BILL NUMBER: AB 1517 ENROLLED
BILL TEXT
PASSED THE SENATE JULY 13, 2015
PASSED THE ASSEMBLY JULY 16, 2015
AMENDED IN SENATE JUNE 1, 2015
AMENDED IN ASSEMBLY APRIL 16, 2015
AMENDED IN ASSEMBLY APRIL 8, 2015
INTRODUCED BY Committee on Banking and Finance (Assembly Members
Dababneh (Chair), Travis Allen (Vice Chair), Achadjian, Brown, Chau,
Gatto, Kim, Low, Perea, Ridley-Thomas, and Mark Stone)
MARCH 10, 2015
An act to amend Section 17511.1 of the Business and Professions
Code, to amend Sections 1632.5, 1748.13, 1789.12, 1812.201, and
2923.3 of the Civil Code, to amend Sections 1101.1, 2207, 2510, 3100,
17713.12, 25003, 25018, 25100, 25207, 25243.5, 25247, 25254, 25401,
25604, 25607, 25612.5, 25614, 25702, 29542, 31408, 31503, and 31513
of the Corporations Code, to amend Sections 620, 622, 1070, 2105,
4057, 12104, 17210.2, 17214, 17311, 17320, 17331, 18405, 22105.1,
22159.5, 22160, 22756, 23070, 23071, 23072, 23073, 23074, 23102,
30217, 50140, 50303, 50307.1, and 50316.5 of, to amend the heading of
Article 4 (commencing with Section 670) of Chapter 7 of Division 1
of, and to repeal Section 1008 of, the Financial Code, to amend
Sections 5970, 6254.5, 6254.12, 6254.22, 11840, 53344.1, 53638, and
54956.87 of the Government Code, to amend Sections 1280.7, 12693.35,
14053, and 15036 of the Insurance Code, to amend Section 4600.5 of
the Labor Code, to amend Section 11604.5 of the Probate Code, to
amend Section 408 of the Revenue and Taxation Code, and to amend
Section 22005.1 of the Welfare and Institutions Code, relating to
business.
LEGISLATIVE COUNSEL'S DIGEST
AB 1517, Committee on Banking and Finance. Business.
(1) Existing law abolished the Department of Corporations and the
Department of Financial Institutions and transferred their
responsibilities to the Department of Business Oversight, which is
headed by a Commissioner of Business Oversight.
This bill would transfer additional duties from the abolished
Department of Corporations and the abolished Department of Financial
Institutions to the Department of Business Oversight and the
Commissioner of Business Oversight, as specified, as well as the
Department of Managed Health Care. This bill would also update
cross-references and outdated contact information with respect to the
Department of Business Oversight.
(2) Existing law, the Corporate Securities Law of 1968, makes it
unlawful for a person, in connection with the offer, sale, or
purchase of a security, directly or indirectly, to employ a device,
scheme, or artifice to defraud, make an untrue statement of material
fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which they were
made, not misleading, or engage in an act, practice, or course of
business that operates or would operate as a fraud or deceit upon
another person.
This bill would instead make it unlawful for any person to offer
or sell a security in this state, or to buy or offer to buy a
security in this state, by means of any written or oral communication
that includes an untrue statement of a material fact or omits to
state a material fact necessary to make the statements made, in the
light of the circumstances under which the statements were made, not
misleading.
Existing law, the Corporate Securities Law of 1968, requires the
offer and sale of securities in the state to be qualified with the
Commissioner of Business Oversight, unless exempt. That law exempts
specific securities or transactions from qualification, including,
among others, any security issued or guaranteed by a public utility
holding company, as specified.
This bill would revise this exemption to exempt any security
issued or guaranteed by a public utility holding company that is
regulated in respect to its rates and charges by the United States or
a state, and delete obsolete cross-references.
This bill would also update and delete obsolete cross-references
to federal law in the Corporate Securities Law of 1968.
(3) Existing law limits the amount of funds of a bank or trust
company that are deposited in any other financial institution, as
specified, unless the financial institution has been designated as a
depositary for the funds of the depositing bank or trust company by a
vote of the majority of the directors of the depositing bank or
trust company and the financial institution has been approved by the
commissioner as a depositary for the purposes of these provisions.
This bill would repeal these provisions.
(4) Existing law, the Banking Law, prescribes the conditions
pursuant to which a state-chartered bank may engage in the practice
of banking. Existing law requires a bank to have authorization to
open an office. Existing law defines core and noncore banking
business and defines a facility, in this context, as an office in
this state at which a bank engages in noncore banking business but
not core banking business.
This bill would delete the phrase "in this state" from the
definition of a facility, as described above.
(5) Existing law requires an industrial loan company to annually
file with the Commissioner of Business Oversight an audit report
containing audited financial statements and other relevant
information the commissioner may require relating to the company.
Existing law further requires an industrial loan company whose
certificate has been surrendered or revoked to submit to the
commissioner a closing audit report containing audited financial
statements, as specified.
This bill would repeal the requirement for the closing audit
report.
(6) This bill would also make technical changes and corrections.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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 upfront 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 Business Oversight 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 Business Oversight 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, finance lender or broker, 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 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 Division 1.2 (commencing with
Section 2000) of the Financial Code to engage in the business of
money transmission 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. 2. Section 1632.5 of the Civil Code is amended to read:
1632.5. (a) A supervised financial organization that negotiates
primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean,
whether orally or in writing, in the course of entering into a
contract or agreement for a loan or extension of credit secured by
residential real property, shall deliver to the other party to that
contract or agreement prior to the execution of the contract or
agreement the form described in subdivision (i) for that language.
(b) For purposes of this section:
(1) "Contract" or "agreement" shall have the same meaning as
defined in subdivision (g) of Section 1632.
(2) "Supervised financial organization" means a bank, savings
association, as defined in Section 5102 of the Financial Code, credit
union, or holding company, affiliate, or subsidiary thereof, or any
person subject to Division 7 (commencing with Section 18000),
Division 9 (commencing with Section 22000), or Division 20
(commencing with Section 50000) of the Financial Code.
(c) (1) With respect to a contract or agreement for a loan or
extension of credit secured by residential real property as described
in subdivision (a), a supervised financial organization that
complies with this section shall be deemed in compliance with Section
1632.
(2) A supervised financial organization that complies with Section
1632, with respect to a contract or agreement for a loan or
extension of credit secured by residential real property as described
in subdivision (a), shall be deemed in compliance with this section.
(d) The supervised financial organization shall provide the form
described in subdivision (i) to the borrower no later than three
business days after receipt of the written application, and if any of
the loan terms summarized materially change after provision of the
translated form but prior to consummation of the loan, the supervised
financial organization shall provide an updated version of the
translated form prior to consummation of the loan.
(e) (1) This section does not apply to a supervised financial
organization that negotiates primarily in a language other than
English, as described by subdivision (a), if the party with whom the
supervised financial organization is negotiating, negotiates the
terms of the contract through his or her own interpreter.
(2) For purposes of this subdivision, "his or her own interpreter"
means a person, not a minor, able to speak fluently and read with
full understanding both the English language and one of the languages
specified in subdivision (a) that is the language in which the
contract was negotiated, who is not employed by, and whose services
are not made available through, the person engaged in the trade or
business.
(f) Notwithstanding subdivision (a), a translated form may retain
any of the following elements of the executed English language
contract or agreement without translation:
(1) Names and titles of individuals and other persons.
(2) Addresses, brand names, trade names, trademarks, or registered
service marks.
(3) Full or abbreviated designations of the make and model of
goods or services.
(4) Alphanumeric codes.
(5) Individual words or expressions having no generally accepted
non-English translation.
(g) The terms of the contract or agreement which is executed in
the English language shall determine the rights and obligations of
the parties. However, the translation of the form described in
subdivision (i) and required by subdivision (a) shall be admissible
in evidence only to show that no contract or agreement was entered
into because of a substantial difference in the material terms and
conditions of the contract or agreement and the prior translated form
provided to the borrower.
(h) (1) A licensing agency may, by order, after appropriate notice
and opportunity for hearing, levy administrative penalties against a
supervised financial organization that violates any provision of
this section, and the supervised financial organization may be liable
for administrative penalties, up to the amounts of two thousand five
hundred dollars ($2,500) for the first violation, five thousand
dollars ($5,000) for the second violation, and ten thousand dollars
($10,000) for each subsequent violation. Except for licensing
agencies exempt from the provisions of the Administrative Procedure
Act, any hearing shall be held in accordance with the Administrative
Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code), and the licensing
agency shall have all the powers granted under that act.
(2) A licensing agency may exercise any and all authority and
powers available to it under any other provisions of law to
administer and enforce this section, including, but not limited to,
investigating and examining the licensed person's books and records,
and charging and collecting the reasonable costs for these
activities. The licensing agency shall not charge a licensed person
twice for the same service. Any civil, criminal, and administrative
authority and remedies available to the licensing agency pursuant to
its licensing law may be sought and employed in any combination
deemed advisable by the licensing agency to enforce the provisions of
this section.
(3) Any supervised financial organization that violates any
provision of this section shall be deemed to have violated its
licensing law.
(4) Nothing in this section shall be construed to impair or impede
the Attorney General from bringing an action to enforce this
division.
(i) The Department of Business Oversight shall create a form to be
made available in each of the languages set forth in subdivision (a)
for use by a supervised financial organization to summarize the
terms of a mortgage loan pursuant to subdivision (a). In creating the
form, the Department of Business Oversight may use as guidance the
United States Department of Housing and Urban Development's Good
Faith Estimate disclosure form.
(j) This section shall not apply to federally chartered banks,
credit unions, savings banks, or thrifts.
(k) Except as otherwise provided in subdivision (h), this section
shall not be construed to create or enhance any claim, right of
action, or civil liability that did not previously exist under state
law, or limit any claim, right of action, or civil liability that
otherwise exists under state law.
(l) An action against a supervised financial organization for a
violation of this section may only be brought by a licensing agency
or by the Attorney General.
(m) This section shall become operative beginning on July 1, 2010,
or 90 days following the issuance of a form by the Department of
Business Oversight pursuant to subdivision (i), whichever occurs
later.
SEC. 3. Section 1748.13 of the Civil Code is amended to read:
1748.13. (a) A credit card issuer shall, with each billing
statement provided to a cardholder in this state, provide the
following on the front of the first page of the billing statement in
type no smaller than that required for any other required disclosure,
but in no case in less than 8-point capitalized type:
(1) A written statement in the following form: "Minimum Payment
Warning: Making only the minimum payment will increase the interest
you pay and the time it takes to repay your balance."
(2) Either of the following:
(A) A written statement in the form of and containing the
information described in clause (i) or (ii), as applicable, as
follows:
(i) A written three-line statement, as follows:
"A one thousand dollar ($1,000) balance will take 17 years and three
months to pay off at a total cost of two thousand five hundred ninety
dollars and thirty-five cents ($2,590.35).
