course
provider, applicant for course provider accreditation, or a person
who, or entity that, acts in a capacity that requires course provider
accreditation to pay a fine or required installment payment on the
fine within 30 days of the date ordered in the citation, unless the
citation is being appealed, shall be cause for additional
disciplinary action by the office department
.
(3) If a citation is not contested and a fine or fine payment is
not paid within 30 days of the date ordered in the citation or other
order of the director commissioner ,
the full amount of the unpaid balance of the assessed fine shall be
added to any fee for renewal of a license. A license shall not be
renewed prior to payment of the renewal fee and fine.
(4) The director commissioner may
order the full amount of any fine to be immediately due and payable
if any payment due on a fine is not received by the office
department within 30 days of its due date.
(5) Any fine, or interest thereon, not paid within 30 days of a
final citation or order shall constitute a valid and enforceable
civil judgment.
(6) A certified copy of the final order, or the citation with
certification by the office department
that no request for hearing was received within 30 days of the date
of issuance of the citation, shall be conclusive proof of the civil
judgment, its terms, and its validity.
(h) A citation may be issued without the assessment of an
administrative fine.
(i) Any administrative fine or penalty imposed pursuant to this
section shall be in addition to any other criminal or civil penalty
provided for by law.
(j) Administrative fines collected pursuant to this section shall
be deposited in the Real Estate Appraisers Regulation Fund.
SEC. 75. Section 11315.5 of the
Business and Professions Code is amended to read:
11315.5. Notwithstanding any other provision of law, the
office department may, at any time the
director commissioner deems it to be in the
public interest, enter into a settlement of any administrative
allegation of violation of this part, or of regulations promulgated
pursuant thereto, upon any terms and conditions as the
director commissioner deems appropriate. Those
settlements may include, but are not limited to, a plan for abatement
of the violation or rehabilitation or requalification of the
applicant, licensed appraiser, course provider, or person acting in a
capacity requiring a license or course provider accreditation within
a specified time.
SEC. 76. Section 11316 of the Business
and Professions Code is amended to read:
11316. (a) The director commissioner
may assess a fine against a licensee, applicant for licensure,
person who acts in a capacity that requires a license under this
part, course provider, applicant for course provider accreditation,
or a person who, or entity that, acts in a capacity that requires
course provider accreditation for violation of this part or any
regulations adopted to carry out its purposes.
(b) (1) Failure of a licensee, applicant for licensure, person who
acts in a capacity that requires a license under this part, course
provider, applicant for course provider accreditation, or a person
who, or entity that, acts in a capacity that requires course provider
accreditation to pay a fine or make a fine payment within 30 days of
the date of assessment shall result in disciplinary action by the
office department . If a licensee,
applicant for licensure, person who acts in a capacity that requires
a license under this part, course provider, applicant for course
provider accreditation, or a person who, or entity that, acts in a
capacity that requires course provider accreditation fails to pay a
fine within 30 days, the director
commissioner shall charge him or her interest and a penalty of
10 percent of the fine or payment amount. Interest shall be charged
at the pooled money investment rate.
(2) If a fine is not paid, the full amount of the assessed fine
shall be added to any fee for renewal of a license. A license shall
not be renewed prior to payment of the renewal fee and fine.
(3) The director commissioner may
order the full amount of any fine to be immediately due and payable
if any payment on the fine, or portion thereof, is not received
within 30 days of its due date.
(4) Any fine, or interest thereon, not paid within 30 days of a
final order shall constitute a valid and enforceable civil judgment.
(5) A certified copy of the final order shall be conclusive proof
of the validity of the order of payment and the terms of payment.
(c) Any administrative fine or penalty imposed pursuant to this
section shall be in addition to any other criminal or civil penalty
provided for by law.
(d) Administrative fines collected pursuant to this section shall
be deposited in the Real Estate Appraisers Regulation Fund.
SEC. 77. Section 11317 of the Business
and Professions Code is amended to read:
11317. The office department shall
publish a summary of public disciplinary actions taken by the
office department , including
resignations while under investigation and the violations upon which
these actions are based, which shall meet, at a minimum, the
requirements of the appraisal subcommittee. The office
department shall not publish identifying
information with respect to private reprovals or letters of warning,
which shall remain confidential.
SEC. 78. Section 11318 of the Business
and Professions Code is amended to read:
11318. (a) A licensee, applicant for licensure, course provider,
or applicant for course provider accreditation shall report to the
office department , in writing, the
occurrence of any of the following events within 30 days of the date
he or she has knowledge of any of these events:
(1) The conviction of the licensee, applicant for licensure,
course provider, or applicant for course provider accreditation of
any of the following:
(A) A felony.
(B) Any crime related to the qualifications, functions, or duties
of a licensee, or to acts or activities committed in the course of
the licensee's or course provider's practice.
As used in this section, a conviction includes an initial plea,
verdict, or finding of guilty, plea of no contest, or pronouncement
of sentence by a trial court even though that conviction may not be
final, the sentence may not be imposed, or all appeals may not be
exhausted.
(2) The cancellation, revocation, or suspension of a license,
other authority to practice, or refusal to renew a license or other
authority to practice as an occupational or professional licensee or
course provider, by any other regulatory entity.
(3) The cancellation, revocation, or suspension of the right to
practice before any governmental body or agency.
(b) The report required by subdivision (a) shall be signed by the
licensee, applicant for licensure, course provider, or applicant for
course provider accreditation and clearly set forth the facts that
constitute the reportable event. The report shall include the title
of the matter, court or agency name, docket number, and dates of
occurrence of the reportable event.
(c) The licensee, applicant for licensure, course provider, or
applicant for course provider accreditation shall also promptly
obtain and submit a certified copy of the police or administrative
agency's investigative report and certified copies of the court or
administrative agency's docket, complaint or accusation, and judgment
or other order.
(d) A licensee, applicant for licensure, course provider, or
applicant for course provider accreditation shall promptly respond to
oral or written inquiries from the office
department concerning the reportable events.
SEC. 79. Section 11325 of the Business
and Professions Code is amended to read:
11325. (a) The director commissioner
shall adopt regulations which determine the parameters of
appraisal work which may be performed by licensed appraisers.
(b) Regulations adopted by the director
commissioner pursuant to this section shall, at a minimum, meet
the standards established by federal financial institution
regulatory agencies as required by Section 1112 of Title XI of the
Financial Institutions Reform, Recovery , and Enforcement
Act of 1989, Public Law 101-73.
SEC. 80. Section 11326 of the Business
and Professions Code is amended to read:
11326. (a) The county assessor shall, upon request, disclose
information, furnish abstracts, copies of maps, construction permits,
notices of completion, sales confirmation, and permit access to all
records in his or her office or branch offices, to the
Office of Real Estate Appraisers department when
it is conducting an investigation related to professional conduct of
appraisers.
(b) Whenever the assessor discloses information, furnishes
abstracts, and all of the above and permits access to records to the
Office of Real Estate Appraisers department
, the office department shall
reimburse the assessor for any reasonable cost incurred as a result
thereof.
SEC. 81. Section 11327 of the Business
and Professions Code is amended to read:
11327. The director commissioner
shall adopt regulations governing the process and procedure of
applying for a trainee license, which shall meet, at a minimum, the
requirements of the Appraisal Foundation.
SEC. 82. Section 11328 of the Business
and Professions Code is amended to read:
11328. To substantiate documentation of appraisal experience, or
to facilitate the investigation of illegal or unethical activities by
a licensee, applicant, or other person acting in a capacity that
requires a license, that licensee, applicant, or person shall, upon
the request of the director commissioner
, submit copies of appraisals, or any work product which is
addressed by the Uniform Standards of Professional Appraisal
Practice, and all supporting documentation and data to the
office department . This material shall be
confidential in accordance with the confidentiality provisions of the
Uniform Standards of Professional Appraisal Practice.
SEC. 83. Section 11340 of the Business
and Professions Code is amended to read:
11340. The director commissioner
shall adopt regulations governing the process and the procedure of
applying for a license which shall include, but not be limited to,
necessary experience or education, equivalency, and minimum
requirements of the Appraisal Foundation, if any.
(a) For purposes of the educational background requirements
established under this section, the director
commissioner shall grant credits for any courses taken on real
estate appraisal ethics or practices pursuant to Section 10153.2, or
which are deemed by the director commissioner
to meet standards established pursuant to this part and
federal law.
(b) For the purpose of implementing and applying this section, the
director commissioner shall prescribe
by regulation "equivalent courses" and "equivalent experience." The
experience of employees of an assessor's office or of the State Board
of Equalization in setting forth opinions of value of real property
for tax purposes shall be deemed equivalent to experience in
federally related real estate appraisal activity. Notwithstanding any
other law, a holder of a valid real estate broker license shall be
deemed to have completed appraisal license application experience
requirements upon proof that he or she has accumulated 1,000 hours of
experience in the valuation of real property.
(c) The director commissioner shall
adopt regulations for licensure which shall meet, at a minimum, the
requirements and standards established by the Appraisal Foundation,
the Resolution Trust Corporation, and the federal financial
institutions regulatory agencies acting pursuant to Section 1112 of
the Financial Institutions Reform , Recovery ,
and Enforcement Act of 1989, Public Law 101-73 (FIRREA). The
director commissioner shall, by regulation,
require the application for a real estate appraiser license to
include the applicant's social security number.
(d) In evaluating the experience of any applicant for a license,
regardless of the number of hours required of that applicant, the
director commissioner shall apply the
same standards to the experience of all applicants.
(e) No license shall be issued to an applicant who is less than 18
years of age.
SEC. 84. Section 11341 of the Business
and Professions Code is amended to read:
11341. A license issued with an effective date of January 1,
2000, or later shall be valid for two years unless otherwise extended
or limited by the director commissioner
.
SEC. 85. Section 11344 of the Business
and Professions Code is amended to read:
11344. (a) Notwithstanding Section 11341, a temporary license may
be issued pending the outcome of the fingerprint and background
check or as otherwise prescribed by the director
commissioner . A temporary license is valid for up to 150
days. Unless otherwise prohibited pursuant to Section 11350.6 of the
Welfare and Institutions Code, a temporary license may be renewed
once at the discretion of the director
commissioner .
(b) The director commissioner may
issue a probationary license as follows:
(1) By term.
(2) By conditions to be observed in the exercise of the privileges
granted.
SEC. 86. Section 11350 of the Business
and Professions Code is amended to read:
11350. The director commissioner
shall adopt regulations governing the process and procedure of
applying for reciprocity, which shall meet, at a minimum, the
requirements of the Appraisal Subcommittee.
SEC. 87. Section 11352 of the Business
and Professions Code is amended to read:
11352. The director commissioner
shall adopt regulations governing the process and procedure of
applying for temporary practice, which shall meet, at a minimum, the
requirements of the Appraisal Subcommittee.
SEC. 88. Section 11360 of the Business
and Professions Code is amended to read:
11360. (a) The director commissioner
shall adopt regulations governing the process and procedures
for renewal of a license which shall include, but not be limited to,
continuing education requirements, which shall be reported on the
basis of four-year continuing education cycles.
(b) An applicant for renewal of a license shall be required to
demonstrate his or her continuing fitness to hold a license prior to
its renewal. Applicants shall also fulfill continuing education
requirements established pursuant to this section and may certify
that they have read and understand all applicable California and
federal laws and regulations pertaining to the licensing and
certification of real estate appraisers in lieu of being required to
take a minimum of four hours of federal and California
appraisal-related statutory and regulatory law every four years.
SEC. 89. Section 11361 of the Business
and Professions Code is amended to read:
11361. The director commissioner
shall adopt regulations for implementation of this chapter to ensure
that persons engaged in appraisal activity have current knowledge of
real estate appraisal theories, practices, and techniques which will
provide a high degree of service and protection to the public.
SEC. 90. Section 11400 of the Business
and Professions Code is amended to read:
11400. (a) Initial application fees shall be paid to the
office department at the time of application.
(b) All issuance-related fees shall be paid to the office
department at the time the issuance application
is submitted to the office department
.
(c) All fees shall be paid by cashier's check, certified check,
money order, or government purchase order. In addition, the
office department may accept personal checks or
credit cards for the payment of fees. All fees shall be deemed earned
by the office department upon receipt
and are refundable at the discretion of the director
commissioner .
SEC. 91. Section 11401 of the
Business and Professions Code is amended to read:
11401. (a) The fee to take an examination or reexamination for a
license shall be set at an amount not to exceed the cost to the
office department as determined by
competitive bid.
(b) The director commissioner may
provide that the applicant pay the fee directly to the examination
provider.
SEC. 92. Section 11406 of the Business
and Professions Code is amended to read:
11406. (a) The director commissioner
shall by regulation establish fees for approval of basic
education and continuing education courses or their equivalent, or
for the evaluation of petitions of applicants based upon claims of
equivalency pursuant to Section 11340. The fees established by
regulation shall be sufficient to cover the costs incurred by the
office department in processing
applications for course approvals and petitions for equivalency.
(b) The director commissioner shall
by regulation establish fees for approval of courses of study
required to be taken by applicants for licenses. The fees established
by regulation shall be sufficient to cover the costs incurred by the
office department in processing
applications for course approvals and petitions for equivalency.
SEC. 93. Section 11407 of the Business
and Professions Code is amended to read:
11407. The director commissioner
may by regulation prescribe fees lower than the maximum fees
established by this chapter if he or she determines that lower fees
will be adequate to offset the costs incurred by the office
department and the committee in the
administration of this part.
SEC. 94. Section 11408 of the Business
and Professions Code is amended to read:
11408. (a) Application for issuance of a license must be
submitted to the office department
within one year of the successful completion of the examination.
(b) Every applicant or licensee shall pay federal registry fees
and state registry processing fees to the state as required as part
of issuance-related fees.
SEC. 95. Section 11409 of the Business
and Professions Code is amended to read:
11409. (a) Except as otherwise provided by law, any order issued
in resolution of a disciplinary proceeding may direct a licensee,
applicant for licensure, person who acts in a capacity that requires
a license under this part, course provider, applicant for course
provider accreditation, or a person who, or entity that, acts in a
capacity that requires course provider accreditation found to have
committed a violation or violations of statutes or regulations
relating to real estate appraiser practice to pay a sum not to exceed
the reasonable costs of investigation, enforcement, and prosecution
of the case.
(b) Where an order for recovery of costs is made and payment is
not made within 30 days of the date directed in the office's
department's decision, the order for recovery
shall constitute a valid and enforceable civil judgment. This
judgment shall be in addition to, and not in place of, any other
criminal or civil penalties provided for by law.
(c) (1) Failure of a licensee, applicant for licensure, person who
acts in a capacity that requires a license under this part, course
provider, applicant for course provider accreditation, or a person
who, or entity that, acts in a capacity that requires course provider
accreditation to pay recovery costs or make a recovery cost payment
within 30 days of the date ordered, shall result in disciplinary
action by the office department . If
the person fails to pay recovery costs within 30 days, that person
shall pay interest and a penalty of 10 percent of the recovery costs
or payment amount. Interest shall be charged at the pooled money
investment rate.
(2) If recovery costs are not paid as ordered, the full amount of
the assessed fine shall be added to any fee for renewal of a license.
A license shall not be renewed prior to payment of the renewal fee
and recovery costs.
(3) The director commissioner may
order the full amount of any recovery costs to be immediately due and
payable if any payment on the recovery costs, or portion thereof, is
not received within 30 days of its due date.
(4) Any recovery costs, or interest thereon, not paid within 30
days of a final order shall constitute a valid and enforceable civil
judgment.
(d) A certified copy of the office's
department's decision shall be conclusive proof of the validity
of the order and its terms.
(e) The office department shall not
renew or reinstate the license of any licensee who has failed to pay
all of the costs ordered under this section.
(f) Nothing in this section shall preclude the office
department from including the recovery of the
costs of investigation and enforcement of a case in any default
decision or stipulated settlement.
SEC. 96. Section 11412 of the Business
and Professions Code is amended to read:
11412. (a) On or before January 1, 2002, the director
commissioner shall determine the number of
complaint cases containing judicial findings of fraud that may be
eligible for recovery pursuant to future regulations that are closely
analogous to those which have been adopted for the Real Estate
Recovery Fund established in Chapter 6.5 (commencing with Section
10470) of Part 1. This information shall be used by the
director commissioner to determine whether a
real estate appraiser Recovery Account is necessary or whether to
recommend that it should be eliminated.
(b) On or before January 1, 2004, regulations shall be adopted for
administration of the Recovery Account, which shall include claims,
funding, and administrative procedures closely analogous to those
which have been adopted for the Real Estate Recovery Fund established
in Chapter 6.5 (commencing with Section 10470) of Part 1.
(c) The statute of limitations for claims against the fund arising
between the effective date of this part and the creation of the fund
shall be tolled until the date the fund is created.
SEC. 97. Section 11422 of the Business
and Professions Code is amended to read:
11422. The office department shall,
on or before February 1, 1994, and at least annually thereafter,
transmit to the appraisal subcommittee specified in subdivision (d)
of Section 11302 a roster of persons licensed pursuant to this part.
SEC. 98. Section 11502.5 of the
Business and Professions Code is amended to read:
11502.5. The course related competency examination or
examinations and education provided to a certified common interest
development manager pursuant to Section 11502 by any professional
association for common interest development managers, or any
postsecondary educational institution, shall be developed and
administered in a manner consistent with standards and requirements
set forth by the American Educational Research Association's
"Standards for Educational and Psychological Testing," and the Equal
Employment Opportunity Commission's "Uniform Guidelines for Employee
Selection Procedures," the Unruh Civil Rights Act, the California
Fair Employment and Housing Act, and the Americans with Disabilities
Act of 1990, or the course or courses that have been approved as a
continuing education course or an equivalent course of study pursuant
to the regulations of the Real Estate
Commissioner of Financial Services .
SEC. 99. Section 17511.1 of the
Business and Professions Code is amended to read:
17511.1. As used in this article, "telephonic seller" or "seller"
means a person who, on his or her own behalf or through salespersons
or through the use of an automatic dialing-announcing device, as
defined in Section 2871 of the Public Utilities Code, causes a
telephone solicitation or attempted telephone solicitation to occur
which meets the criteria specified in subdivision (a), (b), (c), or
(d) and who is not exempted by subdivision (e), as follows:
(a) A telephone solicitation or attempted telephone solicitation
wherein the telephonic seller initiates telephonic contact with a
prospective purchaser and represents or implies one or more of the
following:
(1) That a prospective purchaser who buys one or more items will
also receive additional or other items, whether or not of the same
type as purchased, without further cost. For purposes of this
subdivision, "further cost" does not include actual postage or common
carrier delivery charges, if any.
(2) That a prospective purchaser will receive a prize or gift, if
the person also encourages the prospective purchaser to do either of
the following:
(A) Purchase or rent any goods or services.
(B) Pay any money, including, but not limited to, a delivery or
handling charge.
(3) That a prospective purchaser is able to obtain any item or
service at a price which the seller states or implies is below the
regular price of the item or service offered. This paragraph shall
not apply to retailers who, within the previous 12 months, have sold
a majority of their goods or services through in-person sales at
retail stores.
(4) That a prospective purchaser who buys office equipment or
supplies will, because of some unusual event or imminent price
increase, be able to buy these items at prices which are below those
that are usually charged or will be charged for the items.
(5) That the seller is a person other than the person he or she
is.
(6) That the items for sale are manufactured or supplied by a
person other than the actual manufacturer or supplier.
(7) That the seller is offering to sell the prospective purchaser
any gold, silver, or other metals, including coins, diamonds, rubies,
sapphires, or other stones, coal or other minerals, or any interest
in oil, gas, or mineral fields, wells, or exploration sites, or any
other investment opportunity of any type whatsoever.
(8) That the seller is offering to make a loan, or to arrange or
assist in arranging a loan or to assist in providing information
which may lead to the obtaining of a loan, unless no payment of any
kind is made until the loan proceeds are disbursed to the borrower.
(9) That a prospective purchaser will receive a credit card, as
defined in subdivision (a) of Section 1747.02 of the Civil Code, if
the purchaser pays an up front or preapplication fee for the credit
card to the telephonic seller.
(b) A solicitation or attempted solicitation which is made by
telephone in response to inquiries generated by unrequested
notifications sent by the seller to persons who have not previously
purchased goods or services from the seller or who have not
previously requested credit from the seller, to a prospective
purchaser wherein the seller represents or implies to the recipient
of the notification that any of the following applies to the
recipient:
(1) That the recipient has in any manner been specially selected
to receive the notification or the offer contained in the
notification.
(2) That the recipient will receive a prize or gift if the
recipient calls the seller.
(3) That if the recipient buys one or more items from the seller,
the recipient will also receive additional or other items, whether or
not of the same type as purchased, without further cost or at a cost
which the seller states or implies is less than the regular price of
such items.
However, this subdivision does not apply to the solicitation of
sales by a catalog seller who periodically issues and delivers
catalogs to potential purchasers by mail or by other means. This
exception only applies if the catalog includes a written description
or illustration and the sales price of each item of merchandise
offered for sale, includes at least 24 full pages of written material
or illustrations, is distributed in more than one state, and has an
annual circulation of not less than 250,000 customers.
(c) A solicitation or attempted solicitation which is made by
telephone in response to inquiries generated by advertisements on
behalf of the telephonic seller wherein it is represented or implied
that the seller is offering to sell to the prospective purchaser any
gold, silver, or other metals, including coins, diamonds, rubies,
sapphires, or other stones, coal or other minerals, or any interest
in oil, gas, or mineral fields, wells, or exploration sites, or any
other investment opportunity of any type whatsoever.
(d) A solicitation or attempted solicitation which is made by
telephone in response to inquiries generated by advertisements on
behalf of the telephonic seller wherein it is represented or implied
that the seller is offering to make a loan or to arrange or assist in
arranging a loan or to assist in providing information which may
lead to the obtaining of a loan, unless no payment of any kind is
made until the loan proceeds are disbursed to the borrower.
(e) For purposes of this article, "telephonic seller" or "seller"
does not include any of the following:
(1) A person offering or selling a security qualified under
Section 25110, 25120, or 25130 of the Corporations Code or exempt
from qualification under Chapter 1 (commencing with Section 25100) of
Part 2 of Division 1 of Title 4 of the Corporations Code. The fact
that a notice claiming an exemption under the Corporate Securities
Law of 1968 is filed with the Department of Corporations
Financial Services does not create an exemption
under this paragraph.
(2) A person licensed pursuant to Part 1 (commencing with Section
10000) of Division 4, when the solicited transaction is governed by
that law.
(3) A person licensed pursuant to Chapter 9 (commencing with
Section 7000) of Division 3, when the solicited transaction is
governed by that law.
(4) A person licensed or certificated pursuant to Part 2
(commencing with Section 680) of Division 1 of the Insurance Code,
including a person licensed pursuant to Chapter 5 (commencing with
Section 1621) thereof, when the solicited transaction is governed by
that law.
(5) A person offering or selling a franchise registered pursuant
to Section 31110 of the Corporations Code or exempt from registration
under Chapter 1 (commencing with Section 31100) of Part 2 of
Division 5 of Title 4 of the Corporations Code. The fact that a
notice claiming an exemption under the Franchise Investment Law is
filed with the Department of Corporations
Financial Services does not create an exemption under this
paragraph.
(6) A person soliciting the sale of a seller assisted marketing
plan, as defined in Title 2.7 (commencing with Section 1812.200) of
Part 4 of Division 3 of the Civil Code, who has filed with the
Attorney General the documents required by Section 1812.203 of the
Civil Code.
(7) A person primarily soliciting the sale of a newspaper of
general circulation, as defined in Article 1 (commencing with Section
6000) of Chapter 1 of Division 7 of Title 1 of the Government Code,
a magazine, or membership in a book or record club whose program
operates in conformity with the requirements of Section 1584.5 of the
Civil Code.
(8) A person soliciting business from prospective purchasers who
have previously purchased from the business enterprise for which the
person is calling.
(9) A person soliciting without the intent to complete and who
does not complete the sales presentation during the telephone
solicitation but completes the sales presentation at a later
face-to-face meeting between the solicitor and the prospective
purchaser. However, if a seller, directly following a telephone
solicitation, causes an individual whose primary purpose it is to go
to the prospective purchaser to collect the payment or deliver any
item purchased, this exemption does not apply.
(10) Any supervised financial institution or parent, subsidiary,
or subsidiary of parent thereof. As used in this paragraph,
"supervised financial institution" means any commercial bank, trust
company, savings and loan association, credit union, industrial loan
company, personal property broker, consumer finance lender,
commercial finance lender, or insurer, provided that the institution
is subject to supervision by an official or agency of this state or
of the United States.
(11) A person soliciting the sale of a preneed funeral arrangement
regulated by Article 9 (commencing with Section 7735) of Chapter 12
of Division 3.
(12) A person licensed pursuant to Chapter 19 (commencing with
Section 9600) of Division 3 when acting pursuant to that licensure.
(13) A person soliciting the sale of services provided by a cable
television system licensed or franchised pursuant to Section 53066 of
the Government Code or any other authority.
(14) A person or an affiliate of a person whose business is
regulated by the Public Utilities Commission.
(15) A person soliciting the sale of a commodity pursuant to Part
2 (commencing with Section 58601) of Division 21 of the Food and
Agricultural Code, if the solicitation neither intends to, nor
actually results in, a sale which costs the purchaser in excess of
one hundred dollars ($100).
(16) An issuer or subsidiary of an issuer that has a security
listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., if the exchange or
interdealer quotation system has been certified by rule or order of
the Commissioner of Corporations Financial
Services under subdivision (o) of Section 25100 of the
Corporations Code. A subsidiary of an issuer that qualifies for
exemption under this paragraph is not itself exempt unless not less
than 60 percent of the voting power of its shares is owned by the
qualifying issuer or issuers.
(17) A person soliciting exclusively the sale of telephone
answering services to be provided by that person or that person's
employer.
(18) A person soliciting a transaction regulated by the Commodity
Futures Trading Commission if the person is registered or temporarily
licensed for this activity with the Commodity Futures Trading
Commission under the Commodity Exchange Act (7 U.S.C. Sec. 1 et
seq.), and the registration or license has not expired or been
suspended or revoked.
(19) A person who sells coins or bullion at a price which is not
more than 25 percent more than the price at which the seller is
concurrently buying the same coins or bullion, if: (A) the seller has
had a retail location in California from which he or she has been
selling coins or bullion to the public in person for at least three
years; (B) the telephonic solicitations are not the person's primary
business and sales made telephonically make up less than 20 percent
of the person's total retail sales; and (C) the person claiming an
exemption pursuant to this subdivision complies with Section 17511.3,
as applicable, and subdivision (p) of Section 17511.4.
(20) A person licensed pursuant to Chapter 14 (commencing with
Section 1800) of Division 1 of the Financial Code to receive money
for transmittal to foreign countries if the license has not expired
or been suspended or revoked.
(21) A person licensed as a residential mortgage lender or
servicer pursuant to Division 20 (commencing with Section 50000) of
the Financial Code, when acting under the authority of that license.
(22) A corporation that meets all of the following conditions:
(A) It has been exempt from taxation under Section 23701e of the
Revenue and Taxation Code for a minimum of 10 years.
(B) It has maintained its principal purpose for a minimum of 10
years.
(C) It has been incorporated in the state for a minimum of 25
years.
(f) In any civil proceeding alleging a violation of this article,
the burden of proving an exemption or an exception from a definition
is upon the person claiming it, and in any criminal proceeding
alleging a violation of this article, the burden of producing
evidence to support a defense based upon an exemption or an exception
from a definition is upon the person claiming it.
(g) Compliance with this article does not satisfy nor substitute
for any requirements for license, registration, or regulation
mandated by other laws.
SEC. 100. Section 17537.2 of the
Business and Professions Code is amended to read:
17537.2. The following, when used as part of an advertising plan
or program defined in Section 17537.1, are deceptive and constitute
unfair trade practices:
(a) When, in order to utilize the incentive, the recipient is
requested to pay any money to any person or entity named or referred
to in the offer, or to purchase, rent, or otherwise pay that person
or entity for any product or service including a deposit, whether
returnable or not, whether payment is for an item, a service,
shipping, handling, insurance or payment for anything.