A two thousand five hundred dollar ($2,500) balance will take 30
years and three months to pay off at a total cost of seven thousand
seven hundred thirty-three dollars and forty-nine cents ($7,733.49).
A five thousand dollar ($5,000) balance will take 40 years and two
months to pay off at a total cost of sixteen thousand three hundred
five dollars and thirty-four cents ($16,305.34).
This information is based on an annual percentage rate of 17 percent
and a minimum payment of 2 percent or ten dollars ($10), whichever
is greater."
In the alternative, a credit card issuer may provide this
information for the three specified amounts at the annual percentage
rate and required minimum payment which are applicable to the
cardholder's account. The statement provided shall be immediately
preceded by the statement required by paragraph (1).
(ii) Instead of the information required by clause (i), retail
credit card issuers shall provide a written three-line statement to
read, as follows:
"A two hundred fifty dollar ($250) balance will take two years and
eight months to pay off a total cost of three hundred twenty-five
dollars and twenty-four cents ($325.24).
A five hundred dollar ($500) balance will take four years and five
months to pay off at a total cost of seven hundred nine dollars and
ninety cents ($709.90).
A seven hundred fifty dollar ($750) balance will take five years and
five months to pay off at a total cost of one thousand ninety-four
dollars and forty-nine cents ($1,094.49).
This information is based on an annual percentage rate of 21 percent
and a minimum payment of 5 percent or ten dollars ($10), whichever
is greater."
In the alternative, a retail credit card issuer may provide this
information for the three specified amounts at the annual percentage
rate and required minimum payment which are applicable to the
cardholder's account. The statement provided shall be immediately
preceded by the statement required by paragraph (1). A retail credit
card issuer is not required to provide this statement if the
cardholder has a balance of less than five hundred dollars ($500).
(B) A written statement providing individualized information
indicating an estimate of the number of years and months and the
approximate total cost to pay off the entire balance due on an
open-end credit card account if the cardholder were to pay only the
minimum amount due on the open-ended account based upon the terms of
the credit agreement. For purposes of this subparagraph only, if the
account is subject to a variable rate, the creditor may make
disclosures based on the rate for the entire balance as of the date
of the disclosure and indicate that the rate may vary. In addition,
the cardholder shall be provided with referrals or, in the
alternative, with the "800" telephone number of the National
Foundation for Credit Counseling through which the cardholder can be
referred, to credit counseling services in, or closest to, the
cardholder's county of residence. The credit counseling service shall
be in good standing with the National Foundation for Credit
Counseling or accredited by the Council on Accreditation for Children
and Family Services. The creditor is required to provide, or
continue to provide, the information required by this paragraph only
if the cardholder has not paid more than the minimum payment for six
consecutive months, after July 1, 2002.
(3) (A) A written statement in the following form: "For an
estimate of the time it would take to repay your balance, making only
minimum payments, and the total amount of those payments, call this
toll-free telephone number: (Insert toll-free telephone number)."
This statement shall be provided immediately following the statement
required by subparagraph (A) of paragraph (2). A credit card issuer
is not required to provide this statement if the disclosure required
by subparagraph (B) of paragraph (2) has been provided.
(B) The toll-free telephone number shall be available between the
hours of 8 a.m. and 9 p.m., Pacific standard time, seven days a week,
and shall provide consumers with the opportunity to speak with a
person, rather than a recording, from whom the information described
in subparagraph (A) may be obtained.
(C) The Department of Business Oversight shall establish a
detailed table illustrating the approximate number of months that it
would take and the approximate total cost to repay an outstanding
balance if the consumer pays only the required minimum monthly
payments and if no other additional charges or fees are incurred on
the account, such as additional extension of credit, voluntary credit
insurance, late fees, or dishonored check fees by assuming all of
the following:
(i) A significant number of different annual percentage rates.
(ii) A significant number of different account balances, with the
difference between sequential examples of balances being no greater
than one hundred dollars ($100).
(iii) A significant number of different minimum payment amounts.
(iv) That only minimum monthly payments are made and no additional
charges or fees are incurred on the account, such as additional
extensions of credit, voluntary credit insurance, late fees, or
dishonored check fees.
(D) A creditor that receives a request for information described
in subparagraph (A) from a cardholder through the toll-free telephone
number disclosed under subparagraph (A), or who is required to
provide the information required by subparagraph (B) of paragraph
(2), may satisfy its obligation to disclose an estimate of the time
it would take and the approximate total cost to repay the cardholder'
s balance by disclosing only the information set forth in the table
described in subparagraph (C). Including the full chart along with a
billing statement does not satisfy the obligation under this section.
(b) For purposes of this section:
(1) "Credit card" has the same meaning as in paragraph (2) of
subdivision (a) of Section 1748.12.
(2) "Open-end credit card account" means an account in which
consumer credit is granted by a creditor under a plan in which the
creditor reasonably contemplates repeated transactions, the creditor
may impose a finance charge from time to time on an unpaid balance,
and the amount of credit that may be extended to the consumer during
the term of the plan is generally made available to the extent that
any outstanding balance
is repaid and up to any limit set by the creditor.
(3) "Retail credit card" means a credit card is issued by or on
behalf of a retailer, or a private label credit card that is limited
to customers of a specific retailer.
(c) (1) This section shall not apply in any billing cycle in which
the account agreement requires a minimum payment of at least 10
percent of the outstanding balance.
(2) This section shall not apply in any billing cycle in which
finance charges are not imposed.
SEC. 4. Section 1789.12 of the Civil Code is amended to read:
1789.12. As used in this title:
(a) "Credit services organization" means a person who, with
respect to the extension of credit by others, sells, provides, or
performs, or represents that he or she can or will sell, provide or
perform, any of the following services, in return for the payment of
money or other valuable consideration:
(1) Improving a buyer's credit record, history, or rating.
(2) Obtaining a loan or other extension of credit for a buyer.
(3) Providing advice or assistance to a buyer with regard to
either paragraph (1) or (2).
(b) "Credit services organization" does not include any of the
following:
(1) Any person holding a license to make loans or extensions of
credit pursuant to the laws of this state or the United States who is
subject to regulation and supervision with respect to the making of
those loans or extensions of credit by an official or agency of this
state or the United States and whose business is the making of those
loans or extensions of credit.
(2) Any bank, as defined in Section 102 of the Financial Code, or
any savings institution, as specified in subdivision (a) or (b) of
Section 5102 of the Financial Code, whose deposits or accounts are
eligible for insurance by the Federal Deposit Insurance Corporation.
(3) Any person licensed as a prorater by the Department of
Business Oversight when the person is acting within the course and
scope of that license.
(4) Any person licensed as a real estate broker performing an act
for which a real estate license is required under the Real Estate Law
(Pt. 1 (commencing with Sec. 10000), Div. 4, B. & P.C.) and who is
acting within the course and scope of that license.
(5) Any attorney licensed to practice law in this state, where the
attorney renders services within the course and scope of the
practice of law, unless the attorney is an employee of, or otherwise
directly affiliated with, a credit services organization.
(6) Any broker-dealer registered with the Securities and Exchange
Commission or the Commodity Futures Trading Commission where the
broker-dealer is acting within the course and scope of the
regulation.
(7) Any nonprofit organization described in Section 501(c)(3) of
the Internal Revenue Code that, according to a final ruling or
determination by the Internal Revenue Service, is both of the
following:
(A) Exempt from taxation under Section 501(a) of the Internal
Revenue Code.
(B) Not a private foundation as defined in Section 509 of the
Internal Revenue Code.
An advance ruling or determination of tax-exempt or foundation
status by the Internal Revenue Service does not meet the requirements
of this paragraph.
(c) "Buyer" means any natural person who is solicited to purchase
or who purchases the services of a credit services organization.
(d) "Extension of credit" means the right to defer payment of debt
or to incur debt and defer its payment, offered or granted primarily
for personal, family, or household purposes.
(e) "Consumer credit reporting agency" means a consumer credit
reporting agency subject to the Consumer Credit Reporting Agencies
Act, Title 1.6 (commencing with Section 1785.1).
(f) "Person" includes an individual, corporation, partnership,
joint venture, or any business entity.
SEC. 5. Section 1812.201 of the Civil Code is amended to read:
1812.201. For the purposes of this title, the following
definitions shall apply:
(a) "Seller assisted marketing plan" means any sale or lease or
offer to sell or lease any product, equipment, supplies, or services
that requires a total initial payment exceeding five hundred dollars
($500), but requires an initial cash payment of less than fifty
thousand dollars ($50,000), that will aid a purchaser or will be used
by or on behalf of the purchaser in connection with or incidental to
beginning, maintaining, or operating a business when the seller
assisted marketing plan seller has advertised or in any other manner
solicited the purchase or lease of the seller assisted marketing plan
and done any of the following acts:
(1) Represented that the purchaser will earn, is likely to earn,
or can earn an amount in excess of the initial payment paid by the
purchaser for participation in the seller assisted marketing plan.
(2) Represented that there is a market for the product, equipment,
supplies, or services, or any product marketed by the user of the
product, equipment, supplies, or services sold or leased or offered
for sale or lease to the purchaser by the seller, or anything, be it
tangible or intangible, made, produced, fabricated, grown, bred,
modified, or developed by the purchaser using, in whole or in part,
the product, supplies, equipment, or services that were sold or
leased or offered for sale or lease to the purchaser by the seller
assisted marketing plan seller.
(3) Represented that the seller will buy back or is likely to buy
back any product made, produced, fabricated, grown, or bred by the
purchaser using, in whole or in part, the product, supplies,
equipment, or services that were initially sold or leased or offered
for sale or lease to the purchaser by the seller assisted marketing
plan seller.
(b) A "seller assisted marketing plan" shall not include:
(1) A security, as defined in the Corporate Securities Law of 1968
(Division 1 (commencing with Section 25000) of Title 4 of the
Corporations Code), that has been qualified for sale by the
Department of Business Oversight, or is exempt under Chapter 1
(commencing with Section 25100) of Part 2 of Division 1 of Title 4 of
the Corporations Code from the necessity to qualify.
(2) A franchise defined by the Franchise Investment Law (Division
5 (commencing with Section 31000) of Title 4 of the Corporations
Code) that is registered with the Department of Business Oversight or
is exempt under Chapter 1 (commencing with Section 31100) of Part 2
of Division 5 of Title 4 of the Corporations Code from the necessity
of registering.
(3) Any transaction in which either the seller or purchaser or the
lessor or lessee is licensed pursuant to and the transaction is
governed by the Real Estate Law, Division 4 (commencing with Section
10000) of the Business and Professions Code.
(4) A license granted by a general merchandise retailer that
allows the licensee to sell goods, equipment, supplies, products, or
services to the general public under the retailer's trademark, trade
name, or service mark if all of the following criteria are satisfied:
(A) The general merchandise retailer has been doing business in
this state continually for five years prior to the granting of the
license.
(B) The general merchandise retailer sells diverse kinds of goods,
equipment, supplies, products, or services.
(C) The general merchandise retailer also sells the same goods,
equipment, supplies, products, or services directly to the general
public.
(D) During the previous 12 months the general merchandise retailer'
s direct sales of the same goods, equipment, supplies, products, or
services to the public account for at least 50 percent of its yearly
sales of these goods, equipment, supplies, products, or services made
under the retailer's trademark, trade name, or service mark.
(5) A newspaper distribution system distributing newspapers as
defined in Section 6362 of the Revenue and Taxation Code.
(6) A sale or lease to an existing or beginning business
enterprise that also sells or leases equipment, products, supplies,
or performs services that are not supplied by the seller and that the
purchaser does not utilize with the equipment, products, supplies,
or services of the seller, if the equipment, products, supplies, or
services not supplied by the seller account for more than 25 percent
of the purchaser's gross sales.
(7) The sale in the entirety of an "ongoing business." For
purposes of this paragraph, an "ongoing business" means a business
that for at least six months previous to the sale has been operated
from a particular specific location, has been open for business to
the general public, and has had all equipment and supplies necessary
for operating the business located at that location. The sale shall
be of the entire "ongoing business" and not merely a portion of the
ongoing business.
(8) A sale or lease or offer to sell or lease to a purchaser (A)
who has for a period of at least six months previously bought
products, supplies, services, or equipment that were sold under the
same trademark or trade name or that were produced by the seller and,
(B) who has received on resale of the product, supplies, services,
or equipment an amount that is at least equal to the amount of the
initial payment.
(9) The renewal or extension of an existing seller assisted
marketing plan contract.
(10) A product distributorship that meets each of the following
requirements:
(A) The seller sells products to the purchaser for resale by the
purchaser, and it is reasonably contemplated that substantially all
of the purchaser's sales of the product will be at wholesale.
(B) The agreement between the parties does not require that the
purchaser pay the seller, or any person associated with the seller, a
fee or any other payment for the right to enter into the agreement,
and does not require the purchaser to buy a minimum or specified
quantity of the products, or to buy products for a minimum or
specified period of time. For purposes of this paragraph, a "person
associated with the seller" means a person, including an individual
or a business entity, controlling, controlled by, or under the same
control as the seller.
(C) The seller is a corporation, partnership, limited liability
company, joint venture, or any other business entity.
(D) The seller has a net worth of at least ten million dollars
($10,000,000) according to audited financial statements of the seller
done during the 18 months preceding the date of the initial sale of
products to the purchaser. Net worth may be determined on a
consolidated basis if the seller is a subsidiary of another business
entity that is permitted by generally accepted accounting standards
to prepare financial statements on a consolidated basis and that
business entity absolutely and irrevocably agrees in writing to
guarantee the seller's obligations to the purchaser. The seller's net
worth shall be verified by a certification to the Attorney General
from an independent certified public accountant that the audited
financial statement reflects a net worth of at least ten million
dollars ($10,000,000). This certification shall be provided within 30
days following receipt of a written request from the Attorney
General.
(E) The seller grants the purchaser a license to use a trademark
that is registered under federal law.
(F) It is not an agreement or arrangement encouraging a
distributor to recruit others to participate in the program and
compensating the distributor for recruiting others into the program
or for sales made by others recruited into the program.
(c) "Person" includes an individual, corporation, partnership,
limited liability company, joint venture, or any business entity.
(d) "Seller" means a person who sells or leases or offers to sell
or lease a seller assisted marketing plan and who meets either of the
following conditions:
(1) Has sold or leased or represents or implies that the seller
has sold or leased, whether in California or elsewhere, at least five
seller assisted marketing plans within 24 months prior to a
solicitation.
(2) Intends or represents or implies that the seller intends to
sell or lease, whether in California or elsewhere, at least five
seller assisted marketing plans within 12 months following a
solicitation.
For purposes of this title, the seller is the person to whom the
purchaser becomes contractually obligated. A "seller" does not
include a licensed real estate broker or salesman who engages in the
sale or lease of a "business opportunity" as that term is used in
Sections 10000 to 10030, inclusive, of the Business and Professions
Code, or elsewhere in Chapter 1 (commencing with Section 10000),
Chapter 2 (commencing with Section 10050), or Chapter 6 (commencing
with Section 10450) of Part 1 of Division 4 of the Business and
Professions Code.
(e) "Purchaser" means a person who is solicited to become
obligated or does become obligated on a seller assisted marketing
plan contract.
(f) "Equipment" includes machines, all electrical devices, video
or audio devices, molds, display racks, vending machines, coin
operated game machines, machines that dispense products, and display
units of all kinds.
(g) "Supplies" includes any and all materials used to produce,
grow, breed, fabricate, modify, develop, or make any product or item.
(h) "Product" includes any tangible chattel, including food or
living animals, that the purchaser intends to:
(1) Sell or lease.
(2) Use to perform a service.
(3) Resell or attempt to resell to the seller assisted marketing
plan seller.
(4) Provide or attempt to provide to the seller assisted marketing
plan seller or to any other person whom the seller suggests the
purchaser contact so that the seller assisted marketing plan seller
or that other person may assist, either directly or indirectly, the
purchaser in distributing, selling, leasing, or otherwise disposing
of the product.
(i) "Services" includes any assistance, guidance, direction, work,
labor, or services provided by the seller to initiate or maintain or
assist in the initiation or maintenance of a business.
(j) "Seller assisted marketing plan contract" or "contract" means
any contract or agreement that obligates a purchaser to a seller.
(k) "Initial payment" means the total amount a purchaser is
obligated to pay to the seller under the terms of the seller assisted
marketing plan contract prior to or at the time of delivery of the
equipment, supplies, products, or services or within six months of
the purchaser commencing operation of the seller assisted marketing
plan. If the contract sets forth a specific total sale price for
purchase of the seller assisted marketing plan which total price is
to be paid partially as a downpayment and then in specific monthly
payments, the "initial payment" means the entire total sale price.
( l ) "Initial cash payment" or "downpayment" means
that portion of the initial payment that the purchaser is obligated
to pay to the seller prior to or at the time of delivery of
equipment, supplies, products, or services. It does not include any
amount financed by or for which financing is to be obtained by the
seller, or financing that the seller assists in obtaining.
(m) "Buy-back" or "secured investment" means any representation
that implies in any manner that the purchaser's initial payment is
protected from loss. These terms include a representation or
implication of any of the following:
(1) That the seller may repurchase either all or part of what it
sold to the purchaser.
(2) That the seller may at some future time pay the purchaser the
difference between what has been earned and the initial payment.
(3) That the seller may in the ordinary course buy from the
purchaser items made, produced, fabricated, grown, bred, modified, or
developed by the purchaser using, in whole or in part, the product,
supplies, equipment, or services that were initially sold or leased
to the purchaser by the seller.
(4) That the seller or a person to whom the seller will refer the
purchaser may in the ordinary course sell, lease, or distribute the
items the purchaser has for sale or lease.
SEC. 6. Section 2923.3 of the Civil Code is amended to read:
2923.3. (a) With respect to residential real property containing
no more than four dwelling units, a mortgagee, trustee, beneficiary,
or authorized agent shall provide to the mortgagor or trustor a copy
of the recorded notice of default with an attached separate summary
document of the notice of default in English and the languages
described in Section 1632, as set forth in subdivision (c), and a
copy of the recorded notice of sale with an attached separate summary
document of the information required to be contained in the notice
of sale in English and the languages described in Section 1632, as
set forth in subdivision (d). These summaries are not required to be
recorded or published. This subdivision shall become operative on
April 1, 2013, or 90 days following the issuance of the translations
by the Department of Business Oversight pursuant to subdivision (b),
whichever is later.
(b) (1) The Department of Business Oversight shall provide a
standard translation of the statement in paragraph (1) of subdivision
(c), and of the summary of the notice of default, as set forth in
paragraph (2) of subdivision (c) in the languages described in
Section 1632.
(2) The Department of Business Oversight shall provide a standard
translation of the statement in paragraph (1) of subdivision (d), and
of the summary of the notice of sale, as set forth in paragraph (2)
of subdivision (d).
(3) The department shall make the translations described in
paragraphs (1) and (2) available without charge on its Internet Web
site. Any mortgagee, trustee, beneficiary, or authorized agent who
provides the department's translations in the manner prescribed by
this section shall be in compliance with this section.
(c) (1) The following statement shall appear in the languages
described in Section 1632 at the beginning of the notice of default:
NOTE: THERE IS A SUMMARY OF THE INFORMATION IN THIS DOCUMENT
ATTACHED.
(2) The following summary of key information shall be attached to
the copy of the notice of default provided to the mortgagor or
trustor:
SUMMARY OF KEY INFORMATION
The attached notice of default was sent to name of the
trustor], in relation to description of the property that secures the
mortgage or deed of trust in default]. This property may be sold to
satisfy your obligation and any other obligation secured by the deed
of trust or mortgage that is in default. Trustor] has, as described
in the notice of default, breached the mortgage or deed of trust on
the property described above.
IMPORTANT NOTICE: IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU
ARE BEHIND IN YOUR PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT ACTION,
and you may have the legal right to bring your account in good
standing by paying all of your past due payments plus permitted costs
and expenses within the time permitted by law for reinstatement of
your account, which is normally five business days prior to the date
set for the sale of your property. No sale date may be set until
approximately 90 days from the date the attached notice of default
may be recorded (which date of recordation appears on the notice).
This amount is ____________ as of ___(date)____________and will
increase until your account becomes current.
While your property is in foreclosure, you still must pay other
obligations (such as insurance and taxes) required by your note and
deed of trust or mortgage. If you fail to make future payments on the
loan, pay taxes on the property, provide insurance on the property,
or pay other obligations as required in the note and deed of trust or
mortgage, the beneficiary or mortgagee may insist that you do so in
order to reinstate your account in good standing. In addition, the
beneficiary or mortgagee may require as a condition to reinstatement
that you provide reliable written evidence that you paid all senior
liens, property taxes, and hazard insurance premiums.
Upon your written request, the beneficiary or mortgagee will give
you a written itemization of the entire amount you must pay. You may
not have to pay the entire unpaid portion of your account, even
though full payment was demanded, but you must pay all amounts in
default at the time payment is made. However, you and your
beneficiary or mortgagee may mutually agree in writing prior to the
time the notice of sale is posted (which may not be earlier than
three months after this notice of default is recorded) to, among
other things, (1) provide additional time in which to cure the
default by transfer of the property or otherwise; or (2) establish a
schedule of payments in order to cure your default; or both (1) and
(2).