Notwithstanding the preceding paragraph, when the offered
incentive is a certificate or coupon redeemable for transportation,
accommodations, recreation, vacation, entertainment, or like
services, the offer may place a condition on the use of the incentive
which requires the recipient to pay directly to the transportation
company, the accommodation, recreation, vacation or entertainment
facility, or similar direct provider of like services, a refundable
deposit, not to exceed fifty dollars ($50), to reserve space
availability or admission, only if the deposit shall be returned in
United States dollars immediately upon the recipient's arrival at the
location of the provider to whom the recipient paid the deposit. If
the incentive is such a certificate or coupon, and if
government-imposed taxes directly related to the service being
provided are not included in the incentive, the offer itself, in
close proximity to the description of the incentive which is
evidenced by the certificate or coupon, shall disclose those
government-imposed taxes which will be the recipient's responsibility
and the approximate dollar amount of those taxes. A deposit from the
recipient may be collected to cover the cost of those
government-imposed taxes.
(b) Stating or implying in the offer that the recipient is one of
a selected group to receive a particular incentive or one or more of
a group of incentives, without clearly and conspicuously disclosing
in close proximity to the statement or implied statement of selection
the total number of persons in that select group or the odds of
receiving the incentive or incentives. Statements of selection which
require such disclosure include such phrases as "you are a finalist,"
"we are sending this to a limited number of people," "either you or
another named person has won the major prize," "if you do not
respond, your incentive will be given to someone else."
(c) Stating or implying in the offer that the recipient is likely
to receive one or more of the offered incentives because other named
people have already received other named incentives, unless the offer
clearly and conspicuously discloses in close proximity to the
statement the recipient's odds of receiving the identified incentive.
(d) When the solicitation states or implies that the recipient is
likely to receive an incentive which has a normal retail price which
is higher than that of another named incentive unless that statement
is true. For purposes of this section, a list of incentives implies
that the incentives are in descending or ascending order of value
unless the solicitation clearly and conspicuously negates the
implication in close proximity to the list.
(e) Describing an incentive or incentives in an untrue or
misleading manner. Untrue or misleading descriptions include those
which imply that the incentive being offered is of greater fair
market value or of a different kind or nature than a recipient would
be led to believe from a reasonable reading of the offer, or which
lists the recipient's name in close proximity to a specific incentive
unless the offer clearly and conspicuously discloses immediately
next to or immediately under or above the recipient's name the
recipient's odds of receiving the specific incentive.
(f) Subdivision (a) shall not apply to an incentive constituting
an opportunity to stay at a hotel or other resort accommodations at a
discount from the standard rate for the hotel or resort
accommodations, if all of the following conditions are met:
(1) The fee to utilize the incentive and the requirement, if any,
to attend a sales presentation are clearly and conspicuously
disclosed in close proximity to the description of the offered
incentive.
(2) A statement appears in close proximity to the description of
the offered incentive and in substantially the following form: The
recipient is responsible for payment of any government-imposed taxes
directly related to the service being provided and any personal
expenses incurred when utilizing this offer.
(3) The accommodations to be occupied by the recipient of the
incentive are within a 20-mile radius of the property on which the
accommodations offered for sale are located or, if not within that
radius, the accommodations offered for sale are managed and operated
by the same person as, an affiliate (as defined in Section 150 of the
Corporations Code) of, or a franchisee (as defined in Section 20002)
of, the manager and operator of the accommodations to be occupied,
and the manager and operator of the accommodations offered for sale
or the manager and operator of the accommodations to be occupied is
an issuer or subsidiary of an issuer that has a security listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. and the exchange or
interdealer quotation system has been certified by rule or order of
the Commissioner of Corporations Financial
Services under subdivision (o) of Section 25100 of the
Corporations Code. A subsidiary of an issuer that qualifies under
this paragraph does not itself qualify under this paragraph unless
not less than 60 percent of the voting power of its shares is owned
by the qualifying issuer or issuers.
(4) If the incentive is offered in conjunction with any additional
incentive or incentives or as one or more of a group of incentives,
the offer of such additional incentive or incentives shall comply
with Section 17537.1 and the following:
(A) The additional incentive or incentives are typically and
customarily included in a vacation package and may include, but not
be limited to, transportation, dining, entertainment, or recreation.
(B) The fee and additional requirements, if any, to use the
additional incentive or incentives are clearly and conspicuously
disclosed in close proximity to the description of the offer of them.
SEC. 101. Section 20009 of the Business
and Professions Code is amended to read:
20009. The regulations, releases, guidelines and interpretive
opinions of the Commissioner of Corporations
Financial Services under the Franchise Investment Law (Division
5 (commencing with Section 31000) of Title 4 of the Corporations
Code) regarding whether or not an agreement constitutes a "franchise"
within the meaning of that law shall be prima facie evidence of the
scope and extent of coverage of the definition of "franchise" under
this chapter; provided, however, the burden of proving an exemption
or an exception from a definition is upon the person claiming it.
SEC. 102. Section 163 of the
Corporations Code is amended to read:
163. "Corporation subject to the Banking Law" (Division 1
(commencing with Section 99) of the Financial Code) means:
(a) Any corporation which, with the approval of the Commissioner
of Financial Institutions Services , is
incorporated for the purpose of engaging in, or which is authorized
by the Commissioner of Financial Institutions
Services to engage in, the commercial banking business under
Division 1 (commencing with Section 99) of the Financial Code.
(b) Any corporation which, with the approval of the Commissioner
of Financial Institutions Services , is
incorporated for the purpose of engaging in, or which is authorized
by the Commissioner of Financial Institutions
Services to engage in, the industrial banking business under
Division 1 (commencing with Section 99) of the Financial Code.
(c) Any corporation (other than a corporation described in
subdivision (d)) which, with the approval of the Commissioner of
Financial Institutions Services , is
incorporated for the purpose of engaging in, or which is authorized
by the Commissioner of Financial Institutions
Services to engage in, the trust business under Division 1
(commencing with Section 99) of the Financial Code.
(d) Any corporation which is authorized by the Commissioner of
Financial Institutions Services and the
Commissioner of Insurance to maintain a title insurance department
to engage in title insurance business and a trust department to
engage in trust business; or
(e) Any corporation which, with the approval of the Commissioner
of Financial Institutions Services , is
incorporated for the purpose of engaging in, or which is authorized
by the Commissioner of Financial Institutions
Services to engage in, business under Article 1 (commencing
with Section 3500), Chapter 19, Division 1 of the Financial Code.
SEC. 103. Section 500 of the
Corporations Code is amended to read:
500. Neither a corporation nor any of its subsidiaries shall make
any distribution to the corporation's shareholders (Section 166)
except as follows:
(a) The distribution may be made if the amount of the retained
earnings of the corporation immediately prior thereto equals or
exceeds the amount of the proposed distribution.
(b) The distribution may be made if immediately after giving
effect thereto:
(1) The sum of the assets of the corporation (exclusive of
goodwill, capitalized research and development expenses and deferred
charges) would be at least equal to 11/4 times its liabilities (not
including deferred taxes, deferred income and other deferred
credits); and
(2) The current assets of the corporation would be at least equal
to its current liabilities or, if the average of the earnings of the
corporation before taxes on income and before interest expense for
the two preceding fiscal years was less than the average of the
interest expense of the corporation for those fiscal years, at least
equal to 11/4 times its current liabilities; provided, however, that
in determining the amount of the assets of the corporation profits
derived from an exchange of assets shall not be included unless the
assets received are currently realizable in cash; and provided,
further, that for the purpose of this subdivision "current assets"
may include net amounts which the board has determined in good faith
may reasonably be expected to be received from customers during the
12-month period used in calculating current liabilities pursuant to
existing contractual relationships obligating those customers to make
fixed or periodic payments during the term of the contract or, in
the case of public utilities, pursuant to service connections with
customers, after in each case giving effect to future costs not then
included in current liabilities but reasonably expected to be
incurred by the corporation in performing those contracts or
providing service to utility customers. Paragraph (2) of subdivision
(b) is not applicable to a corporation which does not classify its
assets into current and fixed under generally accepted accounting
principles.
(c) The amount of any distribution payable in property shall, for
the purposes of this chapter, be determined on the basis of the value
at which the property is carried on the corporation's financial
statements in accordance with generally accepted accounting
principles.
(d) For the purpose of applying this section to a distribution by
a corporation of cash or property in payment by the corporation in
connection with the purchase of its shares, there shall be added to
retained earnings all amounts that had been previously deducted
therefrom with respect to obligations incurred in connection with the
corporation's repurchase of its shares and reflected on the
corporation's balance sheet, but not in excess of the principal of
the obligations that remain unpaid immediately prior to the
distribution. In addition, there shall be deducted from liabilities
all amounts that had been previously added thereto with respect to
the obligations incurred in connection with the corporation's
repurchase of its shares and reflected on the corporation's balance
sheet, but not in excess of the principal of the obligations that
will remain unpaid after the distribution, provided that no addition
to retained earnings or deduction from liabilities under this
subdivision shall occur on account of any obligation that is a
distribution to the corporation's shareholders (Section 166) at the
time the obligation is incurred.
(e) This section does not apply to a corporation licensed as a
broker-dealer under Chapter 2 (commencing with Section 25210) of Part
3 of Division 1 of Title 4, if immediately after giving effect to
any distribution the corporation is in compliance with the net
capital rules of the Commissioner of Corporations
Financial Services and the Securities and Exchange
Commission.
SEC. 104. Section 1001 of the
Corporations Code is amended to read:
1001. (a) A corporation may sell, lease, convey, exchange,
transfer, or otherwise dispose of all or substantially all of its
assets when the principal terms are approved by the board, and,
unless the transaction is in the usual and regular course of its
business, approved by the outstanding shares (Section 152), either
before or after approval by the board and before or after the
transaction. A transaction constituting a reorganization (Section
181) is subject to the provisions of Chapter 12 (commencing with
Section 1200) and not this section (other than subdivision (d)). A
transaction constituting a conversion (Section 161.9) is subject to
the provisions of Chapter 11.5 (commencing with Section 1150) and not
this section.
(b) Notwithstanding approval of the outstanding shares (Section
152), the board may abandon the proposed transaction without further
action by the shareholders, subject to the contractual rights, if
any, of third parties.
(c) The sale, lease, conveyance, exchange, transfer or other
disposition may be made upon those terms and conditions and for that
consideration as the board may deem in the best interests of the
corporation. The consideration may be money, securities, or other
property.
(d) If the acquiring party in a transaction pursuant to
subdivision (a) of this section or subdivision (g) of Section 2001 is
in control of or under common control with the disposing
corporation, the principal terms of the sale must be approved by at
least 90 percent of the voting power of the disposing corporation
unless the disposition is to a domestic or foreign corporation or
other business entity in consideration of the nonredeemable common
shares or nonredeemable equity securities of the acquiring party or
its parent.
(e) Subdivision (d) does not apply to any transaction if the
Commissioner of Corporations, the Commissioner of Financial
Institutions Financial Services , the Insurance
Commissioner , or the Public Utilities Commission has
approved the terms and conditions of the transaction and the fairness
of those terms and conditions pursuant to Section 25142, Section
696.5 of the Financial Code, Section 838.5 of the Insurance Code, or
Section 822 of the Public Utilities Code.
SEC. 105. Section 1101.1 of the
Corporations Code is amended to read:
1101.1. Subdivision (c) of Section 1113 and the last two
sentences of Section 1101 do not apply to any transaction if the
Commissioner of Corporations, the Commissioner of Financial
Institutions Financial Services , the Insurance
Commissioner or, the Public Utilities Commission has approved the
terms and conditions of the transaction and the fairness of those
terms and conditions pursuant to Section 25142 or Section 696.5,
5750, or 5802 of the Financial Code, Section 838.5 of the Insurance
Code, or Section 822 of the Public Utilities Code.
SEC. 106. Section 1300 of the
Corporations Code is amended to read:
1300. (a) If the approval of the outstanding shares (Section 152)
of a corporation is required for a reorganization under subdivisions
(a) and (b) or subdivision (e) or (f) of Section 1201, each
shareholder of the corporation entitled to vote on the transaction
and each shareholder of a subsidiary corporation in a short-form
merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their
fair market value the shares owned by the shareholder which are
dissenting shares as defined in subdivision (b). The fair market
value shall be determined as of the day before the first announcement
of the terms of the proposed reorganization or short-form merger,
excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stock
split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares
which come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities
exchange certified by the Commissioner of Corporations
Financial Services under subdivision (o) of
Section 25100 or (B) listed on the National Market System of the
NASDAQ Stock Market, and the notice of meeting of shareholders to act
upon the reorganization summarizes this section and Sections 1301,
1302, 1303 and 1304; provided, however, that this provision does not
apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply
to any class of shares described in subparagraph (A) or (B) if
demands for payment are filed with respect to 5 percent or more of
the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in
subparagraph (A) or (B) of paragraph (1) (without regard to the
provisos in that paragraph), were voted against the reorganization,
or which were held of record on the effective date of a short-form
merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the
approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
(4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of
record.
SEC. 107. Section 2207 of the
Corporations Code is amended to read:
2207. (a) A corporation is liable for a civil penalty in an
amount not exceeding one million dollars ($1,000,000) if the
corporation does both of the following:
(1) Has actual knowledge that an officer, director, manager, or
agent of the corporation does any of the following:
(A) Makes, publishes, or posts, or has made, published, or posted,
either generally or privately to the shareholders or other persons,
either of the following:
(i) An oral, written, or electronically transmitted report,
exhibit, notice, or statement of its affairs or pecuniary condition
that contains a material statement or omission that is false and
intended to give the shares of stock in the corporation a materially
greater or a materially less apparent market value than they really
possess.
(ii) An oral, written, or electronically transmitted report,
prospectus, account, or statement of operations, values, business,
profits, or expenditures, that includes a material false statement or
omission intended to give the shares of stock in the corporation a
materially greater or a materially less apparent market value than
they really possess.
(B) Refuses or has refused to make any book entry or post any
notice required by law in the manner required by law.
(C) Misstates or conceals or has misstated or concealed from a
regulatory body a material fact in order to deceive a regulatory body
to avoid a statutory or regulatory duty, or to avoid a statutory or
regulatory limit or prohibition.
(2) Within 30 days after actual knowledge is acquired of the
actions described in paragraph (1), the corporation knowingly fails
to do both of the following:
(A) Notify the Attorney General or appropriate government agency
in writing, unless the corporation has actual knowledge that the
Attorney General or appropriate government agency has been notified.
(B) Notify its shareholders in writing, unless the corporation has
actual knowledge that the shareholders have been notified.
(b) The requirement for notification under this section is not
applicable if the action taken or about to be taken by the
corporation, or by an officer, director, manager, or agent of the
corporation under paragraph (1) of subdivision (a), is abated within
the time prescribed for reporting, unless the appropriate government
agency requires disclosure by regulation.
(c) If the action reported to the Attorney General pursuant to
this section implicates the government authority of an agency other
than the Attorney General, the Attorney General shall promptly
forward the written notice to that agency.
(d) If the Attorney General was not notified pursuant to
subparagraph (A) of paragraph (2) of subdivision (a), but the
corporation reasonably and in good faith believed that it had
complied with the notification requirements of this section by
notifying a government agency listed in paragraph (5) of subdivision
(e), no penalties shall apply.
(e) For purposes of this section:
(1) "Manager" means a person having both of the following:
(A) Management authority over a business entity.
(B) Significant responsibility for an aspect of a business that
includes actual authority for the financial operations or financial
transactions of the business.
(2) "Agent" means a person or entity authorized by the corporation
to make representations to the public about the corporation's
financial condition and who is acting within the scope of the agency
when the representations are made.
(3) "Shareholder" means a person or entity that is a shareholder
of the corporation at the time the disclosure is required pursuant to
subparagraph (B) of paragraph (2) of subdivision (a).
(4) "Notify its shareholders" means to give sufficient description
of an action taken or about to be taken that would constitute acts
or omissions as described in paragraph (1) of subdivision (a). A
notice or report filed by a corporation with the United States
Securities and Exchange Commission that relates to the facts and
circumstances giving rise to an obligation under paragraph (1) of
subdivision (a) shall satisfy all notice requirements arising under
paragraph (2) of subdivision (a), but shall not be the exclusive
means of satisfying the notice requirements, provided that the
Attorney General or appropriate agency is informed in writing that
the filing has been made together with a copy of the filing or an
electronic link where it is available online without charge.
(5) "Appropriate government agency" means an agency on the
following list that has regulatory authority with respect to the
financial operations of a corporation:
(A) Department of Corporations Financial
Services .
(B) Department of Insurance.
(C) Department of Financial Institutions.
(D)
(C) Department of Managed Health Care.
(E)
(D) United States Securities and Exchange Commission.
(6) "Actual knowledge of the corporation" means the knowledge an
officer or director of a corporation actually possesses or does not
consciously avoid possessing, based on an evaluation of information
provided pursuant to the corporation's disclosure controls and
procedures.
(7) "Refuse to make a book entry" means the intentional decision
not to record an accounting transaction when all of the following
conditions are satisfied:
(A) The independent auditors required recordation of an accounting
transaction during the course of an audit.
(B) The audit committee of the corporation has not approved the
independent auditor's recommendation.
(C) The decision is made for the primary purpose of rendering the
financial statements materially false or misleading.
(8) "Refuse to post any notice required by law" means an
intentional decision not to post a notice required by law when all of
the following conditions exist:
(A) The decision not to post the notice has not been approved by
the corporation's audit committee.
(B) The decision is intended to give the shares of stock in the
corporation a materially greater or a materially less apparent market
value than they really possess.
(9) "Misstate or conceal material facts from a regulatory body"
means an intentional decision not to disclose material facts when all
of the following conditions exist:
(A) The decision not to disclose material facts has not been
approved by the corporation's audit committee.
(B) The decision is intended to give the shares of stock in the
corporation a materially greater or a materially less apparent market
value than they really possess.
(10) "Material false statement or omission" means an untrue
statement of material fact or an omission to state a material fact
necessary in order to make the statements made under the
circumstances under which they were made not misleading.
(11) "Officer" means any person as set forth in Rule 16A-1
promulgated under the Securities Exchange Act of 1934 or any
successor regulation thereto, except an officer of a subsidiary
corporation who is not also an officer of the parent corporation.
(f) This section only applies to corporations that are issuers, as
defined in Section 2 of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
Sec. 7201 and following).
(g) An action to enforce this section may only be brought by the
Attorney General or a district attorney or city attorney in the name
of the people of the State of California.
SEC. 108. Section 7813.5 of the
Corporations Code is amended to read:
7813.5. (a) A mutual benefit corporation may amend its articles
to change its status to that of a public benefit corporation, a
religious corporation, a business corporation, or a cooperative
corporation by complying with this section and the other sections of
this chapter.
(b) Except as authorized by Section 7811 or unless the corporation
has no members, an amendment to change its status to a public
benefit corporation or religious corporation shall: (i) be approved
by the members (Section 5034), and the fairness of the amendment to
the members shall be approved by the Commissioner of
Corporations Financial Services pursuant to
Section 25142; (ii) be approved by the members (Section 5034) in an
election conducted by written ballot pursuant to Section 7513 in
which no negative votes are cast; or (iii) be approved by 100 percent
of the voting power.
(c) Amended articles authorized by this section shall include the
provisions which would have been required (other than the name of the
initial agent for service of process if a statement has been filed
pursuant to Section 8210), and may in addition only include those
provisions which would have been permitted, in original articles
filed by the type of corporation (public benefit, religious,
business, or cooperative) into which the mutual benefit corporation
is changing its status.
(d) At the time of filing a certificate of amendment to change
status to a public benefit corporation, a corporation shall furnish
an additional copy of the certificate of amendment to the Secretary
of State who shall forward that copy to the Attorney General.
(e) In the case of a change of status to a business corporation or
a cooperative corporation, if the Franchise Tax Board has issued a
determination exempting the corporation from tax as provided in
Section 23701 of the Revenue and Taxation Code, the corporation shall
be subject to Section 23221 of the Revenue and Taxation Code upon
filing the certificate of amendment.
SEC. 109. Section 8011.5 of the
Corporations Code is amended to read:
8011.5. Each membership of the same class of any constituent
corporation (other than the cancellation of memberships held by a
surviving corporation or its parent or a wholly owned subsidiary of
either in a constituent corporation) shall be treated equally with
respect to any distribution of cash, property, rights or securities
unless: (i) all members of the class consent or (ii) the Commissioner
of Corporations Financial Services has
approved the terms and conditions of the transaction and the
fairness of such terms pursuant to Section 25142.
SEC. 110. Section 12504 of the
Corporations Code is amended to read:
12504. (a) A corporation may amend its articles to change its
status to that of a nonprofit public benefit corporation, a nonprofit
mutual benefit corporation, a nonprofit religious corporation, or a
business corporation by complying with this section and the other
sections of this chapter.
(b) Except as authorized by Section 12501 or unless the
corporation has no members, an amendment to change its status to a
nonprofit public benefit corporation or a nonprofit religious
corporation shall: (1) be approved by the members (Section 12224),
and the fairness of the amendment to the members shall be approved by
the Commissioner of Corporations Financial
Services pursuant to Section 25142; or (2) be approved by the
members (Section 12224) in an election conducted by written ballot
pursuant to Section 12463 in which no negative votes are cast; or (3)
be approved by 100 percent of the voting power.
(c) Amended articles authorized by this section shall include the
provisions which would have been required (other than the name of the
initial agent for service of process if a statement has been filed
pursuant to Section 12570), and may in addition only include those
provisions which would have been permitted, in original articles
filed by the type of corporation (nonprofit public benefit, nonprofit
mutual benefit, nonprofit religious, or business) into which the
corporation is changing its status.
(d) At the time of filing a certificate of amendment to change
status to a nonprofit public benefit corporation, a corporation shall
furnish an additional copy of the certificate of amendment to the
Secretary of State who shall forward that copy to the Attorney
General.
SEC. 111. Section 12532 of the
Corporations Code is amended to read:
12532. Each membership of the same class of any constituent
corporation (other than the cancellation of memberships held by a
surviving corporation or its parent or a wholly owned subsidiary of
either in a constituent corporation) shall be treated equally with
respect to any distribution of cash, property, rights or securities
unless: (a) all members of the class consent or (b) the Commissioner
of Corporations Financial Services has
approved the terms and conditions of the transaction and the fairness
of such terms pursuant to Section 25142.
SEC. 112. Section 13205 of the
Corporations Code is amended to read:
13205. No association is subject in any manner to the terms of
the Corporate Securities Law and all associations may issue their
membership certificates or stock or other securities as provided in
this division without the necessity of any permit from the
Commissioner of Corporations Financial
Services .
SEC. 113. Section 13406 of the
Corporations Code is amended to read:
13406. (a) Subject to the provisions of subdivision (b), shares
of capital stock in a professional corporation may be issued only to
a licensed person or to a person who is licensed to render the same
professional services in the jurisdiction or jurisdictions in which
the person practices, and any shares issued in violation of this
restriction shall be void. Unless there is a public offering of
securities by a professional corporation or by a foreign professional
corporation in this state, its financial statements shall be treated
by the Commissioner of Corporations
Financial Services as confidential, except to the extent that
such statements shall be subject to subpoena in connection with any
judicial or administrative proceeding, and may be admissible in
evidence therein. No
shareholder of a professional corporation or of a foreign
professional corporation qualified to render professional services in
this state shall enter into a voting trust, proxy, or any other
arrangement vesting another person (other than another person who is
a shareholder of the same corporation) with the authority to exercise
the voting power of any or all of his or her shares, and any such
purported voting trust, proxy or other arrangement shall be void.
(b) A professional law corporation may be incorporated as a
nonprofit public benefit corporation under the Nonprofit Public
Benefit Corporation Law under either of the following circumstances:
(1) The corporation is a qualified legal services project or a
qualified support center within the meaning of subdivisions (a) and
(b) of Section 6213 of the Business and Professions Code.
(2) The professional law corporation otherwise meets all of the
requirements and complies with all of the provisions of the Nonprofit
Public Benefit Corporation Law, as well as all of the following
requirements:
(A) All of the members of the corporation, if it is a membership
organization as described in the Nonprofit Corporation Law, are
persons licensed to practice law in California.
(B) All of the members of the professional law corporation's board
of directors are persons licensed to practice law in California.
(C) Seventy percent of the clients to whom the corporation
provides legal services are lower income persons as defined in
Section 50079.5 of the Health and Safety Code, and to other persons
who would not otherwise have access to legal services.
(D) The corporation shall not enter into contingency fee contracts
with clients.
(c) A professional law corporation incorporated as a nonprofit
public benefit corporation that is a recipient in good standing as
defined in subdivision (c) of Section 6213 of the Business and
Professions Code shall be deemed to have satisfied all of the filing
requirements of a professional law corporation under Sections 6161.1,
6162, and 6163 of the Business and Professions Code.
SEC. 114. Section 13408.5 of the
Corporations Code is amended to read:
13408.5. No professional corporation may be formed so as to cause
any violation of law, or any applicable rules and regulations,
relating to fee splitting, kickbacks, or other similar practices by
physicians and surgeons or psychologists, including, but not limited
to, Section 650 or subdivision (e) of Section 2960 of the Business
and Professions Code. A violation of any such provisions shall be
grounds for the suspension or revocation of the certificate of
registration of the professional corporation. The Commissioner of
Corporations Financial Services or the
Director of the Department of Managed Health Care may refer any
suspected violation of such provisions to the governmental agency
regulating the profession in which the corporation is, or proposes to
be engaged.
SEC. 115. Section 14025 of the
Corporations Code is amended to read:
14025. The director shall do all of the following:
(a) Administer this part.
(b) In accordance with program resources, stimulate the formation
of corporations and the use of branch offices for the purposes of
making this program accessible to all areas of the state.
(c) Expeditiously approve or disapprove the articles of
incorporation and any subsequent amendments to the articles of
incorporation of a corporation.
(d) Require each corporation to submit an annual written plan of
operation.
(e) Review reports from the Department of Financial
Institutions Services and inform corporations as
to what corrective action is required.
(f) Examine, or cause to be examined, at any reasonable time, all
books, records, and documents of every kind, and the physical
properties of a corporation. The inspection shall include the right
to make copies, extracts, and search records.
SEC. 116. Section 15679.2 of the
Corporations Code is amended to read:
15679.2. (a) If the approval of outstanding limited partnership
interests is required for a limited partnership to participate in a
reorganization, pursuant to the limited partnership agreement of the
partnership, or otherwise, then each limited partner of the limited
partnership holding those interests may, by complying with this
article, require the limited partnership to purchase for cash, at its
fair market value, the interest owned by the limited partner in the
limited partnership, if the interest is a dissenting interest as
defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the
proposed reorganization, excluding any appreciation or depreciation
in consequence of the proposed reorganization.
(b) As used in this article, "dissenting interest" means the
interest of a limited partner that satisfies all of the following
conditions:
(1) Either:
(A) The interest was not, immediately prior to the reorganization,
either (i) listed on any national securities exchange certified by
the Commissioner of Corporations Financial
Services under subdivision (o) of Section 25100, or (ii) listed
on the list of OTC margin stocks issued by the Board of Governors of
the Federal Reserve System, provided that in either such instance
the limited partnership whose outstanding interests are so listed
provides, in its notice to limited partners requesting their approval
of the proposed reorganization, a summary of the provisions of this
section and Sections 15679.3, 15679.4, 15679.5, and 15679.6.
(B) Demands for payment are filed with respect to 5 percent or
more of the outstanding interests of any class of interests described
in clause (i) or (ii) of subparagraph (A).
(2) Which was outstanding on the date for the determination of
limited partners entitled to vote on the reorganization.
(3) (i) Which was not voted in favor of the reorganization, or
(ii) if the interest is described in clause (i) or (ii) of
subparagraph (A) of paragraph (1), was voted against the
reorganization; provided, however, that clause (i) rather than clause
(ii) of this paragraph applies in any event where the approval for
the proposed reorganization is sought by written consent rather than
at a meeting.
(4) Which the limited partner has demanded that the limited
partnership purchase at its fair market value in accordance with
Section 15679.3.
(5) Which the limited partner submits for endorsement, if
applicable, in accordance with Section 15679.4.
(c) As used in this article, "dissenting limited partner" means
the recordholder of a dissenting interest, and includes an assignee
of record of such an interest.