Following the expiration of the time period referred to in the
first paragraph of this notice, unless the obligation being
foreclosed upon or a separate written agreement between you and your
creditor permits a longer period, you have only the legal right to
stop the sale of your property by paying the entire amount demanded
by your creditor.
To find out the amount you must pay, or to arrange for payment to
stop the foreclosure, or if your property is in foreclosure for any
other reason, contact:
____________________________________
(Name of beneficiary or mortgagee)
____________________________________
(Mailing address)
____________________________________
(Telephone)
If you have any questions, you should contact a lawyer or the
governmental agency which may have insured your loan.
Notwithstanding the fact that your property is in foreclosure, you
may offer your property for sale, provided the sale is concluded
prior to the conclusion of the foreclosure.
Remember, YOU MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT
ACTION.
If you would like additional copies of this summary, you may
obtain them by calling insert telephone number].
(d) (1) The following statement shall appear in the languages
described in Section 1632 at the beginning of the notice of sale:
NOTE: THERE IS A SUMMARY OF THE INFORMATION IN THIS DOCUMENT
ATTACHED.
(2) The following summary of key information shall be attached to
the copy of the notice of sale provided to the mortgagor or trustor:
SUMMARY OF KEY INFORMATION
The attached notice of sale was sent to trustor], in relation to
description of the property that secures the mortgage or deed of
trust in default].
YOU ARE IN DEFAULT UNDER A (Deed of trust or mortgage) DATED ____.
UNLESS YOU TAKE ACTION TO PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A
PUBLIC SALE.
IF YOU NEED AN EXPLANATION OF THE NATURE OF THE PROCEEDING AGAINST
YOU, YOU SHOULD CONTACT A LAWYER.
The total amount due in the notice of sale is ____.
Your property is scheduled to be sold on insert date and time of
sale] at insert location of sale].
However, the sale date shown on the attached notice of sale may be
postponed one or more times by the mortgagee, beneficiary, trustee,
or a court, pursuant to Section 2924g of the California Civil Code.
The law requires that information about trustee sale postponements be
made available to you and to the public, as a courtesy to those not
present at the sale. If you wish to learn whether your sale date has
been postponed, and, if applicable, the rescheduled time and date for
the sale of this property, you may call telephone number for
information regarding the trustee's sale] or visit this Internet Web
site Internet Web site address for information regarding the sale of
this property], using the file number assigned to this case case file
number]. Information about postponements that are very short in
duration or that occur close in time to the scheduled sale may not
immediately be reflected in the telephone information or on the
Internet Web site. The best way to verify postponement information is
to attend the scheduled sale.
If you would like additional copies of this summary, you may
obtain them by calling insert telephone number].
(e) Failure to provide these summaries to the mortgagor or trustor
shall have the same effect as if the notice of default or notice of
sale were incomplete or not provided.
(f) This section sets forth a requirement for translation in
languages other than English, and a document complying with the
provisions of this section may be recorded pursuant to subdivision
(b) of Section 27293 of the Government Code. A document that complies
with this section shall not be rejected for recordation on the
ground that some part of the document is in a language other than
English.
SEC. 7. Section 1101.1 of the Corporations Code is amended to
read:
1101.1. Subdivision (c) of Section 1113 and subdivision (b) of
Section 1101 do not apply to any transaction if the Commissioner of
Business Oversight, 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 1209, 5750, or 5802 of the Financial
Code, Section 838.5 of the Insurance Code, or Section 822 of the
Public Utilities Code.
SEC. 8. 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 Business Oversight.
(B) Department of Insurance.
(C) Department of Managed Health Care.
(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. 9. Section 2510 of the Corporations Code is amended to read:
2510. "Social purpose corporation subject to the Banking Law"
means any of the following:
(a) A social purpose corporation that, with the approval of the
Commissioner of Business Oversight, is incorporated for the purpose
of engaging in, or that is authorized by the Commissioner of Business
Oversight to engage in, the commercial banking business under the
Banking Law (Division 1 (commencing with Section 99) of the Financial
Code).
(b) Any social purpose corporation that, with the approval of the
Commissioner of Business Oversight, is incorporated for the purpose
of engaging in, or that is authorized by the Commissioner of Business
Oversight to engage in, the industrial banking business under the
Banking Law (Division 1 (commencing with Section 99) of the Financial
Code).
(c) Any social purpose corporation, other than a social purpose
corporation described in subdivision (d), that, with the approval of
the Commissioner of Business Oversight, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Business Oversight to engage in, the trust business under the Banking
Law (Division 1 (commencing with Section 99) of the Financial Code).
(d) Any social purpose corporation that is authorized by the
Commissioner of Business Oversight 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.
(e) Any social purpose corporation that, with the approval of the
Commissioner of Business Oversight, is incorporated for the purpose
of engaging in, or that is authorized by the Commissioner of Business
Oversight to engage in, business under Article 1 (commencing with
Section 3500) of Chapter 19 of Division 1 of the Financial Code.
SEC. 10. Section 3100 of the Corporations Code is amended to read:
3100. (a) A social purpose corporation may sell, lease, convey,
exchange, transfer, or otherwise dispose of all or substantially all
of its assets when the principal terms of the transaction are
approved by the board and are approved by an affirmative vote of at
least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
either before or after approval by the board and before the
transaction. A transaction constituting a reorganization shall be
subject to Chapter 12 (commencing with Section 1200) of Division 1
and Chapter 10 (commencing with Section 3400) of this division and
shall not be subject to this section, other than subdivision (d). A
transaction constituting a conversion shall be subject to Chapter
11.5 (commencing with Section 1150) of Division 1 and Chapter 9
(commencing with Section 3300) of this division and shall not be
subject to this section.
(b) Notwithstanding approval of two-thirds of the outstanding
shares, 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
social purpose corporation. The consideration may be money,
securities, or other property.
(d) If the acquiring party in a transaction pursuant to
subdivision (a) or subdivision (g) of Section 2001 is in control of
or under common control with the disposing social purpose
corporation, the principal terms of the sale shall be approved by at
least 90 percent of the voting power of the disposing social purpose
corporation unless the disposition is to a domestic or foreign other
business entity or social purpose corporation, the articles of
incorporation of which specify materially the same purposes, in
consideration of the nonredeemable common shares or nonredeemable
equity securities of the acquiring party or its parent.
(e) Subdivision (d) shall not apply to a transaction if the
Commissioner of Business Oversight, 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 1209 of the Financial Code,
Section 838.5 of the Insurance Code, or Section 822 of the Public
Utilities Code.
SEC. 11. Section 17713.12 of the Corporations Code is amended to
read:
17713.12. (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 (m) of Section
17701.01 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 (o) of
Section 17701.01 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 Business Oversight.
(B) Department of Insurance.
(C) Department of Managed Health Care.
(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 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 a person appointed pursuant to Section
17703.02, 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 federal Sarbanes-Oxley
Act of 2002 (15 U.S.C. Sec. 7201 et seq.).
(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. 12. Section 25003 of the Corporations Code is amended to
read:
25003. (a) "Agent" means any individual, other than a
broker-dealer or a partner of a licensed broker-dealer, who
represents a broker-dealer or who for compensation represents an
issuer in effecting or attempting to effect purchases or sales of
securities in this state.
(b) "Agent" does not include an individual who only represents an
issuer in effecting transactions in securities exempted by
subdivision (a), (b), (e), (f), (g), (j), (k), or ( l ) of
Section 25100 or in effecting transactions exempted by Section
25102, and does not include an individual who has no place of
business in this state if he or she effects transactions in this
state exclusively with broker-dealers.
(c) "Agent" does not include an associated person of a broker or
dealer effecting transactions described in Section 15(i)(4) of the
Securities Exchange Act of 1934, subject to the provisions of Section
15(i)(3) of that act.
(d) An officer or director of a broker-dealer or issuer, or an
individual occupying a similar status or performing similar
functions, is an agent only if he or she otherwise comes within this
definition and receives compensation specifically related to
purchases or sales of securities.
SEC. 13. Section 25018 of the Corporations Code is amended to
read:
25018. "Securities Act of 1933," "Securities Exchange Act of
1934," "Investment Advisers Act of 1940," and "Investment Company Act
of 1940" mean the federal statutes of those names as amended before
or after the effective date of this law.
SEC. 14. 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 Business Oversight 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 this state.
(f) Any security consisting of any interest in all or portions of
a parcel or parcels of real property that 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 Business Oversight 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 is
(1) subject to jurisdiction of the Federal Energy Regulatory
Commission under the Public Utility Holding Company Act of 2005
regulated in respect to its rates and charges by the United States or
a state or (2) 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.
( l ) 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, if the exchange 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, in a rollup transaction unless the rollup transaction is
an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the
commissioner upon the written request of the exchange if the
commissioner finds that the exchange, in acting on applications for
listing of common stock, substantially applies the minimum standards
set forth in either subparagraph (A) or (B) of paragraph (1), and, 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 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 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 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, 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, 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 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 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 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.
(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 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. 15. Section 25207 of the Corporations Code is amended to
read:
25207. A financial institution that undertakes activities with
respect to an investment company pursuant to the provisions of
Section 1514, 6524, 14652.5, or 18022.5 of the Financial Code shall
not be subject to Section 25210 or 25230 in connection with such
activities but shall be subject to Sections 25218, 25234, 25235, and
25237 and to subdivisions (a), (b), and (d) of Section 25216, and
such rules thereunder as the commissioner may specify by rule.
Nothing in this section shall affect the status of such a financial
institution as a broker-dealer or investment adviser, or the
employees of such persons, when engaged in the activities authorized
by the provisions of the Financial Code specified above.
SEC. 16. 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 Business Oversight 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. 17. 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 Financial Industry Regulatory Authority
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
Business Oversight, the Commissioner of Business Oversight, or any
officer, agent, or employee of the state or of the Department of
Business Oversight 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, 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 Business Oversight, the Commissioner of Business
Oversight, or any officer, agent, or employee of the state or of the
Department of Business Oversight 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 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 Financial Industry Regulatory Authority 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. 18. 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 Business Oversight.
(c) After the exhaustion of the review procedures provided 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, the commissioner may apply to the
appropriate superior court for a judgment in the amount of the
administrative penalty and costs awarded in a final decision and
order compelling the respondent, or the named or cited person, to
comply with the final decision of the commissioner brought under this
division. The application shall include a certified copy of the
final decision of the commission and shall constitute a sufficient
showing to warrant the issuance of the judgment and order from
superior court.
SEC. 19. Section 25401 of the Corporations Code is amended to
read:
25401. It is unlawful for any person to offer or sell a security
in this state, or to buy or offer to buy a security in this state, by
means of any written or oral communication that includes an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements made, in the light of the
circumstances under which
the statements were made, not misleading.
SEC. 20. 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
Business Oversight 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. 21. 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 Business Oversight, (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. 22. 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 Business Oversight.
(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. 23. 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 Business
Oversight) 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. 24. 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 Business Oversight 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 Business Oversight such person shall not be
entitled to any further administrative remedy.
SEC. 25. Section 29542 of the Corporations Code is amended to
read:
29542. (a) If, in the opinion of the commissioner, any person is
engaging in any activity in violation of any provision of this law,
or rule or order under this law, the commissioner may order the
person to desist and refrain from the activity unless and until the
activity will not be in violation of any provision of this law or any
rule or order under this law.
(b) If after an order has been made under subdivision (a), a
request for hearing is filed in writing within 30 days of the date of
service of the order by the person to whom the order was directed, a
hearing shall be held in accordance with the Administrative
Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code), and the commissioner
shall have all of the powers granted under the Administrative
Procedure Act. Unless the hearing is commenced within 15 business
days after the request is filed (or the person affected consents to a
later date), the order is rescinded.
If that person fails to file a written request for a hearing
within 30 days from the date of service of the order, the order shall
be deemed a final order of the commissioner and shall not be subject
to review by any court or agency, notwithstanding Section 29563.
SEC. 26. 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 Business Oversight.
SEC. 27. 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 Business
Oversight, 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. 28. 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 Business Oversight
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 Business
Oversight such person shall not be entitled to any further
administrative remedy.
SEC. 29. Section 620 of the Financial Code is amended to read:
620. If the licensee whose property and business has been taken
pursuant to Section 592 is insured by a Federal Insurance Agency, the
commissioner may tender to the appropriate Federal Insurance Agency
an appointment as conservator, liquidator, or receiver of the
licensee. The commissioner shall determine whether the licensee whose
property and business has been taken shall be liquidated or
conserved. If the Federal Insurance Agency accepts the appointment,
the Federal Insurance Agency shall have, in addition to any powers
conferred by applicable federal law, the powers conferred on the
commissioner pursuant to this chapter.
SEC. 30. Section 622 of the Financial Code is amended to read:
622. If the Federal Insurance Agency accepts the appointment in
accordance with Section 620, the rights of customers and other
creditors of the insured licensee shall be determined in accordance
with the applicable provisions of the laws of this state.
SEC. 31. The heading of Article 4 (commencing with Section 670) of
Chapter 7 of Division 1 of the Financial Code is amended to read:
Article 4. Liquidation of an Uninsured Licensee
SEC. 32. Section 1008 of the Financial Code is repealed.
SEC. 33. Section 1070 of the Financial Code is amended to read:
1070. For purposes of this chapter, the following definitions
apply:
(a) "Automated teller machine" means any electronic information
processing device used by a financial institution and its customers
for the primary purpose of executing transactions solely between the
financial institution and its customers, if the transactions are not
incidental to sales between the customer and a business entity other
than a financial institution.
(b) "Branch office" means any office at which core banking
business is conducted other than an automated teller machine, a
device used to facilitate check guarantee or check authorization, or
a remote service facility as defined in subsection (d) of Section
345.12 of Title 12 of the Code of Federal Regulations.
(c) "Core banking business" means the business of receiving
deposits, paying checks, making loans, and other activities that the
commissioner may specify by order or regulation. "Core banking
business," when used to describe the trust business, includes
receiving fiduciary assets and administering fiduciary accounts.
(d) "Facility," means an office at which a bank engages in noncore
banking business but at which it does not engage in core banking
business.
(e) "Head office" means the office designated by the bank as its
headquarters.
(f) "Noncore banking business" means all activities permissible
for banks, except core banking business, and except those activities
prohibited by law or determined by the commissioner by regulation or
order not to be noncore banking business.
(g) "Office" means the head office, any branch office, and any
facility office of a bank.
(h) "Redesignate offices" means (1) the relocation by a bank of
its head office to the site of a branch or facility office in this
state and the concurrent establishment by the bank of an office at
the former site of the head office, or (2) the relocation by a bank
of a branch office to the site of a facility office and the
concurrent establishment by the bank of a branch or facility office
at the former site of the branch office.
SEC. 34. Section 2105 of the Financial Code is amended to read:
2105. (a) Each licensee or agent shall prominently post on the
premises of each branch office that conducts money transmission a
notice stating that:
""If you have complaints with respect to any
aspect of the money transmission activities
conducted at this location, you may contact the
California Department of Business Oversight at
its toll-free telephone number, 1-866-275-2677,
by email at consumer.services@dbo.ca.gov, or by
mail at the Department of Business Oversight,
Consumer Services, 1515 K Street, Suite 200,
Sacramento, CA 95814.''
(b) The commissioner may by order or regulation modify the content
of the notice required by this section. This notice shall be printed
in English and in the same language principally used by the licensee
or any agent of the licensee to advertise, solicit, or negotiate
either orally or in writing, with respect to money transmission at
that branch office. The information required in this notice shall be
clear, legible, and in letters not less than one-half inch in height.
The notice shall be posted in a conspicuous location in the
unobstructed view of the public within the premises. The licensee
shall provide to each of its agents the notice required by this
section. In those locations operated by an agent, the agent, and not
the licensee, shall be responsible for the failure to properly post
the required notice.
(c) In the event that a licensee or agent conducts money
transmission activity via an Internet Web site or a mobile
application that is not in a branch office, the commissioner may
authorize an alternative form of the notice required in subdivision
(a).
SEC. 35. 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 Business Oversight, Division of Financial Institutions
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 adviser, residential mortgage lender or finance
lender, by the Department of Business Oversight, Division of
Corporations; 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. 36. 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.
( l ) 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 Business Oversight. 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. 37. 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 Business Oversight 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. 38. Section 17214 of the Financial Code is amended to read:
17214. (a) There is established in the Department of Business
Oversight 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. 39. 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 Business Oversight,
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. 40. 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 Business Oversight, 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. 41. 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 Business Oversight, or any officer, agent, or
employee of the state or the Department of Business Oversight 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 Business Oversight, or any officer,
agent, or employee of the state or the Department of Business
Oversight, 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 Business Oversight, or an officer, agent, or
employee of the state or the Department of Business Oversight 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 Business
Oversight, or any officer, agent, or employee of the state or the
Department of Business Oversight, 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 Business
Oversight, 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 Business Oversight 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
Business Oversight 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 Business Oversight 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. 42. Section 18405 of the Financial Code is amended to read:
18405. (a) On or before the 15th day of March of every year, each
industrial loan company shall file with the commissioner an audit
report containing audited financial statements together with such
other relevant information as the commissioner may require relating
to the company and to each place of business of the company. The
audited financial statements shall include a balance sheet of the
company prepared as of the last day of the preceding calendar year
and statements of income and of surplus for such calendar year.
(b) The reports and financial statements referred to in
subdivision (a) shall be prepared in accordance with generally
accepted accounting principles and shall be accompanied by a report,
certificate, or opinion of an independent certified public accountant
or independent public accountant, and shall contain such relevant
information as the commissioner may require. The audits shall be
conducted in accordance with generally accepted auditing standards
and the rules and regulations of the commissioner.
(c) For good cause and upon written request, the commissioner may
extend the time for compliance with subdivision (a).
(d) If the report, certificate, or opinion of the independent
accountant referred to in subdivision (b) hereof is in any way
qualified, the commissioner may require the company to take such
action as he or she deems appropriate to permit an independent
accountant to remove such qualification from the report, certificate,
or opinion.
(e) The commissioner may reject any financial statement, report,
certificate, or opinion filed pursuant to this section by notifying
the company required to make such filing of its rejection and the
cause thereof. Within 30 days after the receipt of such notice, the
company shall correct such deficiency, and the failure so to do shall
be deemed a violation of this division. The commissioner shall
retain a copy of all filings so rejected.
SEC. 43. Section 22105.1 of the Financial Code is amended to read:
22105.1. (a) An applicant for a mortgage loan originator license
shall apply by submitting the uniform form prescribed for such
purpose by the Nationwide Mortgage Licensing System and Registry. The
commissioner may require the submission of additional information or
supporting documentation to the department.
(b) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Business Oversight when using a
national uniform application adopted or approved for use by the
Nationwide Mortgage Licensing System and Registry in connection with
the SAFE Act.
(c) In connection with an application for a license as a mortgage
loan originator, the applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including the following:
(1) Fingerprint images and related information, for purposes of
performing a federal, or both a state and federal, criminal history
background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain both of the
following:
(A) An independent credit report obtained from a consumer
reporting agency.
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(d) The commissioner may ask the Nationwide Mortgage Licensing
System and Registry to obtain state criminal history background check
information on applicants described in subdivision (a) using the
procedures set forth in subdivisions (e) and (f).
(e) If the Nationwide Mortgage Licensing System and Registry
electronically submits fingerprint images and related information, as
required by the Department of Justice, for an applicant for a
mortgage loan originator license, for the purposes of obtaining
information as to the existence and content of a record of state
convictions and state arrests and to the existence and content of a
record of state arrests for which the Department of Justice
establishes that the person is free
on bail or on his or her recognizance pending trial or appeal, the
Department of Justice shall provide an electronic response to the
Nationwide Mortgage Licensing System and Registry pursuant to
paragraph (1) of subdivision (p) of Section 11105 of the Penal Code,
and shall provide the same electronic response to the commissioner.
(f) The Nationwide Mortgage Licensing System and Registry may
request from the Department of Justice subsequent arrest notification
service, as provided pursuant to Section 11105.2 of the Penal Code,
for persons described in subdivision (a). The Department of Justice
shall provide the same electronic response to the commissioner.
(g) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the requests described in this section.
SEC. 44. 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 Business
Oversight 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. 45. Section 22160 of the Financial Code is amended to read:
22160. The commissioner shall make and file annually with the
Department of Business Oversight 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. 46. Section 22756 of the Financial Code is amended to read:
22756. Notwithstanding any other law, any application for
licensure, amendment to the application or registration document or
notice filed under any of the laws administered by the Department of
Business Oversight, or record otherwise required to be filed in this
state as an electronic record pursuant to a nationwide central
depository for information regarding licensees, including mortgage
loan originators, or any electronic record filed through the
Nationwide Mortgage Licensing System and Registry, shall be deemed to
be a valid original document upon reproduction to paper form by the
Department of Business Oversight.
SEC. 47. 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 Business Oversight.
(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 Business
Oversight.
SEC. 48. Section 23071 of the Financial Code is amended to read:
23071. The Commissioner of Business Oversight and the Department
of Business Oversight 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. 49. Section 23072 of the Financial Code is amended to read:
23072. The Department of Business Oversight 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 Business Oversight succeeds pursuant to Section 23071.
SEC. 50. 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 Business Oversight 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 Business Oversight. 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 Business Oversight, pursuant to Part 2 (commencing with Section
18500) of Division 5 of Title 2 of the Government Code.