SEC. 117. Section 15911.21 of the
Corporations Code is amended to read:
15911.21. (a) If the approval of outstanding limited partnership
interests is required for a limited partnership to participate in a
reorganization, pursuant to the limited partnership agreement of the
partnership, or otherwise, then each limited partner of the limited
partnership holding those interests may, by complying with this
article, require the limited partnership to purchase for cash, at its
fair market value, the interest owned by the limited partner in the
limited partnership, if the interest is a dissenting interest as
defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the
proposed reorganization, excluding any appreciation or depreciation
in consequence of the proposed reorganization.
(b) As used in this article, "dissenting interest" means the
interest of a limited partner that satisfies all of the following
conditions:
(1) Either:
(A) Was not, immediately prior to the reorganization, either (i)
listed on any national securities exchange certified by the
Commissioner of Corporations Financial
Services under subdivision (o) of Section 25100, or (ii) listed
on the list of OTC margin stocks issued by the Board of Governors of
the Federal Reserve System, provided that in either such instance
the limited partnership whose outstanding interests are so listed
provides, in its notice to limited partners requesting their approval
of the proposed reorganization, a summary of the provisions of this
section and Sections 15911.22, 15911.23, 15911.24, and 15911.25.
(B) If the interest is of a class of interests listed as described
in clause (i) or (ii) of subparagraph (A), demands for payment are
filed with respect to 5 percent or more of the outstanding interests
of that class.
(2) Was outstanding on the date for the determination of limited
partners entitled to vote on the reorganization.
(3) (A) Was not voted in favor of the reorganization, or (B) if
the interest is described in clause (i) or (ii) of subparagraph (A)
of paragraph (1), was voted against the reorganization; provided,
however, that clause (A) rather than clause (B) of this paragraph
applies in any event where the approval for the proposed
reorganization is sought by written consent rather than at a meeting.
(4) The limited partner has demanded that it be purchased by the
limited partnership at its fair market value in accordance with
Section 15911.22.
(5) The limited partner has submitted it for endorsement, if
applicable, in accordance with Section 15911.23.
(c) As used in this article, "dissenting limited partner" means
the recordholder of a dissenting interest, and includes an assignee
of record of such an interest.
SEC. 118. Section 17656 of the
Corporations Code is amended to read:
17656. (a) A limited liability company is liable for a civil
penalty in an amount not exceeding one million dollars ($1,000,000)
if the limited liability company does both of the following:
(1) Has actual knowledge that a member, officer, manager, or agent
of the limited liability company does any of the following:
(A) Makes, publishes, or posts, or has made, published, or posted,
either generally or privately to the shareholders or other persons,
either of the following:
(i) An oral, written, or electronically transmitted report,
exhibit, notice, or statement of its affairs or pecuniary condition
that contains a material statement or omission that is false and
intended to give membership shares in the limited liability company a
materially greater or a materially less apparent market value than
they really possess.
(ii) An oral, written, or electronically transmitted report,
prospectus, account, or statement of operations, values, business,
profits, or expenditures that includes a material false statement or
omission intended to give membership shares in the limited liability
company a materially greater or a materially less apparent market
value than they really possess.
(B) Refuses or has refused to make any book entry or post any
notice required by law in the manner required by law.
(C) Misstates or conceals or has misstated or concealed from a
regulatory body a material fact in order to deceive a regulatory body
to avoid a statutory or regulatory duty, or to avoid a statutory or
regulatory limit or prohibition.
(2) Within 30 days after actual knowledge is acquired of the
actions described in paragraph (1), the limited liability company
knowingly fails to do both of the following:
(A) Notify the Attorney General or appropriate government agency
in writing, unless the limited liability company has actual knowledge
that the Attorney General or appropriate government agency has been
notified.
(B) Notify its members and investors in writing, unless the
limited liability company has actual knowledge that the members and
investors have been notified.
(b) The requirement for notification under this section is not
applicable if the action taken or about to be taken by the limited
liability company, or by a member, officer, manager, or agent of the
limited liability company under paragraph (1) of subdivision (a), is
abated within the time prescribed for reporting, unless the
appropriate government agency requires disclosure by regulation.
(c) If the action reported to the Attorney General pursuant to
this section implicates the government authority of an agency other
than the Attorney General, the Attorney General shall promptly
forward the written notice to that agency.
(d) If the Attorney General was not notified pursuant to
subparagraph (A) of paragraph (2) of subdivision (a), but the limited
liability company reasonably and in good faith believed that it had
complied with the notification requirements of this section by
notifying a government agency listed in paragraph (5) of subdivision
(e), no penalties shall apply.
(e) For purposes of this section:
(1) "Manager" means a person defined by subdivision (w) of Section
17001 having both of the following:
(A) Management authority over the limited liability company.
(B) Significant responsibility for an aspect of the limited
liability company that includes actual authority for the financial
operations or financial transactions of the limited liability
company.
(2) "Agent" means a person or entity authorized by the limited
liability company to make representations to the public about the
limited liability company's financial condition and who is acting
within the scope of the agency when the representations are made.
(3) "Member" means a person as defined by subdivision (x) of
Section 17001 that is a member of the limited liability company at
the time the disclosure is required pursuant to subparagraph (B) of
paragraph (2) of subdivision (a).
(4) "Notify its members" means to give sufficient description of
an action taken or about to be taken that would constitute acts or
omissions as described in paragraph (1) of subdivision (a). A notice
or report filed by a limited liability company with the United States
Securities and Exchange Commission that relates to the facts and
circumstances giving rise to an obligation under paragraph (1) of
subdivision (a) shall satisfy all notice requirements arising under
paragraph (2) of subdivision (a) but shall not be the exclusive means
of satisfying the notice requirements, provided that the Attorney
General or appropriate agency is informed in writing that the filing
has been made together with a copy of the filing or an electronic
link where it is available online without charge.
(5) "Appropriate government agency" means an agency on the
following list that has regulatory authority with respect to the
financial operations of a limited liability company:
(A) Department of Corporations Financial
Services .
(B) Department of Insurance.
(C) Department of Financial Institutions.
(D)
(C) Department of Managed Health Care.
(E)
(D) United States Securities and Exchange Commission.
(6) "Actual knowledge of the limited liability company" means the
knowledge a member, officer, or manager of a limited liability
company actually possesses or does not consciously avoid possessing,
based on an evaluation of information provided pursuant to the
limited liability company's disclosure controls and procedures.
(7) "Refuse to make a book entry" means the intentional decision
not to record an accounting transaction when all of the following
conditions are satisfied:
(A) The independent auditors required recordation of an accounting
transaction during the course of an audit.
(B) The audit committee of the limited liability company has not
approved the independent auditor's recommendation.
(C) The decision is made for the primary purpose of rendering the
financial statements materially false or misleading.
(8) "Refuse to post any notice required by law" means an
intentional decision not to post a notice required by law when all of
the following conditions exist:
(A) The decision not to post the notice has not been approved by
the limited liability company's audit committee.
(B) The decision is intended to give the membership shares in the
limited liability company a materially greater or a materially less
apparent market value than they really possess.
(9) "Misstate or conceal material facts from a regulatory body"
means an intentional decision not to disclose material facts when all
of the following conditions exist:
(A) The decision not to disclose material facts has not been
approved by the limited liability company's audit committee.
(B) The decision is intended to give the membership shares in the
limited liability company a greater or a less apparent market value
than they really possess.
(10) "Material false statement or omission" means an untrue
statement of material fact or an omission to state a material fact
necessary in order to make the statements made under the
circumstances under which they were made not misleading.
(11) "Officer" means a person appointed pursuant to Section 17154,
except an officer of a specified subsidiary limited liability
company who is not also an officer of the parent limited liability
company.
(f) This section only applies to limited liability companies that
are issuers, as defined in Section 2 of the Sarbanes-Oxley Act of
2002 (15 U.S.C. Sec. 7201 and following).
(g) An action to enforce this section may only be brought by the
Attorney General or a district attorney or city attorney in the name
of the people of the State of California.
SEC. 119. Section 23000 of the
Corporations Code is amended to read:
23000. "Real estate investment trust" as used in this part means
any unincorporated association or trust formed to engage in business
and managed by, or under the direction of, one or more trustees for
the benefit of the holders or owners (hereinafter in this part
"shareowners") of transferable shares of beneficial interest in the
trust estate (hereinafter in this part "shares") and which meets one
of the following two tests:
(a) It received, prior to the effective date of this part, an
order, permit or qualification from the Commissioner of
Corporations Financial Services pursuant to the
provisions of the Corporate Securities Law of 1968 or any predecessor
statute finding that it was a real estate investment trust,
notwithstanding the subsequent amendment, suspension or revocation of
any such finding, order, permit or qualification, and it has for one
or more of its three fiscal years immediately prior to the effective
date of this part complied with, or in good faith filed a federal
income tax return on the basis that it has complied with the
requirements for real estate investment trusts set forth in Section
856 of the Federal Internal Revenue Code; or
(b) It is formed for the purpose of engaging in business as a real
estate investment trust under Part II of Subchapter M of Chapter 1
of Subtitle A of the Federal Internal Revenue Code of 1954, as
amended from time to time; the sale of its shares has been qualified
at any time by the Commissioner of Corporations
Financial Services pursuant to the Corporate Securities
Law of 1968; and in good faith it has commenced business as a real
estate investment trust.
An unincorporated association or trust which otherwise meets the
requirements of this section shall not be affected in its status as a
real estate investment trust whether or not it is in fact taxable
for any year or years under Part II of Subchapter M of Chapter 1 of
Subtitle A of the Federal Internal Revenue Code of 1954, as amended
from time to time.
SEC. 120. Section 25004 of the
Corporations Code is amended to read:
25004. (a) "Broker-dealer" means any person engaged in the
business of effecting transactions in securities in this state for
the account of others or for his own account. "Broker-dealer" also
includes a person engaged in the regular business of issuing or
guaranteeing options with regard to securities not of his own issue.
"Broker-dealer" does not include any of the following:
(1) Any other issuer.
(2) An agent, when an employee of a broker-dealer or issuer.
(3) A bank, trust company, or savings and loan association.
(4) Any person insofar as he buys or sells securities for his own
account, either individually or in some fiduciary capacity, but not
as part of a regular business.
(5) A person who has no place of business in this state if he
effects transactions in this state exclusively with (A) the issuers
of the securities involved in the transactions or (B) other
broker-dealers.
(6) A broker licensed by the Real Estate
Commissioner of Financial Services of this state when
engaged in transactions in securities exempted by subdivision (f) or
(p) of Section 25100 or in securities the issuance of which is
subject to authorization by the Real Estate
Commissioner of Financial Services of this state or in
transactions exempted by subdivision (e) of Section 25102.
(7) An exchange certified by the Commissioner of
Corporations Financial Services pursuant to this
section when it is issuing or guaranteeing options. The commissioner
may by order certify an exchange under this section upon such
conditions as he or she by rule or order deems
appropriate, and upon notice and opportunity to be heard he or
she may suspend or revoke such certification, if he or she
finds such certification, suspension, or revocation to be in
the public interest and necessary and appropriate for the protection
of investors.
(b) For purposes of this section, an agent is an employee of a
broker-dealer under paragraph (2) of subdivision (a) when the agent
is employed by or associated with the broker-dealer under all of the
following conditions:
(1) The agent is subject to the supervision and control of the
broker-dealer.
(2) The agent performs under the name, authority, and marketing
policies of the broker-dealer.
(3) The agent discloses to investors the identity of the
broker-dealer.
(4) The agent is reported pursuant to subdivision (c) of Section
25210 and the rules adopted thereunder.
SEC. 121. Section 25005 of the
Corporations Code is amended to read:
25005. "Commissioner" means the Commissioner of
Corporations Financial Services .
SEC. 122. Section 25014.6 of the
Corporations Code is amended to read:
25014.6. "Rollup transaction" means any transaction or series of
transactions that directly or indirectly through acquisition or
otherwise involves the combination or reorganization of one or more
rollup participants and is one of the following:
(a) The offer or sale of securities by a successor entity, whether
newly formed or previously existing, to one or more investors of the
rollup participants to be combined or reorganized.
(b) The acquisition of the successor entity's securities by the
rollup participants being combined or reorganized; provided however,
that a rollup transaction shall not include any transaction that:
(1) The Securities and Exchange Commission exempts from the
definition of a rollup transaction pursuant to subparagraph (c) (ii)
of Item 901 of Regulation S-K adopted by the Securities and Exchange
Commission.
(2) Is determined to be exempt from this definition by the
Commissioner of Corporations Financial
Services upon his or her determination that this action is in
the public interest and consistent with the protection of investors.
(3) Involves one or more limited partnerships all of the
securities of which are, prior to the transaction, securities for
which transactions are reported under a transaction reporting plan
declared effective before January 1, 1991, by the Securities and
Exchange Commission under Section 11A of the Securities Exchange Act
of 1934.
(4) Involves only those issuers not required to register or report
under Section 12 of the Securities Exchange Act of 1934 where the
resulting issuer is also not required to register or report under
Section 12.
(5) Involves the reorganization to corporate, trust, or
association form or restructuring of a single limited partnership if,
as a consequence of the proposed transaction there will be no
significant, adverse change in any of the following: voting rights,
the term of existence of the entity, management compensation, or
investment objectives.
(6) Involves the reorganization to corporate, trust, or
association form or restructuring of a single limited partnership if
each investor is provided an option to retain a security under
substantially the same terms and conditions as the original issue.
(7) Involves the reorganization to corporate, trust, or
association form or restructuring of a single limited partnership if
transactions in the security issued as a result of the reorganization
or restructuring are not reported under a transaction reporting plan
declared effective before January 1, 1991, by the Securities and
Exchange Commission under Section 11A of the Securities Exchange Act
of 1934.
SEC. 123. Section 25100 of the
Corporations Code is amended to read:
25100. The following securities are exempted from Sections 25110,
25120, and 25130:
(a) Any security (including a revenue obligation) issued or
guaranteed by the United States, any state, any city, county, city
and county, public district, public authority, public corporation,
public entity, or political subdivision of a state or any agency or
corporate or other instrumentality of any one or more of the
foregoing; or any certificate of deposit for any of the foregoing.
(b) Any security issued or guaranteed by Canada, any Canadian
province, any political subdivision or municipality of that province,
or by any other foreign government with which the United States
currently maintains diplomatic relations, if the security is
recognized as a valid obligation by the issuer or guarantor; or any
certificate of deposit for any of the foregoing.
(c) Any security issued or guaranteed by and representing an
interest in or a direct obligation of a national bank or a bank or
trust company incorporated under the laws of this state, and any
security issued by a bank to one or more other banks and representing
an interest in an asset of the issuing bank.
(d) Any security issued or guaranteed by a federal savings
association or federal savings bank or federal land bank or joint
land bank or national farm loan association or by any savings
association, as defined in subdivision (a) of Section 5102 of the
Financial Code, which is subject to the supervision and regulation of
the Commissioner of Financial Institutions of this state.
(e) Any security (other than an interest in all or
portions of a parcel or parcels of real property which are subdivided
land or a subdivision or in a real estate development), the issuance
of which is subject to authorization by the Insurance Commissioner,
the Public Utilities Commission, or the Real Estate
Commissioner of Financial Services of this
state.
(f) Any security consisting of any interest in all or portions of
a parcel or parcels of real property which are subdivided lands or a
subdivision or in a real estate development; provided that the
exemption in this subdivision shall not be applicable to: (1) any
investment contract sold or offered for sale with, or as part of,
that interest, or (2) any person engaged in the business of selling,
distributing, or supplying water for irrigation purposes or domestic
use that is not a public utility except that the exemption is
applicable to any security of a mutual water company (other than an
investment contract as described in paragraph (1)) offered or sold in
connection with subdivided lands pursuant to Chapter 2 (commencing
with Section 14310) of Part 7 of Division 3 of Title 1.
(g) Any mutual capital certificates or savings accounts, as
defined in the Savings Association Law, issued by a savings
association, as defined by subdivision (a) of Section 5102 of the
Financial Code, and holding a license or certificate of authority
then in force from the Commissioner of Financial Institutions of this
state.
(h) Any security issued or guaranteed by any federal credit union,
or by any credit union organized and supervised, or regulated, under
the Credit Union Law.
(i) Any security issued or guaranteed by any railroad, other
common carrier, public utility, or public utility holding company
which is (1) subject to the jurisdiction of the Interstate Commerce
Commission or its successor or (2) a holding company registered with
the Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935 or a subsidiary of that company within
the meaning of that act or (3) regulated in respect of the issuance
or guarantee of the security by a governmental authority of the
United States, of any state, of Canada or of any Canadian province;
and the security is subject to registration with or authorization of
issuance by that authority.
(j) Any security (except evidences of indebtedness, whether
interest bearing or not) of an issuer (1) organized exclusively for
educational, benevolent, fraternal, religious, charitable, social, or
reformatory purposes and not for pecuniary profit, if no part of the
net earnings of the issuer inures to the benefit of any private
shareholder or individual, or (2) organized as a chamber of commerce
or trade or professional association. The fact that amounts received
from memberships or dues or both will or may be used to construct or
otherwise acquire facilities for use by members of the nonprofit
organization does not disqualify the organization for this exemption.
This exemption does not apply to the securities of any nonprofit
organization if any promoter thereof expects or intends to make a
profit directly or indirectly from any business or activity
associated with the organization or operation of that nonprofit
organization or from remuneration received from that nonprofit
organization.
(k) Any agreement, commonly known as a "life income contract," of
an issuer (1) organized exclusively for educational, benevolent,
fraternal, religious, charitable, social, or reformatory purposes and
not for pecuniary profit and (2) which the commissioner designates
by rule or order, with a donor in consideration of a donation of
property to that issuer and providing for the payment to the donor or
persons designated by him or her of income or specified periodic
payments from the donated property or other property for the life of
the donor or those other persons.
() Any note, draft, bill of exchange, or banker's acceptance which
is freely transferable and of prime quality, arises out of a current
transaction or the proceeds of which have been or are to be used for
current transactions, and which evidences an obligation to pay cash
within nine months of the date of issuance, exclusive of days of
grace, or any renewal of that paper which is likewise limited, or any
guarantee of that paper or of that renewal, provided that the paper
is not offered to the public in amounts of less than twenty-five
thousand dollars ($25,000) in the aggregate to any one purchaser. In
addition, the commissioner may, by rule or order, exempt any issuer
of any notes, drafts, bills of exchange or banker's acceptances from
qualification of those securities when the commissioner finds that
the qualification is not necessary or appropriate in the public
interest or for the protection of investors.
(m) Any security issued by any corporation organized and existing
under the provisions of Chapter 1 (commencing with Section 54001) of
Division 20 of the Food and Agricultural Code.
(n) Any beneficial interest in an employees' pension,
profit-sharing, stock bonus or similar benefit plan which meets the
requirements for qualification under Section 401 of the federal
Internal Revenue Code or any statute amendatory thereof or
supplementary thereto. A determination letter from the Internal
Revenue Service stating that an employees' pension, profit-sharing,
stock bonus or similar benefit plan meets those requirements shall be
conclusive evidence that the plan is an employees' pension,
profit-sharing, stock bonus or similar benefit plan within the
meaning of the first sentence of this subdivision until the date the
determination letter is revoked in writing by the Internal Revenue
Service, regardless of whether or not the revocation is retroactive.
(o) Any security listed or approved for listing upon notice of
issuance on a national securities exchange or on the National Market
System of the Nasdaq Stock Market (or any successor to that entity),
if the exchange or Nasdaq Stock Market (or its successor) has been
certified by rule or order of the commissioner and any warrant or
right to purchase or subscribe to the security. The exemption
afforded by this subdivision does not apply to securities listed or
approved for listing upon notice of issuance on a national securities
exchange or on the National Market System of the Nasdaq Stock Market
(or its successor), in a rollup transaction unless the rollup
transaction is an eligible rollup transaction as defined in Section
25014.7.
That certification of any exchange or the Nasdaq Stock Market (or
its successor) shall be made by the commissioner upon the written
request of the exchange or Nasdaq Stock Market (or its successor) if
the commissioner finds that the exchange or Nasdaq Stock Market (or
its successor): (i) in acting on applications for listing of common
stock substantially applies the minimum standards set forth in either
alternative (A) or (B) of paragraph (1), and (ii) in considering
suspension or removal from listing, substantially applies each of the
criteria set forth in paragraph (2).
(1) Listing standards:
(A) (i) Shareholders' equity of at least four million dollars
($4,000,000).
(ii) Pretax income of at least seven hundred fifty thousand
dollars ($750,000) in the issuer's last fiscal year or in two of its
last three fiscal years.
(iii) Minimum public distribution of 500,000 shares (exclusive of
the holdings of officers, directors, controlling shareholders, and
other concentrated or family holdings), together with a minimum of
800 public holders or minimum public distribution of 1,000,000 shares
together with a minimum of 400 public holders. The exchange or
Nasdaq Stock Market (or its successor) may also consider the listing
of a company's securities if the company has a minimum of 500,000
shares publicly held, a minimum of 400 shareholders and daily trading
volume in the issue has been approximately 2,000 shares or more for
the six months preceding the date of application. In evaluating the
suitability of an issue for listing under this trading provision, the
exchange or Nasdaq Stock Market (or its successor) shall review the
nature and frequency of that activity and any other factors as it may
determine to be relevant in ascertaining whether the issue is
suitable for trading. A security that trades infrequently shall not
be considered for listing under this paragraph even though average
daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited
geographical area, or whose securities are largely held in block by
institutional investors, normally may not be considered eligible for
listing unless the public distribution appreciably exceeds 500,000
shares.
(iv) Minimum price of three dollars ($3) per share for a
reasonable period of time prior to the filing of a listing
application; provided, however, in certain instances an exchange or
Nasdaq Stock Market (or its successor) may favorably consider listing
an issue selling for less than three dollars ($3) per share after
considering all pertinent factors, including market conditions in
general, whether historically the issue has sold above three dollars
($3) per share, the applicant's capitalization, and the number of
outstanding and publicly held shares of the issue.
(v) An aggregate market value for publicly held shares of at least
three million dollars ($3,000,000).
(B) (i) Shareholders' equity of at least four million dollars
($4,000,000).
(ii) Minimum public distribution set forth in clause (iii) of
subparagraph (A) of paragraph (1).
(iii) Operating history of at least three years.
(iv) An aggregate market value for publicly held shares of at
least fifteen million dollars ($15,000,000).
(2) Criteria for consideration of suspension or removal from
listing:
(i) If a company that (A) has shareholders' equity of less than
one million dollars ($1,000,000) has sustained net losses in each of
its two most recent fiscal years, or (B) has net tangible assets of
less than three million dollars ($3,000,000) and has sustained net
losses in three of its four most recent fiscal years.
(ii) If the number of shares publicly held (excluding the holdings
of officers, directors, controlling shareholders and other
concentrated or family holdings) is less than 150,000.
(iii) If the total number of shareholders is less than 400 or if
the number of shareholders of lots of 100 shares or more is less than
300.
(iv) If the aggregate market value of shares publicly held is less
than seven hundred fifty thousand dollars ($750,000).
(v) If shares of common stock sell at a price of less than three
dollars ($3) per share for a substantial period of time and the
issuer shall fail to effectuate a reverse stock split of the shares
within a reasonable period of time after being requested by the
exchange to take that action.
A national securities exchange or Nasdaq Stock Market (or its
successor), certified by rule or order of the commissioner under this
subdivision, shall file annual reports when requested to do so by
the commissioner. The annual reports shall contain, by issuer: the
variances granted to an exchange's listing standards or Nasdaq Stock
Market's (or its successor) criteria, including variances from
corporate governance and voting rights' standards, for any security
of that issuer; the reasons for the variances; a discussion of the
review procedure instituted by the exchange or Nasdaq Stock Market
(or its successor) to determine the effect of the variances on
investors and whether the variances should be continued; and any
other information that the commissioner deems relevant. The purpose
of these reports is to assist the commissioner in determining whether
the quantitative and qualitative requirements of this subdivision
are substantially being met by the exchange in general or with regard
to any particular security.
The commissioner after appropriate notice and opportunity for
hearing in accordance with the provisions of the Administrative
Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, may, in his or her
discretion, by rule or order, decertify any exchange or Nasdaq Stock
Market (or its successor) previously certified that ceases
substantially to apply the minimum standards or criteria as set forth
in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that
any security listed or approved for listing upon notice of issuance
on any exchange, or listed on the National Market System of the
Nasdaq Stock Market (or its successor), named in a rule or order of
certification, and any warrant or right to purchase or subscribe to
that security, is exempt under this subdivision until the adoption by
the commissioner of any rule or order decertifying the exchange or
the Nasdaq Stock Market (or its successor).
(p) A promissory note secured by a lien on real property, which is
neither one of a series of notes of equal priority secured by
interests in the same real property nor a note in which beneficial
interests are sold to more than one person or entity.
(q) Any unincorporated interindemnity or reciprocal or
interinsurance contract, that qualifies under the provisions of
Section 1280.7 of the Insurance Code, between members of a
cooperative corporation, organized and operating under Part 2
(commencing with Section 12200) of Division 3 of Title 1, and whose
members consist only of physicians and surgeons licensed in
California, which contracts indemnify solely in respect to medical
malpractice claims against the members, and which do not collect in
advance of loss any moneys other than contributions by each member to
a collective reserve trust fund or for necessary expenses of
administration.
(1) Whenever it appears to the commissioner that any person has
engaged or is about to engage in any act or practice constituting a
violation of any provision of Section 1280.7 of the Insurance Code,
the commissioner may, in the commissioner's discretion, bring an
action in the name of the people of the State of California in the
superior court to enjoin the acts or practices or to enforce
compliance with Section 1280.7 of the Insurance Code. Upon a proper
showing a permanent or preliminary injunction, a restraining order,
or a writ of mandate shall be granted and a receiver or conservator
may be appointed for the defendant or the defendant's assets.
(2) The commissioner may, in the commissioner's discretion, (A)
make public or private investigations within or outside of this state
as the commissioner deems necessary to determine whether any person
has violated or is about to violate any provision of Section 1280.7
of the Insurance Code or to aid in the enforcement of Section 1280.7,
and (B) publish information concerning the violation of Section
1280.7.
(3) For the purpose of any investigation or proceeding under this
section, the commissioner or any officer designated by the
commissioner may administer oaths and affirmations, subpoena
witnesses, compel their attendance, take evidence, and require the
production of any books, papers, correspondence, memoranda,
agreements, or other documents or records which the commissioner
deems relevant or material to the inquiry.
(4) In case of contumacy by, or refusal to obey a subpoena issued
to, any person, the superior court, upon application by the
commissioner, may issue to the person an order requiring the person
to appear before the commissioner, or the officer designated by the
commissioner, to produce documentary evidence, if so ordered, or to
give evidence touching the matter under investigation or in question.
Failure to obey the order of the court may be punished by the court
as a contempt.
(5) No person is excused from attending or testifying or from
producing any document or record before the commissioner or in
obedience to the subpoena of the commissioner or any officer
designated by the commissioner, or in any proceeding instituted by
the commissioner, on the ground that the testimony or evidence
(documentary or otherwise), required of the person may tend to
incriminate the person or subject the person to a penalty or
forfeiture, but no individual may be prosecuted or subjected to any
penalty or forfeiture for or on account of any transaction, matter,
or thing concerning which the person is compelled, after validly
claiming the privilege against self-incrimination, to testify or
produce evidence (documentary or otherwise), except that the
individual testifying is not exempt from prosecution and punishment
for perjury or contempt committed in testifying.
(6) The cost of any review, examination, audit, or investigation
made by the commissioner under Section 1280.7 of the Insurance Code
shall be paid to the commissioner by the person subject to the
review, examination, audit, or investigation, and the commissioner
may maintain an action for the recovery of these costs in any court
of competent jurisdiction. In determining the cost, the commissioner
may use the actual amount of the salary or other compensation paid to
the persons making the review, examination, audit, or investigation
plus the actual amount of expenses including overhead reasonably
incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or
investigation made by the commissioner under Section 1280.7 of the
Insurance Code shall not exceed twenty-five thousand dollars
($25,000), except that costs exceeding twenty-five thousand dollars
($25,000) shall be recoverable if the costs are necessary to prevent
a violation of any provision of Section 1280.7 of the Insurance Code.