SEC. 51. Section 23074 of the Financial Code is amended to read:
23074. The Department of Business Oversight 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 Business Oversight
pursuant to Section 23071.
SEC. 52. 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 Business Oversight pursuant to Section 23071.
SEC. 53. 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 Business Oversight 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. 54. Section 50140 of the Financial Code is amended to read:
50140. (a) An applicant for a license as a mortgage loan
originator shall apply by submitting the uniform form prescribed for
that purpose by the Nationwide Mortgage Licensing System and
Registry. The commissioner may require the submission of additional
information or supporting documentation to the department.
(b) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Business Oversight when using a
national uniform application adopted or approved for use by the
Nationwide Mortgage Licensing System and Registry in connection with
the SAFE Act.
(c) The commissioner shall, by rule, establish the timelines,
fees, and assessments applicable to applicants for original mortgage
loan originator licenses, license renewals, and license changes under
this division.
(d) The commissioner may, by rule, require mortgage loan
originator licensees to pay assessments through the Nationwide
Mortgage Licensing System and Registry.
(e) In connection with an application for a license as a mortgage
loan originator, the applicant shall, at a minimum, furnish to the
Nationwide Mortgage Licensing System and Registry information
concerning the applicant's identity, including the following:
(1) Fingerprint images and related information, for purposes of
performing a federal, or both a state and federal, criminal history
background check.
(2) Personal history and experience in a form prescribed by the
Nationwide Mortgage Licensing System and Registry, including the
submission of authorization for the Nationwide Mortgage Licensing
System and Registry and the commissioner to obtain both of the
following:
(A) An independent credit report obtained from a consumer
reporting agency.
(B) Information related to any administrative, civil, or criminal
findings by any governmental jurisdiction.
(f) The commissioner may ask the Nationwide Mortgage Licensing
System and Registry to obtain state criminal history background check
information on applicants described in subdivision (a) using the
procedures set forth in subdivisions (g) and (h).
(g) If the Nationwide Mortgage Licensing System and Registry
electronically submits fingerprint images and related information, as
required by the Department of Justice, for an applicant for a
mortgage loan originator license, for the purposes of obtaining
information as to the existence and content of a record of state
convictions and state arrests and to the existence and content of a
record of state arrests for which the Department of Justice
establishes that the person is free on bail or on his or her
recognizance pending trial or appeal, the Department of Justice shall
provide an electronic response to the Nationwide Mortgage Licensing
System and Registry pursuant to paragraph (1) of subdivision (p) of
Section 11105 of the Penal Code, and shall provide the same
electronic response to the commissioner.
(h) The Nationwide Mortgage Licensing System and Registry may
request from the Department of Justice subsequent arrest notification
service, as provided pursuant to Section 11105.2 of the Penal Code,
for persons described in subdivision (a). The Department of Justice
shall provide the same electronic response to the commissioner.
(i) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the requests described in this section.
SEC. 55. Section 50303 of the Financial Code is amended to read:
50303. Neither the commissioner nor any employee of the
Department of Business Oversight 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. 56. 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 Business
Oversight 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. 57. Section 50316.5 of the Financial Code is amended to read:
50316.5. Notwithstanding any other law, any application for
licensure, amendment to the application or registration document or
notice filed under any of the laws administered by the Department of
Business Oversight, or record otherwise required to be filed in this
state as an electronic record pursuant to a nationwide central
depository for information regarding licensees, including mortgage
loan originators, or any electronic record filed through the
Nationwide Mortgage Licensing System and Registry, shall be deemed to
be a valid original document upon reproduction to paper form by the
Department of Business Oversight.
SEC. 58. Section 5970 of the Government Code is amended to read:
5970. As used in this chapter, the following phrases have the
following meanings:
(a) "Person" means any broker, dealer, municipal securities
dealer, investment advisor, or investment firm.
(b) "Regulatory agency" means the Department of Business
Oversight, the securities administrators or other similar regulatory
authority in any other state, the Securities and Exchange Commission,
Financial Industry Regulatory Authority, the Municipal Securities
Rulemaking Board, the Commodity Futures Trading Commission, or any
other self-regulatory organization.
(c) "State or local government" means the state, any department,
agency, board, commission, or authority of the state, or any city,
city and county, county, public district, public corporation,
authority, agency, board, commission, or other public entity.
SEC. 59. Section 6254.5 of the Government Code is amended to read:
6254.5. Notwithstanding any other provisions of law, whenever a
state or local agency discloses a public record which is otherwise
exempt from this chapter, to any member of the public, this
disclosure shall constitute a waiver of the exemptions specified in
Section 6254, 6254.7, or other similar provisions of law. For
purposes of this section, "agency" includes a member, agent, officer,
or employee of the agency acting within the scope of his or her
membership, agency, office, or employment.
This section, however, shall not apply to disclosures:
(a) Made pursuant to the Information Practices Act (commencing
with Section 1798 of the Civil Code) or discovery proceedings.
(b) Made through other legal proceedings or as otherwise required
by law.
(c) Within the scope of disclosure of a statute which limits
disclosure of specified writings to certain purposes.
(d) Not required by law, and prohibited by formal action of an
elected legislative body of the local agency which retains the
writings.
(e) Made to any governmental agency which agrees to treat the
disclosed material as confidential. Only persons authorized in
writing by the person in charge of the agency shall be permitted to
obtain the information. Any information obtained by the agency shall
only be used for purposes which are consistent with existing law.
(f) Of records relating to a financial institution or an affiliate
thereof, if the disclosures are made to the financial institution or
affiliate by a state agency responsible for the regulation or
supervision of the financial institution or affiliate.
(g) Of records relating to any person that is subject to the
jurisdiction of the Department of Business Oversight, if the
disclosures are made to the person that is the subject of the records
for the purpose of corrective action by that person, or, if a
corporation, to an officer, director, or other key personnel of the
corporation for the purpose of corrective action, or to any other
person to the extent necessary to obtain information from that person
for the purpose of an investigation by the Department of Business
Oversight.
(h) Made by the Commissioner of Business Oversight under Section
450, 452, 8009, or 18396 of the Financial Code.
(i) Of records relating to any person that is subject to the
jurisdiction of the Department of Managed Health Care, if the
disclosures are made to the person that is the subject of the records
for the purpose of corrective action by that person, or, if a
corporation, to an officer, director, or other key personnel of the
corporation for the purpose of corrective action, or to any other
person to the extent necessary to obtain information from that person
for the purpose of an investigation by the Department of Managed
Health Care.
SEC. 60. Section 6254.12 of the Government Code is amended to
read:
6254.12. Any information reported to the North American
Securities Administrators Association/Financial Industry Regulatory
Authority and compiled as disciplinary records which are made
available to the Department of Business Oversight through a computer
system, shall constitute a public record. Notwithstanding any other
provision of law, the Department of Business Oversight may disclose
that information and the current license status and the year of
issuance of the license of a broker-dealer upon written or oral
request pursuant to Section 25247 of the Corporations Code.
SEC. 61. Section 6254.22 of the Government Code is amended to
read:
6254.22. Nothing in this chapter or any other provision of law
shall require the disclosure of records of a health plan that is
licensed pursuant to the Knox-Keene Health Care Service Plan Act of
1975 (Chapter 2.2 (commencing with Section 1340) of Division 2 of the
Health and Safety Code) and that is governed by a county board of
supervisors, whether paper records, records maintained in the
management information system, or records in any other form, that
relate to provider rate or payment determinations, allocation or
distribution methodologies for provider payments, formulae or
calculations for these payments, and contract negotiations with
providers of health care for alternative rates for a period of three
years after the contract is fully executed. The transmission of the
records, or the information contained therein in an alternative form,
to the board of supervisors shall not constitute a waiver of
exemption from disclosure, and the records and information once
transmitted to the board of supervisors shall be subject to this same
exemption. The provisions of this section shall not prevent access
to any records by the Joint Legislative Audit Committee in the
exercise of its powers pursuant to Article 1 (commencing with Section
10500) of Chapter 4 of Part 2 of Division 2 of Title 2. The
provisions of this section also shall not prevent access to any
records by the Department of Managed Health Care in the exercise of
its powers pursuant to Article 1 (commencing with Section 1340) of
Chapter 2.2 of Division 2 of the Health and Safety Code.
SEC. 62. Section 11840 of the Government Code is amended to read:
11840. The Legislature finds and declares all of the following:
(a) The current regulatory responsibility for medical services is
spread among many governmental entities including all of the
following:
(1) The Medical Board of California.
(2) The Department of Managed Health Care.
(3) The State Department of Health Care Services.
(b) This overlapping jurisdiction has resulted in multiple and
duplicative audits of many physician offices, additional expense and
hiring of additional staff to respond to duplicate requests for
medical records, and the review of confidential medical records by a
growing number of governmental entities.
(c) In the interest of reducing the number of separate times
various public and private agencies review confidential medical
records, streamlining the regulatory process, and reducing the
redundant reviews of the offices of physicians, it is the intent of
the Legislature to coordinate, to the extent feasible, as many of
these regulatory functions as possible.
(d) In addition to government audits of physician offices,
numerous private entities also conduct reviews of physician offices.
(e) It is in the public interest to achieve ultimately a uniform
system of private and public auditing of physician offices and, thus,
streamline the process as much as possible.
SEC. 63. Section 53344.1 of the Government Code is amended to
read:
53344.1. (a) The legislative body may provide in the resolution
of intention or the resolution of consideration, and in documents
setting forth the rights of the debtholders that it shall reserve to
itself, the right and authority to allow any interested owner of
property within the district, subject to the provisions of this
section and to those conditions as it may impose, and any applicable
prepayment penalties as prescribed in the bond indenture or
comparable instrument or document, to tender to the district
treasurer in full payment or part payment of any installment of the
special taxes or the interest or penalties thereon which may be due
or delinquent, but for which a bill has been received, any bond or
other obligation secured thereby, the bond or other obligation to be
taken at par and credit to be given for the accrued interest shown
thereby computed to the date of tender. The district treasurer shall
thereupon cancel the bond debt and shall cause proper credit therefor
to be entered on the records of the district and in the office of
the auditor and tax collector. If the legislative body agrees to
allow bond tenders pursuant to this section or to Section 53356.8,
the legislative body may, at its discretion, agree to distribute or
direct its trustee or other agent to distribute by any means an offer
to purchase bonds or other related inquiry to the holders of the
bonds of the district, at the expense of the person requesting the
mailing. Neither the legislative body, nor any of its officers,
agents, or trustees shall be liable in any way for that distribution.
(b) The provisions of this subdivision apply to any tender of
bonds pursuant to this section by an owner of property within the
district who is delinquent in paying special taxes levied by this
district when due. Bonds may be tendered pursuant to this subdivision
only after all of the following conditions have been satisfied:
(1) The delinquent lot or parcel has been offered for sale as a
result of a foreclosure judgment and the minimum price required to be
paid for the lot or parcel was not received.
(2) The bonds to be tendered to the district were obtained by the
property owner only after their prior owner was presented with a
tender offer or solicitation as defined in this subdivision.
(A) For purposes of this subdivision, a "tender offer" or
"solicitation" is a solicitation by any person or that person's agent
by offering circular, memoranda, tender, or solicitation, or any
other document or written, oral, or electronic communication for the
purchase of the bonds from their then current owner. A person
includes a natural person, corporation, company, partnership, limited
liability company, limited liability partnership, association, or
any other entity and a "tendering party" includes any person making a
tender offer for bonds.
(B) Any tender offer or solicitation shall include all material
information as required under federal and state securities laws and
shall also include the following information, to the extent
applicable:
(i) The name of the tendering party.
(ii) An individual who can be contacted to provide further
information with respect to the tender.
(iii) The current holdings of bonds of the district by the
tendering party and its affiliates.
(iv) The total face amount of the bonds being solicited.
(v) The price or method of determining the price per one thousand
dollars ($1,000) in bonds being offered by the tendering party.
(vi) Whether the tendering party or any person affiliated with or
related to the tendering party, or any employee, agent, or
representative of the tendering party, is a property owner within the
district that issued the bonds.
(vii) Whether the present intentions of the tendering party are to
use the bonds for payment of special taxes or the purchase of
property at a foreclosure sale pursuant to this section or Section
53356.8. This statement of present intentions shall not be construed
to be binding on the tendering party.
(viii) The status of the bond redemption fund, construction fund,
reserve fund, and any other funds of the district, and the special
tax delinquency rate of the district, all of which data shall be the
most recent available from the district and, in any event, shall
apply to the state of the funds after the most recent payment of
principal and interest on the bonds. The district shall provide the
necessary data to the property owner within 10 days of receiving a
written request and may charge a reasonable fee not to exceed its
actual costs of providing the data. The district shall simultaneously
release the same information to the general public. The property
shall also provide the percentage of the delinquency attributable to
the tendering party or any person affiliated with or related to the
tendering party, or any employee, agent, or representative of the
tendering party, for each of the three most recent fiscal years.
(ix) If the tendering party owns or leases property in the
district that issued the bonds, the development plans for that
property and an update on the current status of development of that
property and of any zoning, planning, or other permits or approvals
needed for development of the property to proceed.
(x) Any other material information available to the tendering
party and not generally available to the public that would
significantly affect the market value of the bonds of the district.
(C) The tendering party shall notify the legislative body of
his or her intent to make a tender offer or solicitation at least
simultaneously with making any offer or solicitation.
(D) The tendering party shall provide a copy of the solicitation
to the Department of Business Oversight prior to five working days
after notifying the legislative body pursuant to subparagraph (C).
(3) The tendering property owner provides the legislative body
with a negative assurance from counsel representing the property
owner that no misleading or other information has come to the opining
party's attention after reasonable investigation, that would lead
the party providing the negative assurance to believe that the tender
was in violation of federal or state securities laws.
(4) The tendering property owner delivers to the legislative body
of the district that issued the bonds subject to the tender, a
certificate to the effect that the tender information is accurate in
all material respects and does not omit to state a material fact
necessary in order to make the statements included in the tender
information not misleading, except that the certificate need not
provide any assurances as to the accuracy of the information as to
the bond fund balances and tax payment information provided by the
district.
(c) The provisions of this subdivision apply to any tender of
bonds pursuant to this section by any owner of property within the
district who is not delinquent in paying special taxes on any
property within the district. A person subject to this subdivision
shall be deemed to be a person whose relationship to the issuer may
give him or her access, directly or indirectly, to material
information about the issuer not generally available to the public,
and the provisions of Section 25402 of the Corporations Code apply to
any purchase or sale of securities by that person in connection with
the tender transaction. For purposes of this subdivision, the
"issuer" includes the district, the local agency that created the
district, and any owner of property within the district. At any time
prior to tendering bonds to the district pursuant to this section,
any person subject to this subdivision shall deliver to the
legislative body of the district a certificate that he or she has
complied with this subdivision and applicable federal and state
securities laws.
SEC. 64. Section 53638 of the Government Code is amended to read:
53638. (a) The deposit shall not exceed the shareholder's equity
of any depository bank. For the purposes of this subdivision,
shareholder's equity shall be determined in accordance with Section
463 of the Financial Code, but shall be deemed to include capital
notes and debentures.
(b) The deposit shall not exceed the total of the net worth of any
depository savings association or federal association, except that
deposits not exceeding a total of five hundred thousand dollars
($500,000) may be made to a savings association or federal
association without regard to the net worth of that depository, if
such deposits are insured or secured as required by law.
(c) The deposit to the share accounts of any regularly chartered
credit union shall not exceed the total of the unimpaired capital and
surplus of the credit union, as defined by rule of the Commissioner
of Financial Institutions, except that the deposit to any credit
union share account in an amount not exceeding five hundred thousand
dollars ($500,000) may be made if the share accounts of that credit
union are insured or guaranteed pursuant to Section 14858 of the
Financial Code or are secured as required by law.
(d) The deposit in investment certificates of a federally insured
industrial loan company shall not exceed the total of the unimpaired
capital and surplus of the insured industrial loan company.
SEC. 65. Section 54956.87 of the Government Code is amended to
read:
54956.87. (a) Notwithstanding any other provision of this
chapter, the records of a health plan that is licensed pursuant to
the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of Division 2 of the Health and Safety
Code) and that is governed by a county board of supervisors, whether
paper records, records maintained in the management information
system, or records in any other form, that relate to provider rate or
payment determinations, allocation or distribution methodologies for
provider payments, formulas or calculations for these payments, and
contract negotiations with providers of health care for alternative
rates are exempt from disclosure for a period of three years after
the contract is fully executed. The transmission of the records, or
the information contained therein in an alternative form, to the
board of supervisors shall not constitute a waiver of exemption from
disclosure, and the records and information once transmitted to the
board of supervisors shall be subject to this same exemption.
(b) Notwithstanding any other provision of law, the governing
board of a health plan that is licensed pursuant to the Knox-Keene
Health Care Service Plan Act of 1975 (Chapter 2.2 (commencing with
Section 1340) of Division 2 of the Health and Safety Code) and that
is governed by a county board of supervisors may order that a meeting
held solely for the purpose of discussion or taking action on health
plan trade secrets, as defined in subdivision (f), shall be held in
closed session. The requirements of making a public report of action
taken in closed session, and the vote or abstention of every member
present, may be limited to a brief general description without the
information constituting the trade secret.
(c) Notwithstanding any other provision of law, the governing
board of a health plan may meet in closed session to consider and
take action on matters pertaining to contracts and contract
negotiations by the health plan with providers of health care
services concerning all matters related to rates of payment. The
governing board may delete the portion or portions containing trade
secrets from any documents that were finally approved in the closed
session held pursuant to subdivision (b) that are provided to persons
who have made the timely or standing request.
(d) Nothing in this section shall be construed as preventing the
governing board from meeting in closed session as otherwise provided
by law.
(e) The provisions of this section shall not prevent access to any
records by the Joint Legislative Audit Committee in the exercise of
its powers pursuant to Article 1 (commencing with Section 10500) of
Chapter 4 of Part 2 of Division 2 of Title 2. The provisions of this
section also shall not prevent access to any records by the
Department of Managed Health Care in the exercise of its powers
pursuant to Article 1 (commencing with Section 1340) of Chapter 2.2
of Division 2 of the Health and Safety Code.
(f) For purposes of this section, "health plan trade secret" means
a trade secret, as defined in subdivision (d) of Section 3426.1 of
the Civil Code, that also meets both of the following criteria:
(1) The secrecy of the information is necessary for the health
plan to initiate a new service, program, marketing strategy, business
plan, or technology, or to add a benefit or product.
(2) Premature disclosure of the trade secret would create a
substantial probability of depriving the health plan of a substantial
economic benefit or opportunity.
SEC. 66. Section 1280.7 of the Insurance Code is amended to read:
1280.7. (a) This chapter and the other provisions of this code,
except as set forth in this paragraph, shall not apply to or affect
unincorporated interindemnity or reciprocal or interinsurance
contracts between members of a cooperative corporation, organized and
operating under Part 2 (commencing with Section 12200) of Division 3
of Title 1 of the Corporations Code, whose members consist solely of
physicians and surgeons licensed in California, which contracts
indemnify solely in respect to medical malpractice claims against
those 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. However,
interindemnity, reciprocal, or interinsurance contracts with respect
to the following types of claims, in addition to medical malpractice
claims, may be entered into in conjunction with contracts with
respect to medical malpractice claims if the reserve trust fund is at
least twenty million dollars ($20,000,000):
(1) Bodily injury or property damage arising out of the conduct
and of the operations of the member's professional practice occurring
on the member's premises.
(2) Officers', directors', and administrators' liability, to the
extent that the member's professional practice is operated as a
professional corporation or group.
(3) Nonowned automobile coverage.
The provisions of Chapter 3 (commencing with Section 330) of Part
1 of Division 1 shall apply to unincorporated interindemnity or
reciprocal or interinsurance contracts. Those unincorporated
interindemnity or reciprocal or interinsurance contracts shall comply
with all of the following requirements:
(b) Each participating member shall enter into and, concurrently
therewith, receive an executed copy of a trust agreement, which shall
govern the collection and disposition of all funds of the
interindemnity arrangement.
The trust agreement shall, at a minimum, contain provision for all
the following matters:
(1) An initial trust corpus of not less than ten million dollars
($10,000,000), which corpus shall be a trust fund to secure
enforcement of the interindemnity arrangement. The average
contribution to the initial trust corpus shall be not less than
twenty thousand dollars ($20,000) per member participating in the
interindemnity arrangement. The average contribution to the trust
fund shall continue at all times to be not less than twenty thousand
dollars ($20,000) per participating member unless the interindemnity
arrangement is qualified to admit members under the terms of
subdivision (k). No such interindemnity arrangement shall become
operative until the requisite minimum reserve trust fund has been
established by contributions from not fewer than 500 participating
members.
(2) The reserve trust fund created by the trust agreement shall be
administered by a board of trustees of three or more members, all of
whom shall be physicians and surgeons licensed in California,
participating members in the interindemnity arrangement, and elected
biennially or more frequently by at least a majority of all members
participating in the interindemnity arrangement.
(3) The members of the board of trustees are fiduciaries and the
board shall be the custodian of all funds of the interindemnity
arrangement, and all those funds shall be deposited in the bank or
banks and savings and loan associations in California as the board
may designate. Each account shall require two or more signatories for
withdrawal of funds in excess of ten thousand dollars ($10,000). The
authorized signatories shall be appointed by the board and, as to
any withdrawal in excess of one hundred thousand dollars ($100,000),
at least one of the two or more authorized signatories shall be a
physician and surgeon licensed in California and a participating
member in the interindemnity arrangement. Each signatory on those
accounts shall maintain, at all times while empowered to draw on
those funds, for the benefit of the interindemnity arrangement, a
bond against loss suffered through embezzlement, mysterious
disappearance, holdup or burglary, or other loss issued by a bonding
company licensed to do business in California in a penal sum of not
less than one hundred thousand dollars ($100,000).