(r) Any shares or memberships issued by any corporation organized
and existing pursuant to the provisions of Part 2 (commencing with
Section 12200) of Division 3 of Title 1, provided the aggregate
investment of any shareholder or member in shares or memberships sold
pursuant to this subdivision does not exceed three hundred dollars
($300). This exemption does not apply to the shares or memberships of
that corporation if any promoter thereof expects or intends to make
a profit directly or indirectly from any business or activity
associated with the corporation or the operation of the corporation
or from remuneration, other than reasonable salary, received from the
corporation. This exemption does not apply to nonvoting shares or
memberships of that corporation issued to any person who does not
possess, and who will not acquire in connection with the issuance of
nonvoting shares or memberships, voting power (Section 12253) in the
corporation. This exemption also does not apply to shares or
memberships issued by a nonprofit cooperative corporation organized
to facilitate the creation of an unincorporated interindemnity
arrangement that provides indemnification for medical malpractice to
its physician and surgeon members as set forth in subdivision (q).
(s) Any security consisting of or representing an interest in a
pool of mortgage loans that meets each of the following requirements:
(1) The pool consists of whole mortgage loans or participation
interests in those loans, which loans were originated or acquired in
the ordinary course of business by a national bank or federal savings
association or federal savings bank having its principal office in
this state, by a bank incorporated under the laws of this state or by
a savings association as defined in subdivision (a) of Section 5102
of the Financial Code and which is subject to the supervision and
regulation of the Commissioner of Financial Institutions, and each of
which at the time of transfer to the pool is an authorized
investment for the originating or acquiring institution.
(2) The pool of mortgage loans is held in trust by a trustee which
is a financial institution specified in paragraph (1) as trustee or
otherwise.
(3) The loans are serviced by a financial institution specified in
paragraph (1).
(4) The security is not offered in amounts of less than
twenty-five thousand dollars ($25,000) in the aggregate to any one
purchaser.
(5) The security is offered pursuant to a registration under the
Securities Act of 1933, or pursuant to an exemption under Regulation
A under that act, or in the opinion of counsel for the issuer, is
offered pursuant to an exemption under Section 4(2) of that act.
(t) (1) Any security issued or guaranteed by and representing an
interest in or a direct obligation of an industrial loan company
incorporated under the laws of the state and authorized by the
Commissioner of Financial Institutions
Services to engage in industrial loan business.
(2) Any investment certificate in or issued by any industrial loan
company that is organized under the laws of a state of the United
States other than this state, that is insured by the Federal Deposit
Insurance Corporation, and that maintains a branch office in this
state.
SEC. 124. Section 25102 of the
Corporations Code is amended to read:
25102. The following transactions are exempted from the
provisions of Section 25110:
(a) Any offer (but not a sale) not involving any public offering
and the execution and delivery of any agreement for the sale of
securities pursuant to the offer if (1) the agreement contains
substantially the following provision: "The sale of the securities
that are the subject of this agreement has not been qualified with
the Commissioner of Corporations Financial
Services of the State of California and the issuance of the
securities or the payment or receipt of any part of the consideration
therefor prior to the qualification is unlawful, unless the sale of
securities is exempt from the qualification by Section 25100, 25102,
or 25105 of the California Corporations Code. The rights of all
parties to this agreement are expressly conditioned upon the
qualification being obtained, unless the sale is so exempt"; and (2)
no part of the purchase price is paid or received and none of the
securities are issued until the sale of the securities is qualified
under this law unless the sale of securities is exempt from the
qualification by this section, Section 25100, or 25105.
(b) Any offer (but not a sale) of a security for which a
registration statement has been filed under the Securities Act of
1933 but has not yet become effective, or for which an offering
statement under Regulation A has been filed but has not yet been
qualified, if no stop order or refusal order is in effect and no
public proceeding or examination looking towards an order is pending
under Section 8 of the act and no order under Section 25140 or
subdivision (a) of Section 25143 is in effect under this law.
(c) Any offer (but not a sale) and the execution and delivery of
any agreement for the sale of securities pursuant to the offer as may
be permitted by the commissioner upon application. Any negotiating
permit under this subdivision shall be conditioned to the effect that
none of the securities may be issued and none of the consideration
therefor may be received or accepted until the sale of the securities
is qualified under this law.
(d) Any transaction or agreement between the issuer and an
underwriter or among underwriters if the sale of the securities is
qualified, or exempt from qualification, at the time of distribution
thereof in this state, if any.
(e) Any offer or sale of any evidence of indebtedness, whether
secured or unsecured, and any guarantee thereof, in a transaction not
involving any public offering.
(f) Any offer or sale of any security in a transaction (other than
an offer or sale to a pension or profit-sharing trust of the issuer)
that meets each of the following criteria:
(1) Sales of the security are not made to more than 35 persons,
including persons not in this state.
(2) All purchasers either have a preexisting personal or business
relationship with the offeror or any of its partners, officers,
directors or controlling persons, or managers (as appointed or
elected by the members) if the offeror is a limited liability
company, or by reason of their business or financial experience or
the business or financial experience of their professional advisers
who are unaffiliated with and who are not compensated by the issuer
or any affiliate or selling agent of the issuer, directly or
indirectly, could be reasonably assumed to have the capacity to
protect their own interests in connection with the transaction.
(3) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account (or a trust account if the purchaser is
a trustee) and not with a view to or for sale in connection with any
distribution of the security.
(4) The offer and sale of the security is not accomplished by the
publication of any advertisement. The number of purchasers referred
to above is exclusive of any described in subdivision (i), any
officer, director, or affiliate of the issuer, or manager (as
appointed or elected by the members) if the issuer is a limited
liability company, and any other purchaser who the commissioner
designates by rule. For purposes of this section, a husband and wife
(together with any custodian or trustee acting for the account of
their minor children) are counted as one person and a partnership,
corporation, or other organization that was not specifically formed
for the purpose of purchasing the security offered in reliance upon
this exemption, is counted as one person. The commissioner may by
rule require the issuer to file a notice of transactions under this
subdivision.
The failure to file the notice or the failure to file the notice
within the time specified by the rule of the commissioner shall not
affect the availability of this exemption. An issuer who fails to
file the notice as provided by rule of the commissioner shall, within
15 business days after discovery of the failure to file the notice
or after demand by the commissioner, whichever occurs first, file the
notice and pay to the commissioner a fee equal to the fee payable
had the transaction been qualified under Section 25110.
(g) Any offer or sale of conditional sale agreements, equipment
trust certificates, or certificates of interest or participation
therein or partial assignments thereof, covering the purchase of
railroad rolling stock or equipment or the purchase of motor
vehicles, aircraft, or parts thereof, in a transaction not involving
any public offering.
(h) Any offer or sale of voting common stock by a corporation
incorporated in any state if, immediately after the proposed sale and
issuance, there will be only one class of stock of the corporation
outstanding that is owned beneficially by no more
than 35 persons, provided all of the following
requirements have been met:
(1) The offer and sale of the stock is not accompanied by the
publication of any advertisement, and no selling expenses have been
given, paid, or incurred in connection therewith.
(2) The consideration to be received by the issuer for the stock
to be issued consists of any of the following:
(A) Only assets (which may include cash) of an existing business
enterprise transferred to the issuer upon its initial organization,
of which all of the persons who are to receive the stock to be issued
pursuant to this exemption were owners during, and the enterprise
was operated for, a period of not less than one year immediately
preceding the proposed issuance, and the ownership of the enterprise
immediately prior to the proposed issuance was in the same
proportions as the shares of stock are to be issued.
(B) Only cash or cancellation of indebtedness for money borrowed,
or both, upon the initial organization of the issuer, provided all of
the stock is issued for the same price per share.
(C) Only cash, provided the sale is approved in writing by each of
the existing shareholders and the purchaser or purchasers are
existing shareholders.
(D) In a case where after the proposed issuance there will be only
one owner of the stock of the issuer, only any legal consideration.
(3) No promotional consideration has been given, paid, or incurred
in connection with the issuance. Promotional consideration means any
consideration paid directly or indirectly to a person who, acting
alone or in conjunction with one or more other persons, takes the
initiative in founding and organizing the business or enterprise of
an issuer for services rendered in connection with the founding or
organizing.
(4) A notice in a form prescribed by rule of the commissioner,
signed by an active member of the State Bar of California, is filed
with or mailed for filing to the commissioner not later than 10
business days after receipt of consideration for the securities by
the issuer. That notice shall contain an opinion of the member of the
State Bar of California that the exemption provided by this
subdivision is available for the offer and sale of the securities.
The failure to file the notice as required by this subdivision and
the rules of the commissioner shall not affect the availability of
this exemption. An issuer who fails to file the notice within the
time specified by this subdivision shall, within 15 business days
after discovery of the failure to file the notice or after demand by
the commissioner, whichever occurs first, file the notice and pay to
the commissioner a fee equal to the fee payable had the transaction
been qualified under Section 25110. The notice, except when filed on
behalf of a California corporation, shall be accompanied by an
irrevocable consent, in the form that the commissioner by rule
prescribes, appointing the commissioner or his or her successor in
office to be the issuer's attorney to receive service of any lawful
process in any noncriminal suit, action, or proceeding against it or
its successor that arises under this law or any rule or order
hereunder after the consent has been filed, with the same force and
validity as if served personally on the issuer. An issuer on whose
behalf a consent has been filed in connection with a previous
qualification or exemption from qualification under this law (or
application for a permit under any prior law if the application or
notice under this law states that the consent is still effective)
need not file another. Service may be made by leaving a copy of the
process in the office of the commissioner, but it is not effective
unless (A) the plaintiff, who may be the commissioner in a suit,
action, or proceeding instituted by him or her, forthwith sends
notice of the service and a copy of the process by registered or
certified mail to the defendant or respondent at its last address on
file with the commissioner, and (B) the plaintiff's affidavit of
compliance with this section is filed in the case on or before the
return day of the process, if any, or within the further time as the
court allows.
(5) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account, or a trust account if the purchaser is
a trustee, and not with a view to or for sale in connection with any
distribution of the stock.
For the purposes of this subdivision, all securities held by a
husband and wife, whether or not jointly, shall be considered to be
owned by one person, and all securities held by a corporation that
has issued stock pursuant to this exemption shall be considered to be
held by the shareholders to whom it has issued the stock.
All stock issued by a corporation pursuant to this subdivision as
it existed prior to the effective date of the amendments to this
section made during the 1996 portion of the 1995-96 Regular Session
that required the issuer to have stamped or printed prominently on
the face of the stock certificate a legend in a form prescribed by
rule of the commissioner restricting transfer of the stock in a
manner provided for by that rule shall not be subject to the transfer
restriction legend requirement and, by operation of law, the
corporation is authorized to remove that transfer restriction legend
from the certificates of those shares of stock issued by the
corporation pursuant to this subdivision as it existed prior to the
effective date of the amendments to this section made during the 1996
portion of the 1995-96 Regular Session.
(i) Any offer or sale (1) to a bank, savings and loan association,
trust company, insurance company, investment company registered
under the Investment Company Act of 1940, pension or profit-sharing
trust (other than a pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or individual retirement
account), or other institutional investor or governmental agency or
instrumentality that the commissioner may designate by rule, whether
the purchaser is acting for itself or as trustee, or (2) to any
corporation with outstanding securities registered under Section 12
of the Securities Exchange Act of 1934 or any wholly owned subsidiary
of the corporation that after the offer and sale will own directly
or indirectly 100 percent of the outstanding capital stock of the
issuer, provided the purchaser represents that it is purchasing for
its own account (or for the trust account) for investment and not
with a view to or for sale in connection with any distribution of the
security.
(j) Any offer or sale of any certificate of interest or
participation in an oil or gas title or lease (including subsurface
gas storage and payments out of production) if either of the
following apply:
(1) All of the purchasers meet one of the following requirements:
(A) Are and have been during the preceding two years engaged
primarily in the business of drilling for, producing, or refining oil
or gas (or whose corporate predecessor, in the case of a
corporation, has been so engaged).
(B) Are persons described in paragraph (1) of subdivision (i).
(C) Have been found by the commissioner upon written application
to be substantially engaged in the business of drilling for,
producing, or refining oil or gas so as not to require the protection
provided by this law (which finding shall be effective until
rescinded).
(2) The security is concurrently hypothecated to a bank in the
ordinary course of business to secure a loan made by the bank,
provided that each purchaser represents that it is purchasing for its
own account for investment and not with a view to or for sale in
connection with any distribution of the security.
(k) Any offer or sale of any security under, or pursuant to, a
plan of reorganization under Chapter 11 of the federal bankruptcy law
that has been confirmed or is subject to confirmation by the decree
or order of a court of competent jurisdiction.
() Any offer or sale of an option, warrant, put, call, or
straddle, and any guarantee of any of these securities, by a person
who is not the issuer of the security subject to the right, if the
transaction, had it involved an offer or sale of the security subject
to the right by the person, would not have violated Section 25110 or
25130.
(m) Any offer or sale of a stock to a pension, profit-sharing,
stock bonus, or employee stock ownership plan, provided that (1) the
plan meets the requirements for qualification under Section 401 of
the Internal Revenue Code, and (2) the employees are not required or
permitted individually to make any contributions to the plan. The
exemption provided by this subdivision shall not be affected by
whether the stock is contributed to the plan, purchased from the
issuer with contributions by the issuer or an affiliate of the
issuer, or purchased from the issuer with funds borrowed from the
issuer, an affiliate of the issuer, or any other lender.
(n) Any offer or sale of any security in a transaction, other than
an offer or sale of a security in a rollup transaction, that meets
all of the following criteria:
(1) The issuer is (A) a California corporation or foreign
corporation that, at the time of the filing of the notice required
under this subdivision, is subject to Section 2115, or (B) any other
form of business entity, including without limitation a partnership
or trust organized under the laws of this state. The exemption
provided by this subdivision is not available to a "blind pool"
issuer, as that term is defined by the commissioner, or to an
investment company subject to the Investment Company Act of 1940.
(2) Sales of securities are made only to qualified purchasers or
other persons the issuer reasonably believes, after reasonable
inquiry, to be qualified purchasers. A corporation, partnership, or
other organization specifically formed for the purpose of acquiring
the securities offered by the issuer in reliance upon this exemption
may be a qualified purchaser if each of the equity owners of the
corporation, partnership, or other organization is a qualified
purchaser. Qualified purchasers include the following:
(A) A person designated in Section 260.102.13 of Title 10 of the
California Code of Regulations.
(B) A person designated in subdivision (i) or any rule of the
commissioner adopted thereunder.
(C) A pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or an individual retirement
account, if the investment decisions made on behalf of the trust,
plan, or account are made solely by persons who are qualified
purchasers.
(D) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, each with total assets in excess of five million
dollars ($5,000,000) according to its most recent audited financial
statements.
(E) With respect to the offer and sale of one class of voting
common stock of an issuer or of preferred stock of an issuer
entitling the holder thereof to at least the same voting rights as
the issuer's one class of voting common stock, provided that the
issuer has only one-class voting common stock outstanding upon
consummation of the offer and sale, a natural person who, either
individually or jointly with the person's spouse, (i) has a minimum
net worth of two hundred fifty thousand dollars ($250,000) and had,
during the immediately preceding tax year, gross income in excess of
one hundred thousand dollars ($100,000) and reasonably expects gross
income in excess of one hundred thousand dollars ($100,000) during
the current tax year or (ii) has a minimum net worth of five hundred
thousand dollars ($500,000). "Net worth" shall be determined
exclusive of home, home furnishings, and automobiles. Other assets
included in the computation of net worth may be valued at fair market
value.
Each natural person specified above, by reason of his or her
business or financial experience, or the business or financial
experience of his or her professional adviser, who is unaffiliated
with and who is not compensated, directly or indirectly, by the
issuer or any affiliate or selling agent of the issuer, can be
reasonably assumed to have the capacity to protect his or her
interests in connection with the transaction. The amount of the
investment of each natural person shall not exceed 10 percent of the
net worth, as determined by this subparagraph, of that natural
person.
(F) Any other purchaser designated as qualified by rule of the
commissioner.
(3) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account (or trust account, if the purchaser is a
trustee) and not with a view to or for sale in connection with a
distribution of the security.
(4) Each natural person purchaser, including a corporation,
partnership, or other organization specifically formed by natural
persons for the purpose of acquiring the securities offered by the
issuer, receives, at least five business days before securities are
sold to, or a commitment to purchase is accepted from, the purchaser,
a written offering disclosure statement that shall meet the
disclosure requirements of Regulation D (17 C.F.R. 230.501 et seq.),
and any other information as may be prescribed by rule of the
commissioner, provided that the issuer shall not be obligated
pursuant to this paragraph to provide this disclosure statement to a
natural person qualified under Section 260.102.13 of Title 10 of the
California Code of Regulations. The offer or sale of securities
pursuant to a disclosure statement required by this paragraph that is
in violation of Section 25401, or that fails to meet the disclosure
requirements of Regulation D (17 C.F.R. 230.501 et seq.), shall not
render unavailable to the issuer the claim of an exemption from
Section 25110 afforded by this subdivision. This paragraph does not
impose, directly or indirectly, any additional disclosure obligation
with respect to any other exemption from qualification available
under any other provision of this section.
(5) (A) A general announcement of proposed offering may be
published by written document only, provided that the general
announcement of proposed offering sets forth the following required
information:
(i) The name of the issuer of the securities.
(ii) The full title of the security to be issued.
(iii) The anticipated suitability standards for prospective
purchasers.
(iv) A statement that (I) no money or other consideration is being
solicited or will be accepted, (II) an indication of interest made
by a prospective purchaser involves no obligation or commitment of
any kind, and, if the issuer is required by paragraph (4) to deliver
a disclosure statement to prospective purchasers, (III) no sales will
be made or commitment to purchase accepted until five business days
after delivery of a disclosure statement and subscription information
to the prospective purchaser in accordance with the requirements of
this subdivision.
(v) Any other information required by rule of the commissioner.
(vi) The following legend: "For more complete information about
(Name of Issuer) and (Full Title of Security), send for additional
information from (Name and Address) by sending this coupon or calling
(Telephone Number)."
(B) The general announcement of proposed offering referred to in
subparagraph (A) may also set forth the following information:
(i) A brief description of the business of the issuer.
(ii) The geographic location of the issuer and its business.
(iii) The price of the security to be issued, or, if the price is
not known, the method of its determination or the probable price
range as specified by the issuer, and the aggregate offering price.
(C) The general announcement of proposed offering shall contain
only the information that is set forth in this paragraph.
(D) Dissemination of the general announcement of proposed offering
to persons who are not qualified purchasers, without more, shall not
disqualify the issuer from claiming the exemption under this
subdivision.
(6) No telephone solicitation shall be permitted until the issuer
has determined that the prospective purchaser to be solicited is a
qualified purchaser.
(7) The issuer files a notice of transaction under this
subdivision both (A) concurrent with the publication of a general
announcement of proposed offering or at the time of the initial offer
of the securities, whichever occurs first, accompanied by a filing
fee, and (B) within 10 business days following the close or
abandonment of the offering, but in no case more than 210 days from
the date of filing the first notice. The first notice of transaction
under subparagraph (A) shall contain an undertaking, in a form
acceptable to the commissioner, to deliver any disclosure statement
required by paragraph (4) to be delivered to prospective purchasers,
and any supplement thereto, to the commissioner within 10 days of the
commissioner's request for the information. The exemption from
qualification afforded by this subdivision is unavailable if an
issuer fails to file the first notice required under subparagraph (A)
or to pay the filing fee. The commissioner has the authority to
assess an administrative penalty of up to one thousand dollars
($1,000) against an issuer that fails to deliver the disclosure
statement required to be delivered to the commissioner upon the
commissioner's request within the time period set forth above.
Neither the filing of the disclosure statement nor the failure by the
commissioner to comment thereon precludes the commissioner from
taking any action deemed necessary or appropriate under this division
with respect to the offer and sale of the securities.
(o) An offer or sale of any security issued by a corporation or
limited liability company pursuant to a purchase plan or agreement,
or issued pursuant to an option plan or agreement, where the security
at the time of issuance or grant is exempt from registration under
the Securities Act of 1933, as amended, pursuant to Rule 701 adopted
pursuant to that act (17 C.F.R. 230.701), the provisions of which are
hereby incorporated by reference into this section, provided that
(1) the terms of any purchase plan or agreement shall comply with
Sections 260.140.42, 260.140.45, and 260.140.46 of Title 10 of the
California Code of Regulations, (2) the terms of any option plan or
agreement shall comply with Sections 260.140.41, 260.140.45, and
260.140.46 of Title 10 of the California Code of Regulations, and (3)
the issuer files a notice of transaction in accordance with rules
adopted by the commissioner no later than 30 days after the initial
issuance of any security under that plan, accompanied by a filing fee
as prescribed by subdivision (y) of Section 25608. The failure to
file the notice of transaction within the time specified in this
subdivision shall not affect the availability of this exemption. An
issuer that fails to file the notice shall, within 15 business days
after discovery of the failure to file the notice or after demand by
the commissioner, whichever occurs first, file the notice and pay the
commissioner a fee equal to the maximum aggregate fee payable had
the transaction been qualified under Section 25110.
Offers and sales exempt pursuant to this subdivision shall be
deemed to be part of a single, discrete offering and are not subject
to integration with any other offering or sale, whether qualified
under Chapter 2 (commencing with Section 25110), or otherwise exempt,
or not subject to qualification.
(p) An offer or sale of nonredeemable securities to accredited
investors (Section 28031) by a person licensed under the Capital
Access Company Law (Division 3 (commencing with Section 28000) of
Title 4). All nonredeemable securities shall be evidenced by
certificates that shall have stamped or printed prominently on their
face a legend in a form to be prescribed by rule or order of the
commissioner restricting transfer of the securities in the manner as
the rule or order provides.
(q) Any offer or sale of any viatical or life settlement contract
or fractionalized or pooled interest therein in a transaction that
meets all of the following criteria:
(1) Sales of securities described in this subdivision are made
only to qualified purchasers or other persons the issuer reasonably
believes, after reasonable inquiry, to be qualified purchasers. A
corporation, partnership, or other organization specifically formed
for the purpose of acquiring the securities offered by the issuer in
reliance upon this exemption may be a qualified purchaser only if
each of the equity owners of the corporation, partnership, or other
organization is a qualified purchaser. Qualified purchasers include
the following:
(A) A person designated in Section 260.102.13 of Title 10 of the
California Code of Regulations.
(B) A person designated in subdivision (i) or any rule of the
commissioner adopted thereunder.
(C) A pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or an individual retirement
account, if the investment decisions made on behalf of the trust,
plan, or account are made solely by persons who are qualified
purchasers.
(D) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, each with total assets in excess of five million
dollars ($5,000,000) according to its most recent audited financial
statements.
(E) A natural person who, either individually or jointly with the
person's spouse, (i) has a minimum net worth of one hundred fifty
thousand dollars ($150,000) and had, during the immediately preceding
tax year, gross income in excess of one hundred thousand dollars
($100,000) and reasonably expects gross income in excess of one
hundred thousand dollars ($100,000) during the current tax year or
(ii) has a minimum net worth of two hundred fifty thousand dollars
($250,000). "Net worth" shall be determined exclusive of home, home
furnishings, and automobiles. Other assets included in the
computation of net worth may be valued at fair market value.
Each natural person specified above, by reason of his or her
business or financial experience, or the business or financial
experience of his or her professional adviser, who is unaffiliated
with and who is not compensated, directly or indirectly, by the
issuer or any affiliate or selling agent of the issuer, can be
reasonably assumed to have the capacity to protect his or her
interests in connection with the transaction.
The amount of the investment of each natural person shall not
exceed 10 percent of the net worth, as determined by this
subdivision, of that natural person.
(F) Any other purchaser designated as qualified by rule of the
commissioner.
(2) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account (or trust account, if the purchaser is a
trustee) and not with a view to or for sale in connection with a
distribution of the security.
(3) Each natural person purchaser, including a corporation,
partnership, or other organization specifically formed by natural
persons for the purpose of acquiring the securities offered by the
issuer, receives, at least five business days before securities
described in this subdivision are sold to, or a commitment to
purchase is accepted from, the purchaser, the following information
in writing:
(A) The name, principal business and mailing address, and
telephone number of the issuer.
(B) The suitability standards for prospective purchasers as set
forth in paragraph (1) of this subdivision.
(C) A description of the issuer's type of business organization
and the state in which the issuer is organized or incorporated.
(D) A brief description of the business of the issuer.
(E) If the issuer retains ownership or becomes the beneficiary of
the insurance policy, an audit report of an independent certified
public accountant together with a balance sheet and related
statements of income, retained earnings, and cashflows that reflect
the issuer's financial position, the results of the issuer's
operations, and the issuer's cashflows as of a date within 15 months
before the date of the initial issuance of the securities described
in this subdivision. The financial statements listed in this
subparagraph shall be prepared in conformity with generally accepted
accounting principles. If the date of the audit report is more than
120 days before the date of the initial issuance of the securities
described in this subdivision, the issuer shall provide unaudited
interim financial statements.
(F) The names of all directors, officers, partners, members, or
trustees of the issuer.
(G) A description of any order, judgment, or decree that is final
as to the issuing entity of any state, federal, or foreign country
governmental agency or administrator, or of any state, federal or
foreign country court of competent jurisdiction (i) revoking,
suspending, denying, or censuring for cause any license, permit, or
other authority of the issuer or of any director, officer, partner,
member, trustee, or person owning or controlling, directly or
indirectly, 10 percent or more of the outstanding interest or equity
securities of the issuer, to engage in the securities, commodities,
franchise, insurance, real estate, or lending business or in the
offer or sale of securities, commodities, franchises, insurance, real
estate, or loans, (ii) permanently restraining, enjoining, barring,
suspending, or censuring any such person from engaging in or
continuing any conduct, practice, or employment in connection with
the offer or sale of securities, commodities, franchises, insurance,
real estate, or loans, (iii) convicting any such person of, or
pleading nolo contendere by any such person to, any felony or
misdemeanor involving a security, commodity, franchise, insurance,
real estate, or loan, or any aspect of the securities, commodities,
franchise, insurance, real estate, or lending business, or involving
dishonesty, fraud, deceit, embezzlement, fraudulent conversion, or
misappropriation of property, or (iv) holding any such person liable
in a civil action involving breach of a fiduciary duty, fraud,
deceit, embezzlement, fraudulent conversion, or misappropriation of
property. This subparagraph does not apply to any order, judgment, or
decree that has been vacated, overturned, or is more than 10 years
old.
(H) Notice of the purchaser's right to rescind or cancel the
investment and receive a refund pursuant to Section 25508.5.
(I) The name, address, and telephone number of the issuing
insurance company, and the name, address, and telephone number of
the state or foreign country regulator of the insurance company.
(J) The total face value of the insurance policy and the
percentage of the insurance policy the purchaser will own.
(K) The insurance policy number, issue date, and type.
(L) If a group insurance policy, the name, address, and telephone
number of the group, and, if applicable, the material terms and
conditions of converting the policy to an individual policy,
including the amount of increased premiums.
(M) If a term insurance policy, the term and the name, address,
and telephone number of the person who will be responsible for
renewing the policy if necessary.
(N) That the insurance policy is beyond the state statute for
contestability and the reason therefor.
(O) The insurance policy premiums and terms of premium payments.
(P) The amount of the purchaser's moneys that will be set aside to
pay premiums.
(Q) The name, address, and telephone number of the person who will
be the insurance policy owner and the person who will be responsible
for paying premiums.
(R) The date on which the purchaser will be required to pay
premiums and the amount of the premium, if known.
(S) A statement to the effect that any projected rate of return to
the purchaser from the purchase of a viatical or life settlement
contract or a fractionalized or pooled interest therein is based on
an estimated life expectancy for the person insured under the life
insurance policy; that the return on the purchase may vary
substantially from the expected rate of return based upon the actual
life expectancy of the insured that may be less than, equal to, or
may greatly exceed the estimated life expectancy; and that the rate
of return would be higher if the actual life expectancy were less
than, and lower if the actual life expectancy were greater than the
estimated life expectancy of the insured at the time the viatical or
life settlement contract was closed.
(T) A statement that the purchaser should consult with his or her
tax adviser regarding the tax consequences of the purchase of the
viatical or life settlement contract or fractionalized or pooled
interest therein and, if the purchaser is using retirement funds or
accounts for that purchase, whether or not any adverse tax
consequences might result from the use of those funds for the
purchase of that investment.
(U) Any other information as may be prescribed by rule of the
commissioner.
SEC. 125. Section 25243.5 of the
Corporations Code is amended to read:
25243.5. (a) A broker-dealer or investment adviser, or an agent
or representative thereof, shall not use a senior-specific
certification, credential, or professional designation in connection
with the offer, sale, or purchase of securities, or the provision of
advice as to the value of or the advisability of investing in,
purchasing, or selling securities, either directly or indirectly or
through publications or writings or by issuing or promulgating
analyses or reports relating to securities, that indicates or implies
that the broker-dealer, investment adviser, or an agent or
representative thereof, has special certification or training in
advising or servicing senior citizens or retirees, in such a way as
to mislead any person.
(b) The prohibited use of these certifications, credentials, or
professional designations includes, but is not limited to, the
following:
(1) The use of a certification, credential, or professional
designation by a person who has not actually earned or is otherwise
ineligible to use the certification, credential, or designation.
(2) The use of a nonexistent or self-conferred certification,
credential, or professional designation.
(3) The use of a certification, credential, or professional
designation that indicates or implies a level of occupational
qualifications obtained through education, training, or experience
that the person using the certification, credential, or professional
designation does not have.
(4) The use of a certification, credential, or professional
designation that was obtained from a designating, credentialing, or
certifying organization where any of the following apply:
(A) The organization is primarily engaged in the business of
instruction in sales marketing.
(B) The organization does not have reasonable standards or
procedures for assuring the competency of individuals to whom it
grants a certification, credential, or professional designation.
(C) The organization does not have reasonable standards or
procedures for monitoring and disciplining individuals with a
certification, credential, or professional designation for improper
or unethical conduct.
(D) The organization does not have reasonable continuing education
requirements for individuals with a certification, credential, or
professional designation in order to maintain the certificate,
credential, or professional designation.
(c) There is a rebuttable presumption that a designating,
credentialing, or certifying organization is not disqualified solely
for the purposes of paragraph (4) of subdivision (b) when the
organization has been accredited by the American National Standards
Institute, the National Commission for Certifying Agencies, or an
organization that is on the United States Department of Education's
list entitled "Accrediting Agencies Recognized for Title IV Purposes"
and the certification, credential, or professional designation
issued therefrom does not primarily apply to sales and/or marketing.
(d) In determining whether a combination of words, or an acronym
standing for a combination of words, constitutes a certification,
credential, or professional designation indicating or implying that a
person has special certification or training in advising or serving
senior citizens or retirees, factors to be considered shall include
both of the following:
(1) Use of one or more word such as "senior," "retirement,"
"elder," or like words combined with one or more words such as
"certified," "registered," "chartered," "adviser," "specialist,"
"consultant," "planner," or like words, in the name of the
certification, credential, or professional designation or credential.
(2) The manner in which those words are combined.
(e) This section shall not apply to the use of a job title by a
person within an organization that is licensed or registered by the
Department of Corporations Financial Services
or a federal financial services regulatory agency, when that
job title indicates seniority or standing within the organization, or
specifies a person's area of specialization within the organization.
For the purposes of this subdivision, federal financial services
regulatory agency includes, but is not limited to, an agency that
regulates brokers or dealers, investment advisers, or investment
companies as described under the Investment Company Act of 1940 (15
U.S.C. Sec. 809-1 et seq.).
(f) (1) This section shall not apply to a broker or agent who is
licensed by the Department of Insurance and is in compliance with the
requirements of Section 787.1 of the Insurance Code.
(2) This subdivision shall be operative only if Assembly Bill 2150
of the 2007-08 Regular Session is chaptered and becomes effective
and that bill adds Section 787.1 to the Insurance Code.
(g) This section shall become operative on July 1, 2009.
SEC. 126. Section 25247 of the
Corporations Code is amended to read:
25247. (a) Upon written or oral request, the commissioner shall
make available to any person the information specified in Section
6254.12 of the Government Code and made available through the Public
Disclosure Program of the National Association of Security Dealers,
Incorporated (NASD) with respect to any broker-dealer or agent
licensed or regulated under this part. The commissioner shall also
make available the current license status and the year of issuance of
the license of a broker-dealer. Any information disclosed pursuant
to this subdivision shall constitute a public record. Notwithstanding
any other provisions of law, the commissioner may disclose either
orally or in writing that information pursuant to this subdivision.
There shall be no liability on the part of and no cause of action of
any nature shall arise against the State of California, the
Department of Corporations Financial Services
, the Commissioner of Corporations
Financial Services , or any officer, agent, or employee of the
state or of the Department of Corporations
Financial Services for the release of any false or unauthorized
information, unless the release of that information was done with
knowledge and malice.
(b) Any broker-dealer or agent licensed or regulated under this
part shall upon request deliver a written notice to any client when a
new account is opened stating that information about the license
status or disciplinary record of a broker-dealer or an agent may be
obtained from the Department of Corporations
Financial Services , or from any other source that provides
substantially similar information.
(c) The notice provided under subdivision (b) shall contain the
office location or telephone number where the information may be
obtained.
(d) A broker-dealer or agent shall be exempt from providing the
notice required under subdivision (b) if a person who does not have a
financial relationship with the broker-dealer or agent, requests
only general operational information such as the nature of the
broker-dealer's or agent's business, office location, hours of
operation, basic services, and fees, but does not solicit advice
regarding investments or other services offered.
(e) Upon written or oral request, the commissioner shall make
available to any person the disciplinary records maintained on the
Investment Adviser Registration Depository and made available through
the Investment Advisor Public Disclosure Web site with respect to
any investment adviser, investment adviser representative, or
associated person of an investment adviser licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of an
investment adviser. Any information disclosed pursuant to this
subdivision shall constitute a public record. Notwithstanding any
other provision of law, the commissioner may disclose that
information either orally or in writing pursuant to this subdivision.
There shall be no liability on the part of and no cause of action of
any nature shall arise against the State of California, the
Department of Corporations Financial Services
, the Commissioner of Corporations
Financial Services , or any officer, agent, or employee of the
state or of the Department of Corporations
Financial Services for the release of any false or unauthorized
information, unless the release of that information was done with
knowledge and malice.
(f) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations
Financial Services when using a national, uniform application
adopted or approved for use by the Securities and Exchange
Commission, the North American Securities Administrators Association,
or the National Association of Securities Dealers Regulation, Inc.
that is required for participation in the Central Registration
Depository or the Investment Adviser Registration Depository.
(g) This section shall not require the disclosure of criminal
history record information maintained by the Federal Bureau of
Investigation pursuant to Section 534 of Title 28 of the United
States Code, and the rules thereunder, or information not otherwise
subject to disclosure under the Information Practices Act of 1977.
SEC. 127. Section 25254 of the
Corporations Code is amended to read:
25254. (a) If the commissioner determines it is in the public
interest, the commissioner may include in any administrative action
brought under this part a claim for ancillary relief, including, but
not limited to, a claim for restitution or disgorgement or damages on
behalf of the persons injured by the act or practice constituting
the subject matter of the action, and the administrative law judge
shall have jurisdiction to award additional relief.
(b) In an administrative action brought under this part, the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include an amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations
Financial Services .
SEC. 128. Section 25600 of the
Corporations Code is amended to read:
25600. There is in the state government, in the Business and
Transportation Agency a Department of Corporations, which shall
administer the provisions of this division. The chief officer of the
Department of Corporations is the Commissioner of Corporations. The
commissioner shall be appointed by the Governor and shall hold office
at the pleasure of the Governor. He or she shall receive an annual
salary as fixed in the Government Code. Within 15 days from the time
of his or her appointment the commissioner shall take and subscribe
to the constitutional oath of office and file it in the office of the
Secretary of State.
Whenever
25600. Whenever the term "Division of
Corporations" is used in the law, it means the Department of
Corporations Financial Services. All references to
the "department" shall be deemed to refer to the Department of
Financial Services. All references to the "commissioner" shall be
deemed to refer to the Commissioner of Financial Services .
SEC. 129. Section 25601 of the
Corporations Code is repealed.
25601. The commissioner shall have his principal office in the
City of Sacramento, and may establish branch offices in the City and
County of San Francisco, in the City of Los Angeles and in the City
of San Diego. The commissioner shall from time to time obtain the
necessary furniture, stationery, fuel, light, and other proper
conveniences for the transaction of the business of the Department of
Corporations.
SEC. 130. Section 25602 of the
Corporations Code is amended to read:
25602. In accordance with the laws governing the state civil
service, the commissioner shall employ and, with the approval of the
Department of Finance, fix the compensation of such personnel as the
commissioner needs to discharge properly the duties imposed upon the
commissioner by law, including legal counsel to act as the attorney
for the commissioner in actions or proceedings brought by or against
the commissioner under or pursuant to any provision of any law under
the commissioner's jurisdiction, or in which the commissioner joins
or intervenes as to a matter within the commissioner's jurisdiction,
as a friend of the court or otherwise, and stenographic reporters to
take and transcribe the testimony in any formal hearing or
investigation before the commissioner or before a person authorized
by the commissioner. The personnel of the Department of
Corporations shall perform such duties as the commissioner assigns to
them. Such employees as the commissioner designates by
rule or order shall, within 15 days after their appointments, take
and subscribe to the constitutional oath of office and file it in the
office of the Secretary of State.
SEC. 131. Section 25603 of the
Corporations Code is repealed.
25603. The commissioner shall adopt a seal bearing the
inscription: "Commissioner of Corporations, State of California." The
seal shall be affixed to or imprinted on all orders and certificates
issued by him and such other instruments as he directs. All courts
shall take judicial notice of this seal.
SEC. 132. Section 25604 of the
Corporations Code is amended to read:
25604. The administration and enforcement of, and the education
of the public relative to, the laws and programs of the Department
of Corporations Financial Services
shall be supported from the State Corporations Fund. Funds
appropriated from the State Corporations Fund and made available for
expenditure for any law or program of the department may come from
fees collected from the following:
(a) Section 25608, except for fees collected pursuant to
subdivisions (o) to (r), inclusive, of Section 25608.
(b) Section 25608.1.
SEC. 133. Section 25606 of the
Corporations Code is amended to read:
25606. (a) The Attorney General shall render to the commissioner
opinions upon all questions of law, relating to the construction or
interpretation of any law under the commissioner's jurisdiction or
arising in the administration thereof, that may be submitted to the
Attorney General by the commissioner, and upon the commissioner's
request shall act as the attorney for the commissioner in actions and
proceedings brought by or against the commissioner under or pursuant
to any provision of any law under the commissioner's jurisdiction.
(b) Sections 11041, 11042 and 11043 of the Government Code do not
apply to the Commissioner of Corporations
Financial Services .
SEC. 134. Section 25607 of the
Corporations Code is amended to read:
25607. (a) Neither the commissioner nor any of the commissioner's
assistants, clerks, or deputies shall be interested as a director,
officer, shareholder, member (other than a member of an organization
formed for religious purposes), partner, agent, or employee of any
person who, during the period of the official's or employee's
association with the Department of Corporations
Financial Services , (1) was licensed or applied for
license as a broker-dealer or investment adviser under this division,
or (2) applied for or secured the qualification of the sale of
securities under this division.
(b) Nothing contained in subdivision (a) shall prohibit the
holding or purchasing of any securities by any assistant, clerk, or
deputy in accordance with rules as the commissioner shall adopt for
the purpose of protecting the public interest and avoiding conflicts
of interest.
(c) Nothing contained in subdivision (a) shall prohibit the
holding or purchasing of any securities by the commissioner if any of
the following criteria is met:
(1) The securities held or purchased by the commissioner are
exempt from the qualification requirements of Sections 25110, 25120,
and 25130 by virtue of Section 25100, provided that the holding or
purchasing of those securities is in accordance with rules adopted
for the purpose of protecting the public interest and avoiding
conflicts of interest.
(2) The securities held or purchased by the commissioner are not
subject to Sections 25110, 25120, and 25130 by virtue of Section
25100.1, provided that the holding or purchasing of those securities
is in accordance with rules adopted for the purpose of protecting the
public interest and avoiding conflicts of interest.
(3) The holding or purchasing of any securities by the
commissioner meets each of the following requirements:
(A) The securities are held or purchased through a management
account or trust administered by a bank or trust company authorized
to do business in this state, and the bank or trust company has sole
investment discretion regarding the holding, purchase, and sale of
securities.
(B) The commissioner did not, directly or indirectly, advise,
counsel, command, or suggest the holding, purchase, or sale of any
security or furnish any information relating to the security to the
bank or trust company.
(C) The account or trust does not at any time have more than 10
percent of its total assets invested in the securities of any one
issuer or hold more than 5 percent of the outstanding shares or units
of any class of securities of any one issuer.
(D) The commissioner shall report to the Attorney General not less
often than quarterly all holdings, purchases, and sales of
securities by him or her as authorized in paragraph (3), which
reports shall be retained by the Attorney General as public
documents.
SEC. 135. Section 25612.5 of the
Corporations Code is amended to read:
25612.5. (a) To encourage uniform interpretation and
administration of this law and the Franchise Investment Law (Division
5 (commencing with Section 31000)) and effective securities and
franchise regulation and enforcement, the commissioner may cooperate
with the securities agencies or administrators of one or more states,
Canadian provinces or territories, or other countries, the
Securities and Exchange Commission, the Commodity Futures Trading
Commission, the Securities Investor Protection Corporation, any
self-regulatory organization, any national or international
organization or securities officials or agencies, and any
governmental law enforcement or regulatory agency.
(b) The cooperation authorized by subdivision (a) includes, but is
not limited to, the following actions:
(1) Prescribing rules and forms with a view to achieving maximum
uniformity in the form and content of registration statements,
applications, and reports wherever practicable.
(2) Participating in a nationwide central depository for
qualification or registration of securities under this law and for
documents or records required or allowed to be maintained under this
law.
(3) Participating in the Central Registration Depository, or any
successor or alternative nationwide or regional depository, for the
registering, certifying, or licensing of broker-dealers or agents, or
both.
(4) Participating in the Investment Adviser Registration
Depository, or any successor or alternative nationwide or regional
depository, for the registering, certifying, or licensing of
investment advisers or investment adviser representatives, or both.
(5) Cooperating in any regulatory activity necessary in the
administration of the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (Public Law 107-56; USA Patriot Act), consistent with state
law.
(c) Notwithstanding any other provision of law, any application
for qualification, amendment to the application or related securities
qualification or registration document or notice under Sections
25100.1, 25101.1, 25102, 25102.1, 25110, 25120, 25130, and 25230.1 or
record otherwise required to be signed that is filed in this state
as an electronic record pursuant to a nationwide central depository
for qualification or registration of securities, or any electronic
record filed through the Central Registration Depository or the
Investment Adviser Registration Depository, shall be deemed to be a
valid original document upon reproduction to paper form by the
Department of Corporations Financial Services
.
(d) For purposes of this section, "electronic record" has the same
meaning as in subdivision (g) of Section 1633.2 of the Civil Code.
SEC. 136. Section 25614 of the
Corporations Code is amended to read:
25614. All rules of the commissioner (other than those relating
solely to the internal administration of the Department of
Corporations) Financial Services) shall be made,
amended or rescinded in accordance with the provisions of the
Administrative Procedure Act, Chapter 4 (commencing with Section
11370) of Part 1 of Division 3 of Title 2 of the Government Code.
Rules may be adopted prior to the effective date of this law to
become effective upon its effective date.
SEC. 137. Section 25620 of the
Corporations Code is repealed.
25620. (a) Notwithstanding any other provision of law, the
commissioner may by rule or order prescribe circumstances under which
to accept electronic records or electronic signatures. However,
nothing in this section requires the commissioner to accept
electronic records or electronic signatures.
(b) For purposes of this section, the following terms have the
following meanings:
(1) "Electronic record" means a record created, generated, sent,
communicated, received, or stored by electronic means, and includes a
record transmitted by means of facsimile machine or other telephone
transceiving equipment.
(2) "Electronic signature" means an electronic sound, symbol, or
process attached to or logically associated with an electronic record
and executed or adopted by a person with the intent to sign the
electronic record.
(c) The Legislature hereby finds and declares that the Department
of Corporations has continuously implemented methods to file records
electronically, including broker-dealer and investment adviser
applications, and is encouraged to continue to expand its use of
electronic filings to the extent feasible, as budget, resources, and
equipment are made available to accomplish that goal.
SEC. 138. Section 25702 of the
Corporations Code is amended to read:
25702. Whenever a person is entitled under this law to a hearing
in accordance with the provisions of the Administrative Procedure
Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division
3 of Title 2 of the Government Code, a formal hearing before the
Department of Corporations Financial Services
may be substituted with the consent of such person and of the
commissioner for such hearing before an independent hearing officer;
and in that case after such hearing before the Department of
Corporations Financial Services such person
shall not be entitled to any further administrative remedy.
SEC. 139. Section 28033 of the
Corporations Code is amended to read:
28033. "Commissioner" means the Commissioner of
Corporations Financial Services or his or her
designee with respect to a particular matter.
SEC. 140. Section 28505 of the
Corporations Code is amended to read:
28505. Subject to the provisions of Rules 250.10 and 250.10.5 of
the Commissioner of Corporations Financial
Services, (10 C.C.R. Secs. 250.10 and
250.10.5), the commissioner may make available
to the public any report filed with him or her under this division
or under any regulations or order issued under this division.
SEC. 141. Section 28715 of the
Corporations Code is amended to read:
28715. Sections 11041, 11042, and 11043 of the Government Code do
not apply to the Commissioner of Corporations
Financial Services .
SEC. 142. Section 29200 of the
Corporations Code is amended to read:
29200. Every person doing business as a broker or making
contracts as a broker or agent for the purchase or sale of any
securities or commodities on any board of trade or exchange shall
keep or cause to be kept at his or her office or place of
business correct and permanent records or books of account showing
each of such those transactions as a
separate item. The failure so to keep or cause to be kept
such those records or books of account is prima
facie evidence that any such contract was bucketing or
bucketshopping.
Such
Those records or books of account shall at all times be
open to inspection by the Commissioner of Corporations
Financial Services or by any deputy,
investigator, or auditor of the Department of Corporations
Financial Services to whom he or she
may delegate such that authority in
writing.
SEC. 143. Section 29503 of the
Corporations Code is amended to read:
29503. "Commissioner" means the Commissioner of
Corporations Financial Services .
SEC. 144. Section 31004 of the
Corporations Code is amended to read:
31004. "Commissioner" means the Commissioner of
Corporations Financial Services .
SEC. 145. Section 31210 of the
Corporations Code is amended to read:
31210. It is unlawful for any person to effect or attempt to
effect a sale of a franchise in this state, except in transactions
exempted under Chapter 1 (commencing with Section 31100) of Part 2 of
this division, unless such person is: (1) identified in an
application or amended application filed with the commissioner
pursuant to Part 2 (commencing with Section 31100) of this division,
(2) licensed by the California Department of Real Estate
Financial Services as a real estate broker or
real estate salesman salesperson , or
(3) licensed by the commissioner as a broker-dealer or agent pursuant
to the Corporate Securities Law of 1968.
SEC. 146. Section 31408 of the
Corporations Code is amended to read:
31408. (a) If the commissioner determines it is in the public
interest, the commissioner may include in any administrative action
brought under this division, including a stop order, a claim for
ancillary relief, including, but not limited to, a claim for
rescission, restitution or disgorgement or damages on behalf of the
persons injured by the act or practice constituting the subject
matter of the action, and the administrative law judge shall have
jurisdiction to award additional relief. The person affected may be
required to attend remedial education, as directed by the
commissioner.
(b) In an administrative action brought under this part the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include any amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations
Financial Services .
SEC. 147. Section 31503 of the
Corporations Code is amended to read:
31503. All rules of the commissioner, other than those relating
solely to the internal administration of the Department of
Corporations Financial Services , shall be made,
amended or rescinded in accordance with the provisions of Chapter
4.5 3.5 (commencing with Section
11371) 11340) of Part 1 of Division 3
of Title 2 of the Government Code.
SEC. 148. Section 31513 of the
Corporations Code is amended to read:
31513. Whenever a person is entitled under this law to a hearing
in accordance with the provisions of Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code, a formal hearing before the Department of Corporations
Financial Services may be substituted with the
consent of such that person and of the
commissioner for such that hearing
before an independent hearing officer; and in that case after
such that hearing before the Department
of Corporations such Financial Services that
person shall not be entitled to any further administrative
remedy.
SEC. 149. Section 112 of the Financial
Code is amended to read:
112. "Commissioner" means the Commissioner of Financial
Institutions Services and "department" means the
Department of Financial Institutions
Services .
SEC. 150. Section 200 of the Financial
Code is amended to read:
200. (a) In this section:
(1) "Business and industrial development corporation" means a
corporation licensed under Division 15 (commencing with Section
31000).
(2) "Payment instrument" has the same meaning as set forth in
Section 33059.
(3) "Traveler's check" has the same meaning as set forth in
Section 1852.
(b) There is in the state government, in the Business,
Transportation and Housing Agency, a Department of Financial
Institutions Services which has charge of the
execution of, among other laws, the laws of this state relating to
any of the following: (1) banks or trust companies or the
banking or trust business; (2) savings associations or the savings
association business; (3) credit unions or the credit union business;
(4) persons who engage in the business of receiving money for
transmission to foreign nations or such business; (5) issuers of
traveler's checks or the traveler's check business; (6) issuers of
payment instruments or the payment instrument business; (7) business
and industrial development corporations or the business and
industrial development corporation business, or (8) insurance premium
finance agencies or the insurance premium finance business.
(1) The Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code).
(2) The Subdivided Lands Law (Chapter 1 (commencing with Section
11000) of Part 2 of Division 4 of the Business and Professions Code).
(3) The Vacation Ownership and Time-Share Act of 2004 (Chapter 2
(commencing with Section 11210) of Part 2 of Division 4 of the
Business and Professions Code).
(4) The Real Estate Appraisers' Licensing and Certification Law
(Part 3 (commencing with Section 11302) of Division 4 of the Business
and Professions Code).
(5) Broker-dealers and the agents or registered representatives of
broker-dealers (Chapter 2 (commencing with Section 25210) of Part 3
of Division 1 of Title 4 of the Corporations Code).
(6) Investment advisers and investment adviser representatives or
associated persons (Chapter 3 (commencing with Section 25230) of Part
3 of Division 1 of Title 4 of the Corporations Code).
(7) Capital access companies (Division 3 (commencing with Section
28000) of Title 4 of the Corporations Code).
(8) The Franchise Investment Law (Division 5 (commencing with
Section 31000) of Title 4 of the Corporations Code).
(9) Banks and trust companies (Division 1 (commencing with Section
99)).
(10) Foreign banks (Chapter 13.5 (commencing with Section 1700) of
Division 1).
(11) Money transmitters (Chapter 14 (commencing with Section 1800)
of Division 1).
(12) Issuers of traveler's checks (Chapter 14A (commencing with
Section 1851) of Division 1).
(13) Bank holding companies (Chapter 21 (commencing with Section
3700) of Division 1).
(14) Checksellers, billpayers, and proraters (Division 3
(commencing with Section 12000)).
(15) Credit unions (Division 5 (commencing with Section 14000)).
(16) Escrow agents (Division 6 (commencing with Section 17000)).
(17) Industrial loan companies (Division 7 (commencing with
Section 18000)).
(18) The Finance Lenders Law (Division 9 (commencing with Section
22000)).
(19) Deferred deposit originators (Division 10 (commencing with
Section 23000)).
(20) Securities depositories (Division 14 (commencing with Section
30000)).
(21) Business and industrial development corporations (Division 15
(commencing with Section 31000)).
(22) Sellers of payment instruments (Division 16 (commencing with
Section 33000)).
(23) The California Residential Mortgage Lending Act (Division 20
(commencing with Section 50000)).
(24) Any other persons, entities, or transactions subject to
regulation and oversight by, or subject to the jurisdiction of, the
former Department of Corporations, the Department of Financial
Institutions, the Department of Real Estate, or the Office of Real
Estate Appraisers.
SEC. 151. Section 201 of the Financial
Code is amended to read:
201. This chapter is applicable to this division,
Division 1 (commencing with Section 99), Division 1.5 (commencing
with Section 4800), Division 5 (commencing with Section 14000),
Division 7 (commencing with Section 18000), Division 15 (commencing
with Section 31000), and Division 16 (commencing with Section 33000).
any of the persons, entities, or transactions
described in subdivision (b) of Section 200.
SEC. 152. Section 203 is added to the
Financial Code , to read:
203. Notwithstanding any other provision of law, all references
to the Department of Corporations, the Department of Financial
Institutions, the Department of Real Estate, or the Office of Real
Estate Appraisers shall be deemed to refer to the Department of
Financial Services.
SEC. 153. Section 210 of the Financial
Code is amended to read:
210. The chief officer of the Department of Financial
Institutions Services is the Commissioner of
Financial Institutions Services . The
Commissioner of Financial Institutions
Services is the head of the department and, except as otherwise
provided in this code, is subject to the provisions of the
Government Code relating to department heads, but need not reside in
Sacramento.
SEC. 154. Section 210.5 of the
Financial Code is amended to read:
210.5. As of the operative date of this section:
(a) In this section, "order" means any approval, consent,
authorization, exemption, denial, prohibition, requirement, or other
administrative action, applicable to a specific case.
(b) The office of the Superintendent of Banks and the State
Banking Department are abolished. All powers, duties,
responsibilities, and functions of the Superintendent of Banks and
the State Banking Department are transferred to the Commissioner of
Financial Institutions Services and the
Department of Financial Institutions
Services , respectively. The Commissioner of Financial
Institutions Services and the Department of
Financial Institutions Services succeed
to all the rights and property of the Superintendent of Banks and
the State Banking Department, respectively; the Commissioner of
Financial Institutions Services and the
Department of Financial Institutions
Services are subject to all the debts and liabilities of the
Superintendent of Banks and the State Banking Department,
respectively, as if the Commissioner of Financial
Institutions Services and the Department of
Financial Institutions Services had
incurred them. Any action or proceeding by or against the
Superintendent of Banks or the State Banking Department may be
prosecuted to judgment, which shall bind the Commissioner of
Financial Institutions Services or the
Department of Financial Institutions Services
, respectively, or the Commissioner of Financial
Institutions Services or the Department of
Financial Institutions Services may be
proceeded against or substituted in place of the Superintendent of
Banks or the State Banking Department, respectively. References in
the Constitution of the State of California or in any statute or
regulation to the Superintendent of Banks or to the State Banking
Department mean the Commissioner of Financial Institutions
Services or the Department of Financial
Institutions Services , respectively. All
agreements entered into with, and orders and regulations issued by,
the Superintendent of Banks or the State Banking Department shall
continue in effect as if the agreements were entered into with, and
the orders and regulations were issued by, the Commissioner of
Financial Institutions Services or the
Department of Financial Institutions Services
, respectively.
(c) The office of the Savings and Loan Commissioner and the
Department of Savings and Loan are abolished. All powers, duties,
responsibilities, and functions of the Savings and Loan Commissioner
and the Department of Savings and Loan are transferred to the
Commissioner of Financial Institutions
Services and the Department of Financial Institutions
Services , respectively. The Commissioner of
Financial Institutions Services and the
Department of Financial Institutions
Services succeed to all the rights and property of the Savings
and Loan Commissioner and the Department of Savings and Loan,
respectively; the Commissioner of Financial Institutions
Services and the Department of Financial
Institutions Services are subject to
all the debts and liabilities of the Savings and Loan Commissioner
and the Department of Savings and Loan, respectively, as if the
Commissioner of Financial Institutions
Services and the Department of Financial Institutions
Services had incurred them. Any action or
proceeding by or against the Savings and Loan Commissioner or the
Department of Savings and Loan may be prosecuted to judgment, which
shall bind the Commissioner of Financial Institutions
Services or the Department of Financial
Institutions Services , respectively, or the
Commissioner of Financial Institutions
Services or the Department of Financial Institutions
Services may be proceeded against or substituted
in place of the Savings and Loan Commissioner or the Department of
Savings and Loan, respectively. References in the Constitution of the
State of California or in any statute or regulation to the Savings
and Loan Commissioner or to the Department of Savings and Loan mean
the Commissioner of Financial Institutions
Services or the Department of Financial Institutions
Services , respectively. All agreements entered
into with, and orders and regulations issued by, the Savings and Loan
Commissioner or the Department of Savings and Loan shall continue in
effect as if the agreements were entered into with, and the orders
and regulations were issued by, the Commissioner of Financial
Institutions Services or the Department
of Financial Institutions Services .
(d) All powers, duties, responsibilities, and functions of the
Commissioner of Corporations and the Department of Corporations with
respect to credit unions, the credit union business, industrial loan
companies, or the industrial loan business are transferred to the
Commissioner of Financial Institutions and the Department of
Financial Institutions, respectively. The Commissioner of Financial
Institutions and the Department of Financial Institutions succeed to
all the rights and property of the Commissioner of Corporations and
the Department of Corporations, respectively, with respect to credit
unions, the credit union business, industrial loan companies, or the
industrial loan business; the Commissioner of Financial Institutions
and the Department of Financial Institutions are subject to all the
debts and liabilities of the Commissioner of Corporations and the
Department of Corporations, respectively, with respect to credit
unions, the credit union business, industrial loan companies, or the
industrial loan business, as if the Commissioner of Financial
Institutions and the Department of Financial Institutions had
incurred them. Any action or proceeding by or against the
Commissioner of Corporations or the Department of Corporations with
respect to credit unions, the credit union business, industrial loan
companies, or the industrial loan business may be prosecuted to
judgment, which shall bind the Commissioner of Financial Institutions
or the Department of Financial Institutions, respectively, or the
Commissioner of Financial Institutions or the Department of Financial
Institutions may be proceeded against or substituted in place of the
Commissioner of Corporations or the Department of Corporations,
respectively. References in the Constitution of the State of
California or any statute or regulation to the Commissioner of
Corporations or to the Department of Corporations with respect to
credit unions, the credit union business, industrial loan companies,
or the industrial loan business mean the Commissioner of Financial
Institutions or the Department of Financial Institutions,
respectively. All agreements entered into with, and orders and
regulations issued by, the Commissioner of Corporations or the
Department of Corporations in the exercise of authority under any law
relating to credit unions, the credit union business, industrial
loan companies, or the industrial loan business, shall continue in
effect as if the agreements were entered into with, and the orders
and regulations were issued by, the Commissioner of Financial
Institutions or the Department of Financial Institutions.
SEC. 155. Section 210.9 is added to the
Financial Code , to read:
210.9. (a) The Department of Corporations, the Department of
Financial Institutions, the Department of Real Estate, and the Office
of Real Estate Appraisers are abolished.
(b) All powers, duties, purposes, jurisdiction, responsibilities,
and functions of the Commissioner of Corporations, the Commissioner
of Financial Institutions, the Real Estate Commissioner, and the
Director of the Office of Real Estate Appraisers and the Department
of Corporations, the Department of Financial Institutions, the
Department of Real Estate, and the Office of Real Estate Appraisers
are transferred to the Commissioner of Financial Services and the
Department of Financial Services, respectively.
(c) The Commissioner of Financial Services and the Department of
Financial Services succeed to all the rights and property of the
Commissioner of Corporations, the Commissioner of Financial
Institutions, the Real Estate Commissioner, and the Director of the
Office of Real Estate Appraisers and the Department of Corporations,
the Department of Financial Institutions, the Department of Real
Estate, and the Office of Real Estate Appraisers, respectively; the
Commissioner of Financial Services and the Department of Financial
Services are subject to all the debts and liabilities of the
Commissioner of Corporations, the Commissioner of Financial
Institutions, the Real Estate Commissioner, and the Director of the
Office of Real Estate Appraisers and the Department of Corporations,
the Department of Financial Institutions, the Department of Real
Estate, and the Office of Real Estate Appraisers, respectively, as if
the Commissioner of Financial Services and the Department of
Financial Services had incurred them.
(d) Any action or proceeding by or against the Commissioner of
Corporations, the Commissioner of Financial Institutions, the Real
Estate Commissioner, and the Director of the Office of Real Estate
Appraisers or the Department of Corporations, the Department of
Financial Institutions, the Department of Real Estate, and the Office
of Real Estate Appraisers may be prosecuted to judgment, which shall
bind the Commissioner of Financial Services or the Department of
Financial Services, respectively, or the Commissioner of Financial
Services or the Department of Financial Services may be proceeded
against or substituted in place of the Commissioner of Corporations,
the Commissioner of Financial Institutions, the Real Estate
Commissioner, and the Director of the Office of Real Estate
Appraisers and the Department of Corporations, the Department of
Financial Institutions, the Department of Real Estate, and the Office
of Real Estate Appraisers, respectively.
(e) The following funds and accounts shall be under the
jurisdiction of the Commissioner of Financial Services:
(1) The Real Estate Fund created by Section 10450 of the Business
and Professions Code.
(2) The Education and Research Account, of the Real Estate Fund
created by Section 10450.6 of the Business and Professions Code.
(3) The Recovery Account, of the Real Estate Fund created by
Section 10450.6 of the Business and Professions Code.
(4) The Real Estate Appraisers Regulation Fund created by Section
11410 of the Business and Professions Code.
(5) The Administration Account, of the Real Estate Appraisers
Regulation Fund created by Section 11411 of the Business and
Professions Code.
(6) The Recovery Account, of the Real Estate Appraisers Regulation
Fund created by Section 11411 of the Business and Professions Code.
(7) The Financial Institutions Fund created by Section 265.
(8) The Credit Union Fund created by Section 14354.
(9) The Guaranty Corporation Fund created by Section 18535.
(10) The State Corporations Fund created by subdivision (b) of
Section 13978.6 of the Government Code.
(11) Any other fund or account subject to the jurisdiction of the
former Department of Corporations, the Department of Financial
Institutions, the Department of Real Estate, or the Office of Real
Estate Appraisers.
(f) References in the Constitution of the State of California or
in any statute or regulation to the Commissioner of Corporations, the
Commissioner of Financial Institutions, the Real Estate
Commissioner, and the Director of the Office of Real Estate
Appraisers or the Department of Corporations, the Department of
Financial Institutions, the Department of Real Estate, and the Office
of Real Estate Appraisers shall mean the Commissioner of Financial
Services or the Department of Financial Services, respectively.
(g) All agreements entered into with, and orders and regulations
issued by, the Commissioner of Corporations, the Commissioner of
Financial Institutions, the Real Estate Commissioner, and the
Director of the Office of Real Estate Appraisers or the Department of
Corporations, the Department of Financial Institutions, the
Department of Real Estate, and the Office of Real Estate Appraisers
shall continue in effect as if the agreements were entered into with,
and the orders and regulations were issued by, the Commissioner of
Financial Services or the Department of Financial Services.
SEC. 156. Section 215 of the Financial
Code is amended to read:
215. The commissioner is responsible for the performance of all
duties, the exercise of all powers and jurisdiction, and the
assumption and discharge of all responsibilities vested by law in the
department. The commissioner has and may exercise all the powers
necessary or convenient for the administration and enforcement of,
among other laws, the laws described in subdivision (b) of
Section 200. The commissioner may issue such rules and regulations
consistent with law as he or she may deem necessary or advisable in
executing the powers, duties, and responsibilities of the department.
SEC. 157. Section 262 of the Financial
Code is amended to read:
262. (a) The commissioner shall inform the Commissioner
of Corporations and other appropriate state and federal
officials charged with the regulation of financial institutions or
securities transactions of any enforcement actions, including, but
not limited to, civil or criminal actions, cease and desist orders,
license or authorization suspensions or revocations, or an open
investigation.
(b) The commissioner shall inform the Commissioner of
Corporations and other appropriate state and federal
officials charged with the regulation of financial institutions or
securities transactions if it appears that any bank, bank holding
company, savings association, savings and loan holding company,
credit union, industrial loan company, industrial loan holding
company, or other licensee of the department is conducting its
business in a fraudulent, unsafe, unsound, or injurious manner, or
has suffered or will suffer substantial financial loss or damage, and
it appears to the commissioner that the information is relevant to
the regulatory activities of the other agency.
SEC. 158. Section 1856 of the Financial
Code is amended to read:
1856. Each application for a license shall be accompanied
by such information and documents as the commissioner may by
regulation or order reasonably require, including but not limited to:
(a) The most recent audited and unconsolidated statement of income
and statement of condition of applicant as prepared by an
independent certified public accountant in conformity with generally
accepted accounting principles applied on a consistent basis.
(b) Description of applicant's business and mode of operation.
(c) Enumeration of names of parent and active subsidiary
organizations of applicant, if any.
(d) Copies of the applicant's filings for the preceding year with
the Securities and Exchange Commission, and copies of the most recent
filings for the preceding year with the California
Corporations Commissioner of Financial Services
, or other California state agency.
(e) Detailed statement of eligible securities of applicant,
including identification by name and present value, which applicant
intends to use in the conduct of its business of issuing traveler's
checks.
(f) Amount of issuer's liability for traveler's checks outstanding
in California, and in the United States, as of the last business day
of the preceding calendar quarter.
(g) Name and principal office of each agent, selling or to be
selling traveler's checks in California.
(h) Name of other states, in which applicant has been granted a
license or authorization to sell or is selling traveler's checks.
SEC. 159. Section 4057 of the Financial
Code is amended to read:
4057. (a) An entity that negligently discloses or shares
nonpublic personal information in violation of this division shall be
liable, irrespective of the amount of damages suffered by the
consumer as a result of that violation, for a civil penalty not to
exceed two thousand five hundred dollars ($2,500) per violation.
However, if the disclosure or sharing results in the release of
nonpublic personal information of more than one individual, the total
civil penalty awarded pursuant to this subdivision shall not exceed
five hundred thousand dollars ($500,000).
(b) An entity that knowingly and willfully obtains, discloses,
shares, or uses nonpublic personal information in violation of this
division shall be liable for a civil penalty not to exceed two
thousand five hundred dollars ($2,500) per individual violation,
irrespective of the amount of damages suffered by the consumer as a
result of that violation.
(c) In determining the penalty to be assessed pursuant to a
violation of this division, the court shall take into account the
following factors:
(1) The total assets and net worth of the violating entity.
(2) The nature and seriousness of the violation.
(3) The persistence of the violation, including any attempts to
correct the situation leading to the violation.
(4) The length of time over which the violation occurred.
(5) The number of times the entity has violated this division.
(6) The harm caused to consumers by the violation.
(7) The level of proceeds derived from the violation.
(8) The impact of possible penalties on the overall fiscal
solvency of the violating entity.
(d) In the event a violation of this division results in the
identity theft of a consumer, as defined by Section 530.5 of the
Penal Code, the civil penalties set forth in this section shall be
doubled.
(e) The civil penalties provided for in this section shall be
exclusively assessed and recovered in a civil action brought in the
name of the people of the State of California in any court of
competent jurisdiction by any of the following:
(1) The Attorney General.
(2) The functional regulator with jurisdiction over regulation of
the financial institution as follows:
(A) In the case of banks, savings associations, credit unions,
commercial lending companies, and bank holding companies, by the
Department of Financial Institutions Services
or the appropriate federal authority; (B) in the case of any
person engaged in the business of insurance, by the Department of
Insurance; (C) in the case of any investment broker or dealer,
investment company, investment advisor, residential mortgage lender
or finance lender, by the Department of Corporations
Financial Services ; and (D) in the case of a
financial institution not subject to the jurisdiction of any
functional regulator listed under subparagraphs (A) to (C),
inclusive, above, by the Attorney General.
SEC. 160. Section 4805.055 of the
Financial Code is amended to read:
4805.055. "Commissioner" means the Commissioner of Financial
Institutions Services .
SEC. 161. Section 4970 of the Financial
Code is amended to read:
4970. For purposes of this division:
(a) "Annual percentage rate" means the annual percentage rate for
the loan calculated according to the provisions of the federal Truth
in Lending Act and the regulations adopted thereunder by the Federal
Reserve Board.
(b) "Covered loan" means a consumer loan in which the original
principal balance of the loan does not exceed the most current
conforming loan limit for a single-family first mortgage loan
established by the Federal National Mortgage Association in the case
of a mortgage or deed of trust, and where one of the following
conditions are met:
(1) For a mortgage or deed of trust, the annual percentage rate at
consummation of the transaction will exceed by more than eight
percentage points the yield on Treasury securities having comparable
periods of maturity on the 15th day of the month immediately
preceding the month in which the application for the extension of
credit is received by the creditor.
(2) The total points and fees payable by the consumer at or before
closing for a mortgage or deed of trust will exceed 6 percent of the
total loan amount.
(c) "Points and fees" shall include the following:
(1) All items required to be disclosed as finance charges under
Sections 226.4(a) and 226.4(b) of Title 12 of the Code of Federal
Regulations, including the Official Staff Commentary, as amended from
time to time, except interest.
(2) All compensation and fees paid to mortgage brokers in
connection with the loan transaction.
(3) All items listed in Section 226.4(c)(7) of Title 12 of the
Code of Federal Regulations, only if the person originating the
covered loan receives direct compensation in connection with the
charge.
(d) "Consumer loan" means a consumer credit transaction that is
secured by real property located in this state used, or intended to
be used or occupied, as the principal dwelling of the consumer that
is improved by a one-to-four residential unit. "Consumer loan" does
not include a reverse mortgage, an open line of credit as defined in
Part 226 of Title 12 of the Code of Federal Regulations (Regulation
Z), or a consumer credit transaction that is secured by rental
property or second homes. "Consumer loan" does not include a bridge
loan. For purposes of this division, a bridge loan is any temporary
loan, having a maturity of one year or less, for the purpose of
acquisition or construction of a dwelling intended to become the
consumer's principal dwelling.
(e) "Original principal balance" means the total initial amount
the consumer is obligated to repay on the loan.
(f) "Licensing agency" shall mean the Department of Real
Estate Financial Services for licensed real
estate brokers, the Department of Corporations for
licensed residential mortgage lenders and licensed finance lenders
and brokers, and the Department of Financial Institutions
for commercial and industrial banks and savings
associations and credit unions organized in this state.
(g) "Licensed person" means a real estate broker licensed under
the Real Estate Law (Part 1 (commencing with Section 10000) of
Division 4 of the Business and Professions Code), a finance lender or
broker licensed under the California Finance Lenders Law (Division 9
(commencing with Section 22000)), a residential mortgage lender
licensed under the California Residential Mortgage Lending Act
(Division 20 (commencing with Section 50000)), a commercial or
industrial bank organized under the Banking Law (Division 1
(commencing with Section 99)), a savings association organized under
the Savings Association Law (Division 2 (commencing with Section
5000)), and a credit union organized under the California Credit
Union Law (Division 5 (commencing with Section 14000)). Nothing in
this division shall be construed to prevent any enforcement by a
governmental entity against any person who originates a loan and who
is exempt or excluded from licensure by all of the licensing
agencies, based on a violation of any provision of this division.
Nothing in this division shall be construed to prevent the Department
of Real Estate Fin ancial
Services from enforcing this division against a licensed
salesperson employed by a licensed real estate broker as if that
salesperson were a licensed person under this division. A licensed
person includes any person engaged in the practice of consumer
lending, as defined in this division, for which a license is required
under any other provision of law, but whose license is invalid,
suspended or revoked, or where no license has been obtained.
(h) "Originate" means to arrange, negotiate, or make a consumer
loan.
(i) "Servicer" has the same meaning provided in Section 6 (i)(2)
of the Real Estate Settlement Procedures Act of 1974.
SEC. 162. Section 4990 of the Financial
Code is amended to read:
4990. (a) Any person convicted of a felony violation of any of
the provisions specified in subdivision (b) shall not serve in any
capacity as a director or officer or in any other position involving
any management duties with a financial institution in this state with
accounts insured by an agency or instrumentality of the United
States or a private share insurance or guaranty arrangement. This
subdivision does not, however, apply to any director or officer of a
financial institution, or to persons serving in managerial positions
for financial institutions, whose office or employment with a
financial institution commenced, and whose felony conviction
occurred, prior to January 1, 1991.
(b) Subdivision (a) applies to felony convictions of offenses
specified in Chapter 18 (commencing with Section 3350) of Division 1,
Article 4 (commencing with Section 5300) of Chapter 1 of Division 2,
Article 8 (commencing with Section 14750) of Chapter 4 of Division
5, and Chapter 6 (commencing with Section 18435) of Division 7.
Subdivision (a) also applies to felony convictions of offenses
specified in provisions of the laws of the United States added or
amended by the federal Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (Public Law 101-73).
(c) On and after January 1, 1991, any person who seeks employment
by, or a controlling interest in, a financial institution specified
in subdivision (a) shall, as a condition to obtaining that employment
or controlling interest, permit the financial institution, its
regulatory agency, or both to have access to that person's state
summary criminal history information, as defined in Section 11105 of
the Penal Code, for purposes of determining whether the person has a
prior conviction of a felony offense specified in subdivision (b) or
any theft offense.
(d) Any state summary criminal history information obtained
pursuant to this subdivision shall be kept confidential and no
recipient under this subdivision shall disclose the contents other
than for the purpose of determining eligibility for employment by, or
acquisition of a controlling interest in, a financial institution
specified in subdivision (a).
(e) The authority granted by this section to the Commissioner of
Financial Institutions Services and
other regulatory agencies shall be in addition to any other authority
granted by law to obtain information about the background of any
person. Nothing in this section shall be construed to limit any
authority of the Commissioner of Financial Institutions
Services or any regulatory agency otherwise
provided by law.
SEC. 163. Section 5104 of the Financial
Code is amended to read:
5104. "Commissioner" means the Commissioner of Financial
Institutions Services .
SEC. 164. Section 12003 of the
Financial Code is amended to read:
12003. "Commissioner" means the Commissioner of
Corporations Financial Services of the State of
California, or any deputy, investigator, auditor, or any other person
employed by him.
SEC. 165. Section 12100 of the
Financial Code is amended to read:
12100. This division does not apply to any of the following:
(a) Any person, or his or her authorized agent, doing business
under license and authority of the Commissioner of Financial
Institutions Services under Division 1
(commencing with Section 99) or under any law of this state or of the
United States relating to banks, trust companies, building or
savings associations, industrial loan companies, personal property
brokers, credit unions, title insurance companies or underwritten
title companies, as defined in Section 12402 of the Insurance Code,
escrow agents subject to Division 6 (commencing with Section 17000),
or finance lenders subject to Division 9 (commencing with Section
22000).
(b) (1) Any person licensed under Chapter 14A (commencing with
Section 1851) of Division 1 or any agent of the person, when selling
any traveler's check, as defined in Section 1852, which is issued by
the person.
(2) Any person licensed under Division 16 (commencing with Section
33000) or any agent of the person, when selling any payment
instrument, as defined in Section 33059, which is issued by the
person.
(c) The services of a person licensed to practice law in this
state, when the person renders services in the course of his or her
practice as an attorney-at-law, and the fees and disbursements of the
person, whether paid by the debtor or other person, are not charges
or costs and expenses regulated by or subject to the limitations of
this chapter. These fees and disbursements shall not be shared,
directly or indirectly, with the prorater or check seller.
(d) Any transaction in which money or other property is paid to a
"joint control agent" for disbursal or use in payment of the cost of
labor, materials, services, permits, fees, or other items of expense
incurred in construction of improvements upon real property.
(e) A merchant-owned credit or creditors association, or a
member-owned, member-controlled, or member-directed association whose
principal function is that of servicing the community as a reporting
agency.
(f) Any agency or service subject to Title 2.91 (commencing with
Section 1812.500) of Part 4 of Division 3 of the Civil Code, when
providing services under that title.
(g) Any person licensed under Part 1 (commencing with Section
10000) of Division 4 of the Business and Professions Code, when
acting in any capacity for which he or she is licensed under that
part.
(h) A common law or statutory assignment for the benefit of
creditors or the operation or liquidation of property or a business
enterprise under supervision of a creditor's committee.
(i) The services of a person licensed as a certified public
accountant or a public accountant in this state, when the person
renders services in the course of his or her practice as a certified
public accountant or a public accountant, and the fees and
disbursements of the person, whether paid by the debtor or other
person, are not charges or costs and expenses regulated by or subject
to the limitations of this chapter. These fees and disbursements
shall not be shared, directly or indirectly, with the prorater or
check seller.
(j) Any person licensed under Chapter 14 (commencing with Section
1800) of Division 1 or any agent of the person, when selling any
check or draft that is drawn by the person and is of the type
described in paragraph (3) of subdivision (a) of Section 1800.5.
(k) Any group of banks each of which is organized under the laws
of a nation other than the United States and one or more of which are
licensed by the Commissioner of Financial Institutions
Services under Article 3 (commencing with
Section 1750) of Chapter 13.5 of Division 1, or any agent of the
group, when selling any foreign currency traveler's check, as defined
in Section 1852, issued by the group. Each bank that is a member of
the group is jointly and severally liable to pay the foreign currency
traveler's check.
() Any transaction of the type described in Section 1854.1.
SEC. 166. Section 12104 of the
Financial Code is amended to read:
12104. A nonprofit community service organization that meets all
of the following criteria shall be exempt from any requirements
imposed on proraters pursuant to this division:
(a) The nonprofit community service organization incorporates in
this state or any other state as a nonprofit corporation and operates
pursuant to either the Nonprofit Public Benefit Corporation Law,
Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code or the Nonprofit Mutual Benefit Corporation Law,
Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the
Corporations Code.
(b) The nonprofit community service organization limits its
membership to retailers, lenders in the consumer credit field,
educators, attorneys, social service organizations, employer and
employee organizations, and related groups that serve educational,
benevolent, fraternal, religious, charitable, social, or reformatory
purposes.
(c) The nonprofit community service organization has as its
principal functions the following:
(1) Consumer credit education.
(2) Counseling on consumer credit problems and family budgets.
(3) Arranging or administering debt management plans. "Debt
management plan" means a method of paying debtor's obligations in
installments on a monthly basis.
(4) Arranging or administering debt settlement plans. "Debt
settlement plans" means a method of paying debtor's obligations in a
negotiated amount to each creditor on a one-time basis.
(d) The nonprofit community service organization receives from a
debtor no more than the following maximum amounts to offset the
organization's actual and necessary expenses for the services
described in subdivision (c): a one-time sum not to exceed fifty
dollars ($50) for education and counseling combined in connection
with debt management or debt settlement services; and for debt
management plans, a sum not to exceed 8 percent of the money
disbursed monthly, or thirty-five dollars ($35) per month, whichever
is less, and for debt settlement plans a sum not to exceed 15 percent
of the amount of the debt forgiven for negotiated debt settlement
plans. Nonprofit community service organizations shall not require
any upfront payments or deposits on debt settlement plans and may
only require payment of fees once the debt has been successfully
settled. For purposes of this subdivision, a household shall be
considered one debtor. The fees allowed pursuant to this subdivision
shall be the only fees that may be charged by a nonprofit community
service organization for any services related to a debt management
plan or a debt settlement plan.
(e) The nonprofit community service organization maintains and
keeps current and accurate books, records, and accounts relating to
its business in accordance with generally accepted accounting
principles, and stores them in a readily accessible place for a
period of no less than five years from the end of the fiscal year in
which any transactions occurred.
(f) The nonprofit community service organization deposits any
money received from a debtor for the services described in
subdivision (c) in a noninterest-bearing trust account in a federally
insured state or federal bank, savings bank, savings and loan
association, or credit union, which account is maintained
specifically for purposes of administering a debt management plan or
debt settlement plan. The nonprofit community service organization
shall provide the commissioner the following prior to engaging in
business in this state and claiming this exemption:
(1) A written notice with the name, address, and telephone number
of the bank, savings bank, savings and loan association, or credit
union where the trust account is maintained, and the name of the
account and the account number. The account information required in
this paragraph shall be kept confidential pursuant to the laws
governing disclosure of public records, including the California
Public Records Act, Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code, and the rules adopted
thereunder.
(2) An irrevocable written consent providing that upon the
commissioner taking possession of the property and business of the
nonprofit community service organization, all books, records,
property and business, including trust accounts and any other
accounts holding debtors' funds, shall be immediately turned over to
the commissioner or receiver appointed pursuant to this division. The
consent shall be signed by the nonprofit community service
organization and the bank, savings bank, savings and loan
association, or credit union where the trust account is maintained.
The consent shall be binding upon the nonprofit community service
organization and the bank, savings bank, savings and loan
association, or credit union, and any objection to it must be raised
pursuant to the laws of the State of California and only in the forum
in which the proceeding to take possession or appointment of the
receiver has been filed. The nonprofit community service organization
and the bank, savings bank, savings and loan association, or credit
union shall further consent to the jurisdiction of the commissioner
for the purpose of any investigation or proceeding under Sections
12105 and 12106 or any other provision of this division. The consent
required by this paragraph shall include the name, title, and
signature of an official of the bank, savings bank, savings and loan
association, or credit union holding the authority to consent on
behalf of that institution, and the name, title, and signature of the
chief executive officer or president of the nonprofit community
service organization.
(g) The nonprofit community service organization maintains at all
times a surety bond in the amount of twenty-five thousand dollars
($25,000), issued by an insurer licensed in this state. The bond
shall be conditioned upon the obligor faithfully conforming to and
abiding by the provisions of Section 12104 of the Financial Code,
honestly and faithfully applying all funds received, honestly and
faithfully performing all obligations and undertakings required under
this section, and paying to the state and to any person all money
that becomes due and owing to the state or to any person owed by the
obligor of the bond.
(h) The nonprofit community service organization reports all of
the following to the debtor at least once every three months, or upon
the debtor's request, for any debt management plan or debt
settlement plan:
(1) Total amount received from the debtor.
(2) Total amount paid to each creditor.
(3) Total amount any creditor has agreed to accept as payment in
full on any debt owed by the debtor.
(4) Any amount paid to the organization by the debtor.
(5) Any amount held in reserve.
(i) The nonprofit community service organization submits to the
commissioner, at the organization's expense, an audit report
containing audited financial statements covering the calendar year
or, if the organization has an established fiscal year, then for that
fiscal year, within 120 days after the close of the calendar or
fiscal year.
(j) The nonprofit community service organization submits with the
annual financial statements required under subdivision (i) a
declaration that conforms to Section 2015.5 of the Code of Civil
Procedure, is executed by an official authorized by the board of the
organization, and that states that the organization complies with
this section. The annual financial statements shall also include a
separate written statement that identifies the name, address, contact
person, and telephone number of the organization.
(k) The nonprofit community service organization maintains
accreditation by an independent accrediting organization, including
either the Council on Accreditation or the International Standards
Organization, with sector certification.
() The nonprofit community service organization does not engage in
any act or practice in violation of Section 17200 or 17500 of the
Business and Professions Code.
(m) The nonprofit community service organization inserts the
following statement, in not less than 10-point type, in its debt
management plan and debt settlement plan agreements: "Complaints
related to this agreement may be directed to the California
Department of Corporations
Financial Services . This nonprofit community service
organization has adopted best practices for debt management plans and
debt settlement plans, and a copy will be provided upon request."
(n) The nonprofit community service organization adopts and
implements on a continuous basis policies or procedures of best
practices that are designed to prevent improper debt management or
debt settlement practices and prevent theft and misappropriation of
funds. Failure to do the following shall constitute improper debt
management or debt settlement practices, as applicable:
(1) Obtain counselor certification conducted by a nationally
recognized third-party certification program that certifies that all
of the agency's counselors receive proper training and are qualified
to provide financial assistance prior to performing counseling
services in this state.
(2) Disburse funds no later than 15 days after receipt of valid
funds, or by a scheduled disbursement date, whichever is the greater
amount of time.
(3) Transmit funds utilizing electronic payment processing when
available.
(4) Implement an inception date policy, which shall include an
agreement that a consumer's first disbursement pursuant to a debt
management plan shall be received within 90 days of agreeing to the
debt management plan service. The debt management plan shall include
all items described in subdivision (h) and shall be provided to the
consumer at the inception date of the plan. A description of best
practices of the agency and
of the consumer complaint resources shall be issued no later than
the first payment date.
(5) Respond to and research any complaint initiated by a consumer
within five business days of receipt of the complaint.
(6) Prohibit a policy requiring debt management plan consumers
from being required to utilize additional ancillary services.
(7) Provide consumer access to debt management plan services
regardless of the consumer's ability to pay fees related to the debt
management plan, lack of creditor participation, or the amount of the
consumer's outstanding debt.
(8) Implement policies that specifically prohibit credit
counselors from receiving financial incentives or additional
compensation based on the outcome of the counseling process.
(9) Prohibit the practice of paying referral fees to consumers or
other third parties who refer new clients to the agency.
(10) Disclose in all written contracts with consumers the portion
of funding for the agency that is provided by creditors.
(11) Disclose in all written contracts for debt management plans
or debt settlement plans that these plans are not suitable for all
consumers and that consumers may request information on other
options, including, but not limited to, bankruptcy.
(12) Fully disclose all services to be provided by the agency and
any initial and ongoing fees to be charged by the agency for
services, including, but not limited to, contributions to the agency.
(13) Prohibit the agency or any affiliate of the agency from
purchasing debt from a consumer.
(14) Prohibit the agency from offering loans to consumers
involving the charging of interest.
(15) Prominently disclose in written contracts with consumers of
any financial arrangement between the agency and any lender or any
provider of financial services if the agency receives any form of
compensation for referring consumers to that lender or provider of
financial services.
(16) Provide professional liability insurance coverage.
(17) Provide the debtor a written individualized evaluation of his
or her financial status and an initial debt management plan for the
debtor's debts with specific recommendations regarding actions the
debtor should take.
(18) Provide the debtor enrolling in a debt management plan a
written reliable estimate of the length of time it will take to
complete the plan and identifies the total debt owed to each creditor
included in the plan, the proposed payment to each creditor, and any
fees that would be charged for administering the plan. The estimate
shall be provided prior to receipt of the debtor's first deposit.
(o) The nonprofit community service organization provides a copy
of the best practices described in subdivision (n) to its debtor,
upon request.
(p) The nonprofit community service organization resolves in a
prompt and reasonable manner complaints from debtors relating to the
organization's debt management plans or debt settlement plans.
(q) The nonprofit community service organization provides written
notice to the commissioner within 30 days of dissolution or
termination of engaging in the activities of a prorater, as defined
in Section 12002.1.
(r) This section shall become inoperative upon the enactment of a
statute requiring the licensure and regulation of nonprofit community
service organizations providing consumer credit counseling.
SEC. 167. Section 12307.4 of the
Financial Code is amended to read:
12307.4. Whenever the commissioner has taken possession of the
property and business of a licensee the commissioner may petition the
superior court for the appointment of a receiver to liquidate the
affairs of the licensee. During the time that the commissioner
retains possession of the property and business of a licensee the
commissioner shall have the same powers and authority with reference
to the licensee as are vested in the Commissioner of Financial
Institutions Services with respect to
banks pursuant to Chapter 17 (commencing with Section 3100) of
Division 1 and the licensee shall likewise have the same rights to
hearings and judicial review as are granted to banks. While in
possession of the property and business of a check seller, a receiver
shall have the same powers and authority as are vested in the
Commissioner of Financial Institutions
Services while in possession of the property and business of a
bank.
SEC. 168. Section 14003 of the
Financial Code is amended to read:
14003. "Commissioner" means the Commissioner of Financial
Institutions Services of the State of
California.
SEC. 169. Section 14200.1 of the
Financial Code is amended to read:
14200.1. There is in the Department of Financial
Institutions Services , the Division of Credit
Unions. The Division of Credit Unions has charge of the execution of
the laws of this state relating to credit unions or to the credit
union business.
SEC. 170. Section 14200.2 of the
Financial Code is amended to read:
14200.2. The Chief Officer of the Division of Credit Unions is
the Deputy Commissioner of Financial Institutions
Services for the Division of Credit Unions. The Deputy
Commissioner of Financial Institutions
Services for the Division of Credit Unions shall administer the
laws of this state relating to credit unions or the credit union
business under the direction of and on behalf of the commissioner.
The Deputy Commissioner of Financial Institutions
Services for the Division of Credit Unions shall be
appointed by the Governor and shall hold office at the pleasure of
the Governor. The Deputy Commissioner of Financial
Institutions Services shall receive an annual
salary as fixed by the Governor.
SEC. 171. Section 14381 of the
Financial Code is amended to read:
14381. The Credit Union Advisory Committee shall advise the
commissioner and the Deputy Commissioner of Financial
Institutions Services for the Division of Credit
Unions on matters relating to credit unions or the credit union
business.
SEC. 172. Section 17002 of the
Financial Code is amended to read:
17002. "Commissioner" means the Commissioner of
Corporations Financial Services .
SEC. 173. Section 17006 of the
Financial Code is amended to read:
17006. (a) This division does not apply to:
(1) Any person doing business under any law of this state or the
United States relating to banks, trust companies, building and loan
or savings and loan associations, or insurance companies.
(2) Any person licensed to practice law in California who has a
bona fide client relationship with a principal in a real estate or
personal property transaction and who is not actively engaged in the
business of an escrow agent.
(3) Any person whose principal business is that of preparing
abstracts or making searches of title that are used as a basis for
the issuance of a policy of title insurance by a company doing
business under any law of this state relating to insurance companies.
(4) Any real estate broker licensed by the
Real Estate Commissioner of Financial Services
while performing acts in the course of or incidental to a real estate
transaction in which the real estate broker is an agent
or a party to the transaction and in which the real estate
broker is performing an act for which a real estate license is
required.
(b) The exemptions provided for in paragraphs (2) and (4) of
subdivision (a) are personal to the persons listed, and those persons
shall not delegate any duties other than duties performed under the
direct supervision of those persons. Notwithstanding the provisions
of this subdivision, the exemptions provided for in paragraphs (2)
and (4) of subdivision (a) are not available for any arrangement
entered into for the purpose of performing escrows for more than one
business.
SEC. 174. Section 17210.2 of the
Financial Code is amended to read:
17210.2. (a) No escrow agent shall disseminate, or cause or
permit to be disseminated, in any manner whatsoever, any statement or
representation which is false, misleading, or deceptive, or which
omits to state material information, or which refers to the
supervision of that agent by the State of California or any
department or official thereof.
(b) A licensed escrow agent, in referring to the corporation's
licensure under this law in any written or printed communication or
any communication by means of recorded telephone messages or spoken
on radio, television, or similar communications media, shall include
the following statement: "This escrow company holds
California Department of Corporations
Financial Services Escrow License No. ____."
(c) The commissioner may order any person to desist from any
conduct which the commissioner finds to be a violation of this
section.
SEC. 175. Section 17214 of the
Financial Code is amended to read:
17214. (a) There is established in the Department of
Corporations Financial Services an Escrow Law
Advisory Committee consisting of 11 members. The members shall
consist of the commissioner or his or her designee; the chairman of
the board and the immediate past chairman of the board for the Escrow
Agents' Fidelity Corporation; the current chairman of the board and
the immediate past chairman of the board for the Escrow Institute of
California; a person selected by the commissioner to represent a
different type of business ownership under this division; a person
selected by the commissioner to represent a different type of
business specialization; a person selected by the commissioner to
represent small businesses operating pursuant to this division; a
person selected by the commissioner to represent medium-sized
businesses operating pursuant to this division; an attorney at law
experienced in escrow matters selected by the commissioner; and a
certified public accountant experienced in the escrow business
selected by the commissioner.
Except for the members from the Escrow Agents' Fidelity
Corporation and the Escrow Institute of California, members appointed
by the commissioner shall serve for a term of two years.
The committee shall meet at least quarterly. The commissioner or
his or her designee shall chair the committee. All members shall
serve without compensation or reimbursement for expenses.
Where the chairman of the board or the immediate past chairman of
the board of the Escrow Agents' Fidelity Corporation is the same
person, or is unable to serve on the advisory committee, then the
commissioner after consultation with the board of directors of the
Escrow Agents' Fidelity Corporation, shall choose a member of the
board of directors to serve on the committee. Where the president or
past president of the Escrow Institute of California is the same
person, or is unable to serve on the advisory committee, then the
commissioner after consultation with the board of directors of the
Escrow Institute of California, shall choose a member of the board of
directors to serve on the committee.
(b) The purpose of the committee is to assist the commissioner in
the implementation of the commissioner's duties under this chapter.
SEC. 176. Section 17303 of the
Financial Code is amended to read:
17303. "Commissioner" means the Commissioner of
Corporations Financial Services .
SEC. 177. Section 17311 of the
Financial Code is amended to read:
17311. (a) Persons licensed pursuant to this division shall
maintain a corporation under the Nonprofit Mutual Benefit Corporation
Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1
of the Corporations Code) operating under the name Escrow Agents'
Fidelity Corporation.
(b) The State of California, the Department of
Corporations Financial Services , or any
officer, agent, or employee of either shall not be liable in any way
for the conduct of Fidelity Corporation, its directors, officers,
agents, employees, or members.
SEC. 178. Section 17312 of the
Financial Code is amended to read:
17312. (a) Each person licensed pursuant to this division who is
engaged in the business of receiving escrows specified in subdivision
(c) and whose escrow business location is located within the State
of California shall participate as a member in Fidelity Corporation
in accordance with this chapter and rules established by the board of
directors of Fidelity Corporation. Fidelity Corporation shall not
deny membership to any escrow agent holding a valid unrevoked license
under the Escrow Law who is required to be a member under this
subdivision.
(b) Upon filing a new application for licensure as required by
Section 17201, persons required to be a member of Fidelity
Corporation shall file a copy thereof concurrently with Fidelity
Corporation. If an application for licensure submitted to Fidelity
Corporation contains personal or confidential information, Fidelity
Corporation and its board shall maintain this information in
confidence to protect the privacy of the information. The copy of the
application shall include the three thousand dollar ($3,000) fee
specified in subdivision (a) of Section 17320 and all required
Fidelity Corporation Certificates set forth in Sections 17331 and
17331.1. Fidelity Corporation shall promptly furnish to the
commissioner a compliance letter confirming that the applicant has
satisfied the requirements to be a member of Fidelity Corporation.
(c) The required membership in Fidelity Corporation shall be
limited to those licensees whose escrow business location is located
within the State of California and who engage, in whole or in part,
in the business of receiving escrows for deposit or delivery in the
following types of transactions:
(1) Real property escrows, including, but not limited to, the
sale, encumbrance, lease, exchange, or transfer of title, and loans
or other obligations to be secured by a lien upon real property.
(2) Bulk sale escrows, including, but not limited to, the sale or
transfer of title to a business entity and the transfer of liquor
licenses or other types of business licenses or permits.
(3) Fund or joint control escrows, including, but not limited to,
transactions specified in Section 17005.1, and contracts specified in
Section 10263 of the Public Contract Code.
(4) The sale, transfer of title, or refinance escrows for
manufactured homes or mobilehomes.
(5) Reservation deposits required under Article 2 (commencing with
Section 11010) of Chapter 1 of Part 2 of Division 4 of the Business
and Professions Code or by regulation of the Department of
Real Estate Financial Services to be held in an
escrow account.
(6) Escrows for sale, transfer, modification, assignment, or
hypothecation of promissory notes secured by deeds of trust.
(d) Coverage required to be provided by Fidelity Corporation under
this chapter shall be provided to members only for loss of trust
obligations with respect to those types of transactions specified in
subdivision (c). If a loss covered by Fidelity Corporation is also
covered by a member's general liability, dishonesty, or indemnity
policy, or other private insurance policy, then the member's private
policy shall first be applied as the primary indemnity to cover the
loss. However, the failure of the member's private primary policy to
indemnify the member's loss within the time specified for Fidelity
Corporation indemnity in subdivision (a) of Section 17314 shall not
limit the indemnity obligations of Fidelity Corporation as defined in
this chapter. Indemnity coverage for those types of transactions not
specified in subdivision (c) shall be provided by escrow agents in
accordance with Section 17203.1.
SEC. 179. Section 17320 of the
Financial Code is amended to read:
17320. Fidelity Corporation shall establish and maintain the
following funds for payment of claims and for payment of costs of
administration: the membership fund, the operations fund, and the
fidelity fund.
(a) An applicant or a licensee shall, at the time an application
is filed for a license, pay to Fidelity Corporation a membership fee
of three thousand dollars ($3,000) for each location for which a
license is applied. If the application is denied, withdrawn, or
abandoned, Fidelity Corporation may retain two hundred dollars ($200)
from the membership fee to cover costs of administration.
(1) The membership fund shall be reserved for payment of claims
which exceed the fidelity fund balance and for payment of
extraordinary operational costs.
(2) Any member who, on the effective date of this section, has an
account balance which exceeds the three thousand dollars ($3,000)
membership fee times the number of its licensed locations shall be
credited in a special reserve account for the excess amount. This
balance shall be credited against future assessments made pursuant to
subdivision (b) of Section 17321 in an amount not exceeding four
hundred dollars ($400) per licensed location per year. Any member
whose account balance is less than three thousand dollars ($3,000)
times the number of its licensed locations shall, on or before
December 1, 1988, pay to Fidelity Corporation an amount sufficient to
allow the member's account to be maintained at three thousand
dollars ($3,000) times the number of licensed locations. Fidelity
Corporation shall provide each member with an accounting of the
amounts being reserved for the members' membership account and
amounts being held as a special reserve.
(3) The membership fee, less any unpaid assessments and related
costs, shall be refunded to the member in accordance with Fidelity
Corporation's bylaws not less than 30 months and no more than 36
months after the effective date of surrender of a license.
(4) Any member who does not engage in any escrow transactions
pursuant to subdivision (c) of Section 17312 may terminate its
membership in Fidelity Corporation by written notice to Fidelity
Corporation and the Department of Corporations
Financial Services , as provided in the Fidelity
Corporation's bylaws and rules and regulations. The membership fee,
less any unpaid assessments and related costs, shall be refunded to
the member in accordance with Fidelity Corporation's bylaws not less
than 30 months and no more than 36 months after the effective date of
the member's written request to terminate its membership in Fidelity
Corporation. Before a licensee resumes those escrow transactions, it
shall first be required to become a member of Fidelity Corporation,
as provided in this subdivision.
(b) Fidelity Corporation shall prepare, prior to its fiscal year
end, an estimated annual operational budget projecting the costs of
operations and administration for the succeeding fiscal year,
excluding the amount paid for claims and premiums paid for excess
coverage bonding. The amount of the assessment shall be 150 percent
of the budgetary projection. In succeeding years, the assessment
shall be adjusted by adding the prior year's deficit or deducting
unused surplus from the prior year.
(c) Fidelity Corporation shall establish a fidelity fund for the
payment of claims and for the payment of the premium for the fidelity
bond or insurance policy, if any. All claims shall be paid from the
fidelity fund, provided that, to the extent that the fidelity fund
balance is not sufficient to pay claims, the claim shall be paid from
the membership fund by charging each member's membership account a
pro rata share of the excess.
(d) All interest earned on the membership fund and the operations
fund shall be credited to the fidelity fund.
SEC. 180. Section 17331 of the
Financial Code is amended to read:
17331. (a) An applicant applying for licensure as an escrow agent
under this division is required to apply for a Fidelity Corporation
Certificate, prepared and issued by Fidelity Corporation, for each
proposed shareholder, officer, director, trustee, manager, or
employee who is to be directly or indirectly compensated by the
escrow agent, prior to licensure of the escrow agent by the
commissioner.
(b) A shareholder, officer, director, trustee, manager, or
employee of an escrow agent, directly or indirectly compensated by an
escrow agent within this state, is required to complete and execute
a Fidelity Corporation Certificate application, prepared and issued
by Fidelity Corporation, as a condition of his or her employment or
entitlement to compensation, before the person may continue the
regular discharge of his or her duties, or have access to moneys or
negotiable securities belonging to or in the possession of the escrow
agent, or draw checks upon the escrow agent or the trust funds of
the escrow agent.
(c) Fidelity Corporation Certificates may also be known as Escrow
Agent's Fidelity Corporation Certificates or EAFC Certificates. The
certificate at all times remains the property of Fidelity
Corporation, and is not transferable by either a member or employee.
The certificate is not a warranty or guarantee by Fidelity
Corporation of the integrity, veracity, or competence of the person.
(d) An application for a Fidelity Corporation Certificate shall be
in writing and in the form prescribed by Fidelity Corporation. The
application may include (1) a fee not to exceed fifty dollars ($50),
(2) two passport-size photographs, and (3) a set of fingerprint
images and related information using the process established by the
Department of Justice for requesting state summary criminal history
information, plus the fee charged by the Department of Justice for
processing noncriminal applicant fingerprint images and related
information, in a manner established by the Department of Justice
pursuant to subdivision (l). The Department of Justice shall honor
the Fidelity Corporation report request form and issue a report to
Fidelity Corporation, notwithstanding any other provision of law or
regulation to the contrary. Fidelity Corporation is also entitled to
submit a set of fingerprint images and related information in the
Department of Justice specified noncriminal applicant fingerprint
format for the purpose of requesting and obtaining a report from the
Department of Justice, for the officers and employees of Fidelity
Corporation. A member shall cause the filing of applications for all
existing employees as required by this section within 30 days of
written notice by Fidelity Corporation to the member.
(e) The application form shall include a provision for binding
arbitration to allow for arbitration of any appeal or dispute as to a
decision by Fidelity Corporation concerning the certificate, as
follows:
A DISPUTE AS TO WHETHER THE DENIAL OF THIS CERTIFICATE APPLICATION
OR ANY SUBSEQUENT SUSPENSION OR REVOCATION OF THE CERTIFICATE IS
UNNECESSARY OR UNAUTHORIZED OR WAS IMPROPERLY, NEGLIGENTLY, OR
UNLAWFULLY RENDERED, MAY BE DETERMINED BY SUBMISSION TO ARBITRATION
AS PROVIDED BY CALIFORNIA LAW, AND NOT BY A LAWSUIT OR RESORT TO
COURT PROCESS EXCEPT AS CALIFORNIA LAW PROVIDES FOR JUDICIAL REVIEW
OF ARBITRATION PROCEEDINGS OR EXCEPT AS PROVIDED BY SECTION 17331.3
OF THE FINANCIAL CODE. THE APPLICANT MAY, SUBJECT TO AGREEMENT,
SUBMIT ANY ISSUE ARISING FROM A DECISION BY FIDELITY CORPORATION TO
DENY THIS CERTIFICATE APPLICATION OR TO SUSPEND OR REVOKE THE
CERTIFICATE TO BE DECIDED BY BINDING NEUTRAL ARBITRATION. UPON AN
AGREEMENT TO SUBMIT TO BINDING NEUTRAL ARBITRATION, THE APPLICANT HAS
NO RIGHT TO HAVE ANY DISPUTE CONCERNING THIS CERTIFICATE APPLICATION
LITIGATED IN A COURT OR JURY TRIAL NOR ANY JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, EXCEPT AS SPECIFICALLY PROVIDED IN THE ESCROW
LAW. ARBITRATION MAY BE COMPELLED AS PROVIDED BY LAW.
(f) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations Financial Serv
ices , or any officer, agent, or employee of the
state or the Department of Corporations
Financial Services for statements made by Fidelity Corporation
in reports or recommendations made pursuant to this division, or for
reports or recommendations made pursuant to this division to Fidelity
Corporation by its members, directors, officers, employees or
agents, the State of California, the Department of
Corporations Financial Services , or any
officer, agent, or employee of the state or the Department of
Corporations Financial Services ,
unless the information provided is false and the party making the
statement or providing the false information does so with knowledge
and malice. Reports or recommendations made pursuant to this section,
or Section 17331.1, 17331.2, or 17331.3, are not public documents.
(g) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations Financial
Services , or an officer, agent, or employee of the state or
the Department of Corporations Financial
Services for the release of any information furnished to
Fidelity Corporation pursuant to this section unless the information
released is false and the party, including Fidelity Corporation, its
members, directors, officers, employees, or agents, the state, the
Department of Corporations Financial Services
, or any officer, agent, or employee of the state or the
Department of Corporations Financial Services
, who releases the false information does so with knowledge
and malice.
(h) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its directors,
officers, employees, or agents, for any decision to deny an
application for a certificate or to suspend or revoke the certificate
of any person or for the timing of any decision or the timing of any
notice to persons or members thereof, or for any failure to deny an
application under subdivision (a) of Section 17331.2. This
subdivision does not apply to acts performed in bad faith or with
malice.
(i) Fidelity Corporation, any member of Fidelity Corporation, an
agent of Fidelity Corporation or of its members, or any person who
uses any information obtained under this section for any purpose not
authorized by this chapter is guilty of a misdemeanor.
(j) Section 17331, 17331.1, or 17331.2 does not constitute a
restriction or limitation upon the obligation of Fidelity Corporation
to indemnify members against loss,
as provided in Sections 17310 and 17314. The failure to
obtain a certificate, the denial of an application for a certificate,
or the suspension, cancellation, or revocation of a certificate does
not limit the obligation of Fidelity Corporation to indemnify a
member against loss.
(k) Notwithstanding Section 11105 of the Penal Code, Fidelity
Corporation is entitled to receive state summary criminal history
information and subsequent arrest notification from the Department of
Justice as a result of fingerprint images and related information
submitted to the Department of Justice by the Department of
Corporations Financial Services , pursuant to
subdivision (g) of Section 17209, Section 17212.1, and subdivision
(d) of Section 17414.1, by or on behalf of escrow agents,
shareholders, officers, directors, trustees, managers, or employees
of an escrow agent, directly or indirectly compensated by an escrow
agent. The Department of Justice and Fidelity Corporation shall enter
into an agreement to implement this subdivision. The Department of
Corporations Financial Services shall
forward to Fidelity Corporation, weekly, a list of names of
individual fingerprints submitted to the Department of Justice.
(l) (1) The fingerprint images and related information required
pursuant to subdivision (d) shall be submitted by the Department of
Corporations Financial Services to the
Department of Justice, in a manner established by the Department of
Justice, for the purposes of obtaining information as to the
existence and content of a record of state or federal convictions,
state or federal arrests, and information as to the existence of and
content of a record of state or federal arrests for which the
Department of Justice establishes that the person is free on bail or
on his or her own recognizance pending trial or appeal.
(2) Upon receipt, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary criminal
history information received pursuant to this section. The
Department of Justice shall review the information returned from the
Federal Bureau of Investigation and compile and disseminate a
response to the Department of Corporations
Financial Services and a fitness determination to Fidelity
Corporation pursuant to subdivision (p) of Section 11105 of the Penal
Code.
(3) The Department of Justice shall charge a fee sufficient to
cover the costs of processing the requests pursuant to this
subdivision.
SEC. 181. Section 17423.1 of the
Financial Code is amended to read:
17423.1. (a) (1) Whenever the commissioner takes any enforcement
or disciplinary action pursuant to Section 17423, upon the action
becoming final the commissioner shall notify the Real Estate
Commissioner and the Insurance Commissioner of the action
or actions taken. The purpose of this notification is to alert the
departments department that enforcement
or disciplinary action has been taken, if the person seeks or
obtains employment with entities regulated by the
departments department .
(2) The commissioner shall provide the Real Estate
Commissioner and the Insurance Commissioner, in addition to
the notification of the action taken, with a copy of the written
accusation, statement of issues, or order issued or filed in the
matter and, at the request of the Real Estate Commissioner
or Insurance Commissioner, with any underlying factual
material relevant to the enforcement or disciplinary action. Any
confidential information provided by the commissioner to the
Insurance Commissioner or the Real Estate Commissioner
shall not be made public pursuant to this section.
Notwithstanding any other provision of law, the disclosure of any
underlying factual material to the Insurance Commissioner or
the Real Estate Commissioner shall not operate as a waiver
of confidentiality or any privilege that the commissioner may
assert.
(b) The commissioner shall establish and maintain, on the
Internet Web site maintained by the Department of
Corporations Financial Services , a separate and
readily identifiable database of all persons who have been subject
to any enforcement or disciplinary action that triggers the
notification requirements of this section. The database shall also
contain a direct link to the databases, described in Section 10176.1
of the Business and Professions Code and Section 12414.31 of the
Insurance Code and required to be maintained on the Internet
Web sites site of the
Department of Real Estate and the Department of Insurance
, respectively, of persons who have been subject
to enforcement or disciplinary action for malfeasance or misconduct
related to the escrow industry by the Insurance Commissioner
and the Real Estate Commissioner .
(c) There shall be no liability on the part of, and no cause of
action of any nature shall arise against, the State of California,
the Department of Corporations Financial
Services , the Commissioner of Corporations
Financial Services , any other state agency, or any
officer, agent, employee, consultant, or contractor of the state, for
the release of any false or unauthorized information pursuant to
this section, unless the release of that information was done with
knowledge and malice, or for the failure to release any information
pursuant to this section.
SEC. 182. Section 18002 of the
Financial Code is amended to read:
18002. "Commissioner" means the Commissioner of Financial
Institutions Services of the State of
California.
SEC. 183. Section 18002.5 of the
Financial Code is amended to read:
18002.5. "Department" means the Department of Financial
Institutions Services .
SEC. 184. Section 18339 of the
Financial Code is amended to read:
18339. As of the operative date of this section:
(a) There is established an Industrial Loan Account in the
Financial Institutions Fund in the State Treasury.
(b) All money on deposit with the Treasurer in the State
Corporations Fund that has been received or collected by the
Commissioner of Corporations Financial
Services under this division or any other law relating to
industrial loan companies or the industrial loan business, all other
assets of the State Corporations Fund that have been acquired by the
Commissioner of Corporations Financial
Services under this division or any other law relating to
industrial loan companies or the industrial loan business, and all
liabilities of the State Corporations Fund that have been incurred
under this division or any other law relating to industrial loan
companies or the industrial loan business shall be transferred to the
Industrial Loan Account.
SEC. 185. Section 18427.9 of the
Financial Code is amended to read:
18427.9. There shall be exempted from the provisions of Section
18427.1 all of the following:
(a) (1) Any offer, not involving a public offering, to an
affiliate or to a person of the type described in subdivision (i) of
Section 25102 of the Corporations Code or in the regulations of the
Commissioner of Corporations Financial
Services adopted thereunder.
(2) The execution and delivery of an agreement for the sale of
securities to any person of the type described in paragraph (1),
subject to all of the following:
(A) The agreement shall contain substantially the following
provision:
"The sale of the securities which are the subject of this agreement
has not been authorized by a permit issued by the Commissioner of
Financial Institutions Services of the
State of California. The issuance of the securities or the payment or
receipt of any part of the consideration therefor prior to the
issuance of a permit is unlawful, unless the sale of securities is
exempt from Section 18427.1 of the California Financial Code. The
rights of all parties to this agreement are expressly conditioned
upon the issuance of a permit, unless the sale is so exempt."
(B) No part of the purchase price may be paid or received, and
none of the securities may be issued, until a permit authorizing the
sale of the securities is issued, unless the sale is exempt from
Section 18427.1.
(b) Any transaction or security which the commissioner by
regulation or order exempts as not being comprehended within the
purposes of this article and the regulation of which he or she finds
is not necessary or appropriate in the public interest or for the
protection of investors.
SEC. 186. Section 18596 of the
Financial Code is amended to read:
18596. A premium finance company may issue or sell investment
certificates only (a) to its customers directly in connection with
the financing of premiums for such customers, provided that the
aggregate finance charges, including interest paid or not paid on
such investment certificates, do not exceed those charges permitted
under Section 18626 and (b) to any such institutional investors,
governmental agency or instrumentality as the Commissioner of
Corporations Financial Services may
designate by rule.
SEC. 187. Section 22005 of the Financial
Code is amended to read:
22005. "Commissioner" means the Commissioner of
Corporations Financial Services .
SEC. 188. Section 22159.5 of the
Financial Code is amended to read:
22159.5. (a) The commissioner may, as he or she deems necessary,
require licensees to provide reports concerning their residential
mortgage loan servicing activities, including, but not limited to,
information similar to that collected in connection with the Mortgage
Servicers Survey, first published by the Department of
Corporations Financial Services, successor to the
Department of Corporations in December 2007. The commissioner
is additionally authorized to seek and accept information provided on
a voluntary basis by residential mortgage loan servicers not subject
to the commissioner's jurisdiction. The commissioner shall post only
aggregated survey results on the department's Internet Web site, and
shall note the number of loan servicers submitting data included in
the aggregated totals and the estimated percentage of outstanding
mortgage loans to Californians that are serviced by these loan
servicers, to the extent information on the number of outstanding
loans is available from a reliable source. Nothing in this section is
intended to reduce or change the commissioner's authority to request
and demand reports under Sections 22150 and 22159.
(b) For purposes of this section, "mortgage loan servicing
activity" means receiving more than three installment payments of
principal, interest, or other amounts placed in escrow, pursuant to
the terms of a mortgage loan, and performing services relating to
that receipt or the enforcement of its receipt, on behalf of the
holder of the note evidencing that loan.
SEC. 189. Section 22160 of the
Financial Code is amended to read:
22160. The commissioner shall make and file annually with the
Department of Corporations Financial Services
as a public record a composite of the annual reports and any
comments on the reports that he or she deems to be in the public
interest.
SEC. 190. Section 22304 of the
Financial Code is amended to read:
22304. As an alternative to the charges authorized by Section
22303, a licensee may contract for and receive charges at the greater
of the following:
(a) A rate not exceeding 1.6 percent per month on the unpaid
principal balance.
(b) A rate not exceeding five-sixths of 1 percent per month plus a
percentage per month equal to one-twelfth of the annual rate
prevailing on the 25th day of the second month of the quarter
preceding the quarter in which the loan is made, as established by
the Federal Reserve Bank of San Francisco, on advances to member
banks under Sections 13 and 13a of the Federal Reserve Act, as now in
effect or hereafter from time to time amended, or if there is no
single determinable rate for advances, the closest counterpart of
this rate as shall be determined by the Commissioner of Financial
Institutions Services . Charges shall
be calculated on the unpaid principal balance.
(c) This section does not apply to any loan of a bona fide
principal amount of two thousand five hundred dollars ($2,500) or
more as determined in accordance with Section 22251.
SEC. 191. Section 23001 of the Financial
Code is amended to read:
23001. As used in this division, the following terms have the
following meanings:
(a) "Deferred deposit transaction" means a transaction whereby a
person defers depositing a customer's personal check until a specific
date, pursuant to a written agreement for a fee or other charge, as
provided in Section 23035.
(b) "Commissioner" means the Commissioner of Corporations
Financial Services .
(c) "Department" means the Department of Corporations
Financial Services .
(d) "Licensee" means any person who offers, originates, or makes a
deferred deposit transaction, who arranges a deferred deposit
transaction for a deferred deposit originator, who acts as an agent
for a deferred deposit originator, or who assists a deferred deposit
originator in the origination of a deferred deposit transaction.
However, "licensee" does not include a state or federally chartered
bank, thrift, savings association, industrial loan company, or credit
union. "Licensee" also does not include a retail seller engaged
primarily in the business of selling consumer goods, including
consumables, to retail buyers that cashes checks or issues money
orders for a minimum fee not exceeding two dollars ($2) as a service
to its customers that is incidental to its main purpose or business.
"Licensee" also does not include an employee regularly employed by a
licensee at the licensee's place of business. An employee, when
acting under the scope of the employee's employment, shall be exempt
from any other law from which the employee's employer is exempt.
(e) "Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a joint
stock company, a trust, an unincorporated organization, a government
entity, or a political subdivision of a government entity.
(f) "Deferred deposit originator" means a person who offers,
originates, or makes a deferred deposit transaction.
SEC. 192. Section 23070 of the
Financial Code is amended to read:
23070. (a) The Legislature finds and declares that it is in the
public interest for the administration and enforcement of this
division to be undertaken by the Department of Corporations
Financial Services .
(b) It is therefore the intent of the Legislature to transfer the
existing responsibilities relating to administration and enforcement
of check cashers that engage in activities subject to this division
from the Department of Justice to the Department of
Corporations Financial Services .
SEC. 193. Section 23071 of the
Financial Code is amended to read:
23071. The Commissioner of Corporations
Financial Services and the Department of Corporations
Financial Services shall succeed to, and are
vested with, all duties, powers, purposes, responsibilities, and
jurisdiction of the Department of Justice as they relate to check
cashers who engage in the activities subject to this division.
SEC. 194. Section 23072 of the
Financial Code is amended to read:
23072. The Department of Corporations
Financial Services may use the unexpended balance of funds
available for use in connection with the performance of duties of the
Department of Justice to which the Department of
Corporations Financial Services succeeds
pursuant to Section 23071.
SEC. 195. Section 23073 of the
Financial Code is amended to read:
23073. All officers and employees of the Department of Justice
who, on the operative date of this division, are performing any duty,
power, purpose, responsibility, or jurisdiction to which the
Department of Corporations Financial Services
succeeds, and who are serving in the civil service, other than
as temporary employees or persons in positions exempted from civil
service, shall be transferred to the Department of
Corporations F inancial Services .
The status, position, and rights of those persons shall not be
affected by the transfer and shall be retained by those persons as
officers and employees of the Department of Corporations
Financial Services , pursuant to Part 2
(commencing with Section 18500) of Division 5 of Title 2 of the
Government Code.
SEC. 196. Section 23074 of the
Financial Code is amended to read:
23074. The Department of Corporations
Financial Services shall have possession and control of all
records, criminal history information, papers, equipment, supplies,
moneys, funds, appropriations, licenses, permits, contracts, claims,
judgments, land, and other property, real or personal, connected with
the administration of, or held for the benefit or use of, the
Department of Justice for the performance of the functions
transferred to the Department of Corporations
Financial Services pursuant to Section 23071.
SEC. 197. Section 23102 of the
Financial Code is amended to read:
23102. The deferred deposits made pursuant to a permit issued
under Section 1789.37 of the Civil Code prior to December 31, 2004,
shall be subject to and enforced to the extent valid under Sections
1789.30 to 1789.37, inclusive, of the Civil Code, as if those
sections were not repealed. Any regulation, order, or other action
adopted, prescribed, taken, or performed by the Department of Justice
or by an officer of that department in connection with deferred
deposit transactions made prior to December 31, 2004, shall continue
to apply to those transactions. No suit, action, or other proceeding
lawfully commenced by or against the Department of Justice or any
other officer of the state in relation to deferred deposit
transactions made prior to December 31, 2004, shall abate by reason
of the transfer of authority concerning deferred deposit transactions
to the Department of Corporations Financial
Services pursuant to Section 23071.
SEC. 198. Section 28000 of the
Financial Code is amended to read:
28000. (a) Pursuant to the authority contained in Section 1 of
Article XV of the State Constitution, and subject to subdivision (b),
educational institutions of collegiate grade are authorized to make
loans or forbearances to finance student educational expenses
including tuition, room, and board, and other costs of attendance or
living at the institution, at rates not to exceed the higher of:
(1) Ten percent per annum.
(2) Five percent per annum plus the rate established by the
Federal Reserve Bank of San Francisco on advances to member banks
under Sections 13 and 13(a) of the Federal Reserve Act as now in
effect or hereafter from time to time amended or, if there is no such
single determinable rate of advances, the closest counterpart of
this rate as shall be designated by the Commissioner of Financial
Institutions Services of the State of
California unless some other person or agency is delegated such
authority by the Legislature. The date of determining the applicable
rate established by the Federal Reserve bank
Bank shall be the 25th day of the month preceding the earlier
of the date of execution of the contract to make the loan or
forbearance, or the date of making the loan or forbearance.
(b) Where the institution has obtained a loan specifically in
order to make loans to finance student educational expenses, the rate
of interest shall not exceed the lower of:
(1) The rate determined pursuant to subdivision (a).
(2) One percentage point in excess of the interest rate imposed
upon the loan made to the institution, as of the date of execution of
the contract to make the student loan to such extent the foregoing
creates and authorizes a class of exempt persons pursuant to Section
1 of Article XV of the Constitution.
(c) Solely with respect to loans or forbearances made by
educational institutions of collegiate grade to their faculty or
staff, secured by real property consisting of a residential dwelling,
these institutions are hereby declared to be an exempt class of
persons as this term is used in Section 1 of Article XV of the
Constitution.
SEC. 199. Section 30002 of the
Financial Code is amended to read:
30002. "Commissioner" means the Commissioner of
Corporations Financial Services .
SEC. 200. Section 30005 of the
Financial Code is amended to read:
30005. This division does not apply to:
(a) A securities depository which is operated by a corporation,
all of the capital stock (other than directors' qualifying shares, if
any) of which is held by or for a national securities exchange or
association registered under a statute of the United States such as
the Securities Exchange Act of 1934, or by a corporation all of the
capital stock (other than directors' qualifying shares, if any) of
which is held by or for such a wholly owned subsidiary of a
registered national securities exchange.
(b) A securities depository which is registered with the
Securities and Exchange Commission pursuant to any provision of
federal law or which is regulated by the Comptroller of the Currency,
the Federal Reserve Board, or the Federal Deposit Insurance
Corporation pursuant to any provision of federal law, or which is
regulated by the Commissioner of Financial Institutions
Services under Division 1 (commencing with
Section 99) of the Financial Code .
SEC. 201. Section 30217 of the
Financial Code is amended to read:
30217. The commissioner may from time to time make, amend, and
rescind such rules, forms, and orders as are necessary to carry out
the provisions of this law, including rules defining any terms,
whether or not used in this law, insofar as the definitions are not
inconsistent with the provisions of this law. For the purposes of
rules and forms, the commissioner may classify persons and matters
within his jurisdiction and may prescribe different requirements for
different classes. The commissioner may in his discretion waive any
requirement of any rule or form in situations where in his opinion
such requirement is not necessary in the public interest or for the
protection of investors. All rules of the commissioner other than
those relating solely to the internal administration of the
Department of Corporations Financial Services
shall be made, amended, or rescinded in accordance with the
provisions of Chapter 4.5 (commencing with Section 11371) of Part 1
of Division 3 of Title 2 of the Government Code.
SEC. 202. Section 31055 of the
Financial Code is amended to read:
31055. "Commissioner" means the Commissioner of Financial
Institutions Services or any person to
whom the Commissioner of Financial Institutions
Services delegates the authority to act for him or her in
the particular matter.
SEC. 203. Section 33045.5 of the
Financial Code is amended to read:
33045.5. "Commissioner" means the Commissioner of Financial
Institutions Services or any person to
whom the Commissioner of Financial Institutions
Services delegates the authority to act for the
Commissioner of Financial Institutions
Services in this matter.
SEC. 204. Section 33785 of the
Financial Code is amended to read:
33785. No licensee shall appoint or continue as a California
agent any person whom the Commissioner of Corporations
Financial Services has, pursuant to Section
12301.4, ordered a check seller licensed under Division 3 (commencing
with Section 12000) to terminate as its agent, unless the
Commissioner of Corporations Financial
Services shall have first, pursuant to Section 12301.4, vacated
such order or given his written consent for any check seller
licensed under Division 3 to appoint such person as its agent.
SEC. 205. Section 50003 of the
Financial Code is amended to read:
50003. (a) "Annual audit" means a certified audit of the licensee'
s books, records, and systems of internal control performed by an
independent certified public accountant in accordance with generally
accepted accounting principles and generally accepted auditing
standards.
(b) "Borrower" means the loan applicant.
(c) "Buy" includes exchange, offer to buy, or solicitation to buy.
(d) "Commissioner" means the Commissioner of Corporations
Financial Services .
(e) "Control" means the possession, directly or indirectly, of the
power to direct, or cause the direction of, the management and
policies of a licensee under this division, whether through voting or
through the ownership of voting power of an entity that possesses
voting power of the licensee, or otherwise. Control is presumed to
exist if a person, directly or indirectly, owns, controls, or holds
10 percent or more of the voting power of a licensee or of an entity
that owns, controls, or holds, with power to vote, 10 percent or more
of the voting power of a licensee. No person shall be deemed to
control a licensee solely by reason of his or her status as an
officer or director of the licensee.
(f) "Engage in the business" means the dissemination to the
public, or any part of the public, by means of written, printed, or
electronic communication or any communication by means of recorded
telephone messages or spoken on radio, television, or similar
communications media, of any information relating to the making of
residential mortgage loans, the servicing of residential mortgage
loans, or both. "Engage in the business" also means, without
limitation, making residential mortgage loans or servicing
residential mortgage loans, or both.
(g) "Exempt person" means any of the following:
(1) Any bank, trust company, insurance company, or industrial loan
company doing business under the authority of or in accordance with
a license, certificate, or charter issued by the United States or any
state, district, territory, or commonwealth of the United States
that is authorized to transact business in this state.
(2) A federally chartered savings and loan association, federal
savings bank, or federal credit union that is authorized to transact
business in this state.
(3) A
savings and loan association, savings bank, or credit union organized
under the laws of this or any other state that is authorized to
transact business in this state.
(4) A person engaged solely in business, commercial, or
agricultural mortgage lending.
(5) A wholly owned service corporation of a savings and loan
association or savings bank organized under the laws of this state or
the wholly owned service corporation of a federally chartered
savings and loan association or savings bank that is authorized to
transact business in this state.
(6) Any person making residential mortgage loans with his, her, or
its own funds for his, her, or its own investment without intent to
resell more than eight residential loans in any one calendar year.
(7) An agency, or other instrumentality of the federal government,
or state or municipal government.
(8) An employee or employer pension plan making residential
mortgage loans only to its participants, or a person making those
loans only to its employees or the employees of a holding company,
owner who controls that person, affiliate, or subsidiary of that
person.
(9) A person acting in a fiduciary capacity conferred by the
authority of a court.
(10) A real estate broker licensed under California law, when
making, arranging, selling, or servicing a residential loan.
(11) A California finance lender licensed under Division 9
(commencing with Section 22000), when acting under the authority of
that license.
(12) A trustee under a deed of trust pursuant to the Civil Code,
when collecting delinquent loan payments, interest, or other loan
amounts, or performing other acts in a judicial or nonjudicial
foreclosure proceeding.
(h) "In this state" means any activity of a person relating to
making or servicing a residential mortgage loan that originates from
this state and is directed to persons outside this state, or that
originates from outside this state and is directed to persons inside
this state, or that originates inside this state and is directed to
persons inside this state, or that leads to the formation of a
contract and the offer or acceptance thereof is directed to a person
in this state (whether from inside or outside this state and whether
the offer was made inside or outside the state).
(i) "Institutional investor" means the following:
(1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
(2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial bank or industrial loan
company, personal property broker, consumer finance lender,
commercial finance lender, or insurance company, or subsidiary or
affiliate of one of the preceding entities, doing business under the
authority of or in accordance with a license, certificate, or charter
issued by the United States or any state, district, territory, or
commonwealth of the United States.
(3) Trustees of pension, profit-sharing, or welfare funds, if the
pension, profit-sharing, or welfare fund has a net worth of not less
than fifteen million dollars ($15,000,000), except pension,
profit-sharing, or welfare funds of a licensee or its affiliate,
self-employed individual retirement plans, or individual retirement
accounts.
(4) A corporation or other entity with outstanding securities
registered under Section 12 of the Securities Exchange Act of 1934 or
a wholly owned subsidiary of that corporation or entity, provided
that the purchaser represents either of the following:
(A) That it is purchasing for its own account for investment and
not with a view to, or for sale in connection with, any distribution
of a promissory note.
(B) That it is purchasing for resale pursuant to an exemption
under Rule 144A (17 C.F.R. 230.144A) of the Securities and Exchange
Commission.
(5) An investment company registered under the Investment Company
Act of 1940; or a wholly owned and controlled subsidiary of that
company, provided that the purchaser makes either of the
representations provided in paragraph (4).
(6) A person licensed to make residential mortgage loans under
this law or an affiliate or subsidiary of that person.
(7) Any person who is licensed as a securities broker or
securities dealer under any law of this state, or of the United
States, or any employee, officer or agent of that person, if that
person is acting within the scope of authority granted by that
license or an affiliate or subsidiary controlled by that broker or
dealer, in connection with a transaction involving the offer, sale,
purchase, or exchange of one or more promissory notes secured
directly or indirectly by liens on real property or a security
representing an ownership interest in a pool of promissory notes
secured directly or indirectly by liens on real property, and the
offer and sale of those securities is qualified under the California
Corporate Securities Law of 1968 or registered under federal
securities laws, or exempt from qualification or registration.
(8) A licensed real estate broker selling the loan to an
institutional investor specified in paragraphs (1) to (7), inclusive,
or paragraph (9) or (10).
(9) A business development company as defined in Section 2(a)(48)
of the Investment Company Act of 1940 or a Small Business Investment
Company licensed by the United States Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of
1958.
(10) A syndication or other combination of any of the foregoing
entities that is organized to purchase a promissory note.
(11) A trust or other business entity established by an
institutional investor for the purpose of issuing or facilitating the
issuance of securities representing undivided interests in, or
rights to receive payments from or to receive payments primarily
from, a pool of financial assets held by the trust or business
entity, provided that all of the following apply:
(A) The business entity is not a sole proprietorship.
(B) The pool of assets consists of one or more of the following:
(i) Interest-bearing obligations.
(ii) Other contractual obligations representing the right to
receive payments from the assets.
(iii) Surety bonds, insurance policies, letters of credit, or
other instruments providing credit enhancement for the assets.
(C) The securities will be either one of the following:
(i) Rated as "investment grade" by Standard and Poor's Corporation
or Moody's Investors Service, Inc. "Investment grade" means that the
securities will be rated by Standard and Poor's Corporation as AAA,
AA, A, or BBB or by Moody's Investors Service, Inc. as Aaa, Aa, A, or
Baa, including any of those ratings with "+" or "--" designation or
other variations that occur within those ratings.
(ii) Sold to an institutional investor.
(D) The offer and sale of the securities is qualified under the
California Corporate Securities Law of 1968 or registered under
federal securities laws, or exempt from qualification or
registration.
(j) "Institutional lender" means the following:
(1) The United States or any state, district, territory, or
commonwealth thereof, or any city, county, city and county, public
district, public authority, public corporation, public entity, or
political subdivision of a state, district, territory, or
commonwealth of the United States, or any agency or other
instrumentality of any one or more of the foregoing, including, by
way of example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation.
(2) Any bank, trust company, savings bank or savings and loan
association, credit union, industrial loan company, or insurance
company, or service or investment company that is wholly owned and
controlled by one of the preceding entities, doing business under the
authority of and in accordance with a license, certificate, or
charter issued by the United States or any state, district,
territory, or commonwealth of the United States.
(3) Any corporation with outstanding securities registered under
Section 12 of the Securities Exchange Act of 1934 or any wholly owned
subsidiary of that corporation.
(4) A person licensed to make residential mortgage loans under
this law.
(k) "Law" means the California Residential Mortgage Lending Act.
() "Lender" means a person that (1) is an approved lender for the
Federal Housing Administration, Veterans Administration, Farmers Home
Administration, Government National Mortgage Association, Federal
National Mortgage Association, or Federal Home Loan Mortgage
Corporation, (2) directly makes residential mortgage loans, and (3)
makes the credit decision in the loan transactions.
(m) "Licensee" means, depending on the context, a person licensed
under either Chapter 2 (commencing with Section 50120) or Chapter 3
(commencing with Section 50130).
(n) "Makes or making residential mortgage loans" or "mortgage
lending" means processing, underwriting, or as a lender using or
advancing one's own funds, or making a commitment to advance one's
own funds, to a loan applicant for a residential mortgage loan.
(o) "Mortgage loan," "residential mortgage loan," or "home
mortgage loan" means a federally regulated mortgage loan as defined
in Section 3500.2 of Title 24 of the Code of Federal Regulations, or
a loan made to finance construction of a one to four family dwelling.
(p) "Mortgage servicer" or "residential mortgage loan servicer"
means a person that (1) is an approved servicer for the Federal
Housing Administration, Veterans Administration, Farmers Home
Administration, Government National Mortgage Association, Federal
National Mortgage Association, or Federal Home Loan Mortgage
Corporation, and (2) directly services or offers to service mortgage
loans.
(q) "Net worth" has the meaning set forth in Section 50201.
(r) "Own funds" means (1) cash, corporate capital, or warehouse
credit lines at commercial banks, savings banks, savings and loan
associations, industrial loan companies, or other sources that are
liability items on a lender's financial statements, whether secured
or unsecured, or (2) a lender's affiliate's cash, corporate capital,
or warehouse credit lines at commercial banks or other sources that
are liability items on the affiliate's financial statements, whether
secured or unsecured. "Own funds" does not include funds provided by
a third party to fund a loan on condition that the third party will
subsequently purchase or accept an assignment of that loan.
(s) "Person" means a natural person, a sole proprietorship, a
corporation, a partnership, a limited liability company, an
association, a trust, a joint venture, an unincorporated
organization, a joint stock company, a government or a political
subdivision of a government, and any other entity.
(t) "Residential real property" or "residential real estate" means
real property located in this state that is improved by a
one-to-four family dwelling.
(u) "Service" or "servicing" means receiving more than three
installment payments of principal, interest, or other amounts placed
in escrow, pursuant to the terms of a mortgage loan and performing
services by a licensee relating to that receipt or the enforcement of
its receipt, on behalf of the holder of the note evidencing that
loan.
(v) "Sell" includes exchange, offer to sell, or solicitation to
sell.
SEC. 206. Section 50303 of the
Financial Code is amended to read:
50303. Neither the commissioner nor any employee of the
Department of Corporations Financial Services
shall be precluded from obtaining a residential mortgage loan
from a lender licensed under this division, subject to the rules that
may be adopted hereunder or pursuant to other proper authority.
SEC. 207. Section 50307.1 of the
Financial Code is amended to read:
50307.1. The commissioner may, as he or she deems necessary,
require licensees to provide reports concerning their residential
mortgage loan servicing activities, including, but not limited to,
information similar to that collected in connection with the Mortgage
Servicers Survey, first published by the Department of
Corporations Financial Services in December
2007. The commissioner is additionally authorized to seek and accept
information provided on a voluntary basis by residential mortgage
loan servicers not subject to the commissioner's jurisdiction. The
commissioner shall post only aggregated survey results on the
department's Internet Web site, and shall note the number of loan
servicers submitting data included in the aggregated totals and the
estimated percentage of outstanding mortgage loans to Californians
that are serviced by these loan servicers, to the extent information
on the number of outstanding loans is available from a reliable
source. Nothing in this section is intended to reduce or change the
commissioner's authority to request and demand reports under Section
50307.
SEC. 208. Section 50602 of the
Financial Code is amended to read:
50602. This division is repealed on January 1, 1996, unless the
following two conditions are met. First, the Commissioner of
Corporations Financial Services must receive,
on or before March 1, 1995, from no fewer than 150 persons, a notice
of intention to file an application for licensure as a residential
mortgage lender or residential mortgage loan servicer, accompanied by
the application filing fee and an annual financial report for
calendar year 1994 that meets the requirements of subdivision (a) of
Section 50401. Second, the Legislature shall appropriate money for
the implementation of this division to the Department of
Corporations Financial Services from Item
2180-001-067 of the 1995-96 Budget Act. If the above two conditions
are not met, all persons who have paid fees or assessments under this
division shall receive a refund prior to the date of repeal.
SEC. 208. Section 50702 of the
Financial Code is amended to read:
50702. (a) The annual report required by Section 50401(a) shall
include both of the following:
(1) The number and the aggregate principal amount of closed
residential mortgage loans secured by residential real estate in
which the licensee provides brokerage services, as defined in this
chapter.
(2) The number and aggregate principal amount of residential
mortgage loans made by the licensee under this division.
(b) The sum total of the aggregate principal loan amounts reported
in paragraphs (1) and (2) of subdivision (a) shall be deemed the
aggregate principal amount of mortgage loans secured by residential
real property originated by the licensee, for purposes of determining
a licensee's annual assessment under subdivision (a) of Section
50401.
(c) The commissioner shall provide copies of the annual reports
required by subdivision (a) of Section 50401 to the Department of
Real Estate Financial Services upon
request of the Real Estate Commissioner of
Financial Services .
SEC. 210. Section 13975 of the
Government Code is amended to read:
13975. The Business and Transportation Agency in state government
is hereby renamed the Business, Transportation and Housing Agency.
The agency consists of the State Department of Alcoholic Beverage
Control, the Department of the California Highway Patrol,
the Department of Corporations, the Department of Housing
and Community Development, the Department of Motor Vehicles,
the Department of Real Estate, the Department of
Transportation, the Department of Financial Institutions
Services , the Department of Managed Health
Care, and the Board of Pilot Commissioners for the Bays of San
Francisco, San Pablo, and Suisun; and the California Housing Finance
Agency is also located within the Business, Transportation and
Housing Agency, as specified in Division 31 (commencing with Section
50000) of the Health and Safety Code.
SEC. 2. It is the intent of the Legislature to
do all of the following:
(a) Abolish the Department of Corporations (DOC), the Department
of Financial Institutions (DFI), the Department of Real Estate (DRE),
and the Office of Real Estate Appraisers (OREA) in the Business,
Transportation and Housing Agency.
(b) Create a new Department of Financial Services (DFS) in the
Business, Transportation and Housing Agency.
(c) Designate the chief officer of DFS as the Commissioner of
Financial Services.
(d) Cause DFS and the Commissioner of Financial Services to
succeed to and be vested with all the duties, powers, purposes,
responsibilities, and jurisdiction currently vested in DOC, DFI, DRE,
and OREA, and the Commissioner of Corporations, the Commissioner of
Financial Institutions, the Commissioner of Real Estate, and the
Director of Real Estate Appraisers.
(e) Authorize the Controller to transfer funds from DOC, DFI, DRE,
and OREA to DFS.
(f) Consolidate the operations and licensing frameworks of DOC,
DFI, DRE, and OREA and transfer them to DFS and, specifically,
require DFS to regulate the following persons, entities, and
transactions currently subject to regulation and oversight by, or
subject to the jurisdiction of, DOC, DFI, DRE, and OREA:
(1) Broker-dealers and the agents or registered representatives of
broker-dealers (Chapter 2 (commencing with Section 25210) of Part 3
of Division 1 of Title 4 of the Corporations Code).
(2) Investment advisers and investment adviser representatives or
associated persons (Chapter 3 (commencing with Section 25230) of Part
3 of Division 1 of Title 4 of the Corporations Code).
(3) Capital access companies (Division 3 (commencing with Section
28000) of Title 4 of the Corporations Code).
(4) The Franchise Investment Law (Division 5 (commencing with
Section 31000) of Title 4 of the Corporations Code).
(5) Banks and trust companies (Division 1 (commencing with Section
99) of the Financial Code).
(6) Foreign banks (Chapter 13.5 (commencing with Section 1700) of
Division 1 of the Financial Code).
(7) Money transmitters (Chapter 14 (commencing with Section 1800)
of Division 1 of the Financial Code).
(8) Issuers of travelers checks (Chapter 14A (commencing with
Section 1851) of Division 1 of the Financial Code).
(9) Bank holding companies (Chapter 21 (commencing with Section
3700) of Division 1 of the Financial Code).
(10) Checksellers, billpayers, and proraters (Division 3
(commencing with Section 12000) of the Financial Code).
(11) Credit unions (Division 5 (commencing with Section 14000) of
the Financial Code).
(12) Escrow agents (Division 6 (commencing with Section 17000) of
the Financial Code).
(13) Industrial loan companies (Division 7 (commencing with
Section 18000) of the Financial Code).
(14) The Finance Lenders Law (Division 9 (commencing with Section
22000) of the Financial Code).
(15) Deferred deposit originators (Division 10 (commencing with
Section 23000) of the Financial Code).
(16) Securities depositories (Division 14 (commencing with Section
30000) of the Financial Code).
(17) Business and industrial development corporations (Division 15
(commencing with Section 31000) of the Financial Code).
(18) Sellers of payment instruments (Division 16 (commencing with
Section 33000) of the Financial Code).
(19) The California Residential Mortgage Lending Act (Division 20
(commencing with Section 50000) of the Financial Code).
(20) The Real Estate Law (Part 1 (commencing with Section 10000)
of Division 4 of the Business and Professions Code).
(21) The Subdivided Lands Law (Chapter 1 (commencing with Section
11000) of Part 2 of Division 4 of the Business and Professions Code).
(22) The Vacation Ownership and Time-Share Act of 2004 (Chapter 2
(commencing with Section 11210) of Part 2 of Division 4 of the
Business and Professions Code).
(23) The Real Estate Appraisers' Licensing and Certification Law
(Part 3 (commencing with Section 11302) of Division 4 of the Business
and Professions Code).
(24) Any other persons, entities, or transactions subject to
regulation and oversight by, or subject to the jurisdiction of, DOC,
DFI, DRE, or OREA.