(4) All funds held in trust that are in excess of current
financial needs shall be invested and reinvested from time to time,
under the direction of the board of trustees, in eligible securities,
as defined in Section 16430 of the Government Code, in portfolios of
eligible securities, in exchange traded financial futures contracts
or exchange traded options contracts to hedge investment in those
eligible securities, or in certificates of deposits or time deposits
issued by banks and savings and loan associations in California duly
insured by instrumentalities of the United States government.
Pursuant to the authority contained in Section 1 of Article XV of
the California Constitution, the restrictions upon rates of interest
contained in Section 1 of Article XV of the California Constitution
shall not apply to any obligations of, loans made by, or forbearances
of, any trust established by a cooperative corporation providing
indemnity pursuant to this section.
(5) The income earned on the corpus of the trust fund shall be the
source for the payment of the claims, costs, judgments, settlements,
and costs of administration contemplated by the interindemnity
arrangement, and to the extent the income is insufficient for those
purposes, the board of trustees shall have the power and authority to
assess participating members for all amounts necessary to meet the
obligations of the interindemnity arrangement in accordance with the
terms thereof. If necessary in the best interests of the
interindemnity arrangement, the board of trustees may make
assessments to increase the corpus of the trust fund in accordance
with the terms of the interindemnity arrangement. Any assessment
levied against a member shall be the personal obligation of the
member. Any person who obtains a final judgment of recovery for
medical malpractice or other liability authorized by this section
against a member of the interindemnity arrangement shall have, in
addition to any other remedy, the right to assert directly all rights
to indemnification that the judgment debtor has under the
interindemnity arrangement. The final judgment shall be a lien on the
reserve trust fund to secure payment of the judgment, limited to the
extent of the judgment debtor's rights to indemnification.
Any change in the assessment agreement between the interindemnity
arrangement and its membership shall be submitted to the entire
membership for ratification. If the ratification process is to be
performed by a mail ballot, a ballot shall be sent to each member by
first-class mail, postage prepaid. Within 45 days after the posted
date on the mail ballot, each member who decides to vote on the
assessment change shall return his or her ballot to the
interindemnity arrangement for the tallying of the ballots. An
affirmative vote of 75 percent of those voting shall be required to
effectuate any change in the assessment agreement.
If a change in the assessment agreement is to be submitted to
members at a properly called meeting, the membership shall be
notified of the meeting and the proposed assessment change by
first-class mail, postage prepaid, posted at least 45 days prior to
the meeting. Seventy-five percent of those present in person or by
proxy at the meeting shall be required to effectuate any change in
the assessment agreement.
(6) Each participating member shall be covered by the
interindemnity arrangement for not less than one million dollars
($1,000,000) for each occurrence of professional negligence or other
liability authorized by this section, with the terms and conditions
of the coverage to be specified in the trust agreement, except that
the interindemnity arrangement may provide participating members with
an aggregate limit for all payments on behalf of the member and may
provide participating members with less than one million dollars
($1,000,000) of coverage for each occurrence of professional
negligence or other liability authorized by this section if the
interindemnity arrangement obtains for the benefit of the members
reinsurance of excess limits coverage in an amount that when added to
the coverage provided by the interindemnity arrangement would equal
not less than one million dollars ($1,000,000) for each occurrence of
professional negligence or other liability authorized by this
section.
Any change in the coverage provided by the trust agreement between
the interindemnity arrangement and its membership shall be submitted
to the entire membership for ratification. If the ratification
process is to be performed by a mail ballot, a ballot shall be sent
to each member by first-class mail, postage prepaid. Within 45 days
after the posted date on the mail ballot, each member who decides to
vote on the coverage change shall return his or her ballot to the
interindemnity arrangement for the tallying of the ballot. An
affirmative vote of 75 percent of those voting shall be required to
effectuate any change in the coverage provided by the trust
agreement, except that at least 50 percent of the entire membership
must agree to any change.
If any change is to be submitted to members at a properly called
meeting, the membership shall be notified of the meeting and the
proposed coverage change by first-class mail, postage prepaid, posted
at least 45 days prior to the meeting. An affirmative vote of 75
percent of the membership present at the meeting, in person or by
proxy, shall be required to effectuate any change, except that at
least 50 percent of the entire membership must agree to any change.
(7) Withdrawal of all, or any portion of, the corpus of the
reserve trust fund shall be upon the written authorization signed by
at least two-thirds of the members of the board of trustees.
(8) The board of trustees shall cause both of the following to be
furnished to each member participating in the interindemnity
arrangement, and to be filed with the Commissioner of Business
Oversight:
(A) Within 90 days after the end of each fiscal year, a statement
of the assets and liabilities of the interindemnity arrangement as of
the end of that year, a statement of the revenue and expenditures of
the interindemnity arrangement, and a statement of the changes in
corpus of the reserve trust for that year, in each case accompanied
by a certificate signed by a firm of independent certified public
accountants selected by the board of trustees indicating that the
firm has conducted an audit of those statements in accordance with
generally accepted auditing standards and indicating the results of
the audit.
(B) Within 45 days after the end of each of the first three
quarterly periods of each fiscal year, a statement of the assets and
liabilities of the interindemnity arrangement as of the end of the
quarterly period, a statement of the revenue and expenditures of the
interindemnity arrangement, and a statement of the changes in corpus
of the reserve trust for the period, in each case accompanied by a
certificate signed by a majority of the members of the board of
trustees to the effect that the statements were prepared from the
official books and records of the interindemnity arrangement.
(C) In addition to the statements required to be filed pursuant to
this paragraph, the board of trustees shall annually file with the
Commissioner of Business Oversight an authorization for disclosure to
the commissioner of all financial records pertaining to the
interindemnity arrangement. For the purpose of this subparagraph, the
authorization for disclosure shall also include the financial
records of any association, partnership, or corporation that has
management or control of the funds or the operation of the
interindemnity arrangement.
(9) The trust agreement shall also provide for all the following:
(A) In the event a participating member who is in full compliance
with the trust agreement, including the payment of all outstanding
dues and assessments, dies, the initial contribution made by the
decedent shall be returned to the member's estate or designated
beneficiary; the indemnity coverage shall continue for the benefit of
the decedent's estate in respect of occurrences during the time the
decedent was a participating member; and neither the person receiving
the repayment of the initial contribution nor the decedent's estate
shall be responsible for any assessments levied following the death
of the member.
(B) A participating member who is then in full compliance with the
trust agreement and who has reached the age of 65 years and who has
retired completely from the practice of medicine may elect to retire
from the interindemnity arrangement, in which case the member shall
not be responsible for assessments levied following the date notice
of retirement is given to the trust. Following that retirement, the
indemnity coverage shall continue for the benefit of the member in
respect of occurrences prior to the time the member retired from the
interindemnity arrangement. That retired member's initial
contribution shall be repaid 10 years from the date the notice of
retirement is received by the trust, or an earlier date as specified
in the trust agreement. The board of trustees may reduce the age for
retirement to not less than 55 years subject to all other
requirements in this paragraph and any additional requirements deemed
necessary by the board.
(C) During any period in which a participating member, who is then
in full compliance with the trust agreement, has, in the judgment of
the board of trustees, become unable to perform any and every duty
of his or her regular professional occupation, the participating
member may request disability status in accordance with the terms of
the interindemnity arrangement. During any period of disability
status, the member shall not be responsible for assessments levied
during the period and, if so provided in the interindemnity
arrangement, all indemnity coverage, both as to defense and payment
of claims, shall terminate as to occurrences arising out of the
actions of the participating member during the period of disability
status.
(D) In the event a participating member fails to pay any
assessment when due, the board of trustees may terminate that person'
s membership status if the failure to pay is not cured within 30 days
from the date the assessment was due. Upon that termination the
former participating member shall not be entitled to the return of
all or any part of his or her initial contribution, and the indemnity
coverage shall thereupon terminate as to all claims then pending
against that person and in respect to all occurrences prior to the
date of that termination of membership. However, in the event the
interindemnity arrangement is then providing legal defense services
to that person, the interindemnity arrangement shall continue to
provide those services for a period of 10 days following that
termination.
(E) In the event a participating member fails to comply with any
provision of the trust agreement (other than a failure to pay
assessments when due), the board of trustees may terminate that
person's membership status if the failure to comply is not cured
within 60 days from the date the person is notified of the failure,
provided that before that membership status may be terminated the
person shall be given the right to call for a hearing before the
board of trustees (to be held before the expiration of the 60-day
period), at which hearing the person shall be given the opportunity
to demonstrate to the board of trustees that no failure to comply has
occurred or, if it has occurred, that it has been cured. Upon that
termination, the former participating member shall not be entitled to
the return of all or any part of his or her initial contribution,
and the indemnity coverage shall thereupon terminate as to all claims
then pending against the person and in respect to all occurrences
prior to the date of the termination of membership. However, in the
event the interindemnity arrangement is then providing legal defense
services to that person, the interindemnity arrangement shall
continue to provide those services for a period of 10 days following
the termination.
(F) A participating member who is then in full compliance with the
trust agreement may elect voluntarily to terminate his or her
membership in the interindemnity arrangement. Upon that voluntary
termination, that person may further elect to cease being responsible
for future assessments, or to continue to pay those assessments
until the time as the person's initial contribution is repaid. In the
event the person elects to cease being responsible for future
assessments, the indemnity coverage shall thereupon terminate and the
person shall either be responsible for his or her own exposure for
acts committed while a participating member in the interindemnity
arrangement, or he or she may request the interindemnity arrangement
to purchase or provide, at the cost of the person, coverage for that
exposure. The initial contribution of the person shall be repaid on
the 10th anniversary of the date the contribution was made. In the
event the person elects to continue to be responsible for
assessments, the indemnity coverage shall continue in respect of
occurrences prior to the date of the voluntary termination, and the
initial contribution of the person shall be repaid at the time as the
board of trustees is satisfied that (i) there are no claims pending
against the person in respect of occurrences during the time the
person was a participating member, and (ii) the statute of
limitations has run on all claims that might be asserted against that
person in respect of occurrences during that time. In no event shall
that repayment be made earlier than the 10th anniversary of the date
the contribution was made.
Any person whose membership in an interindemnity arrangement is
involuntarily terminated for failure to pay assessments or who
voluntarily terminates that membership and elects to be responsible
for his or her own exposure for acts committed while a participating
member, shall not be eligible to become a member of any other
interindemnity arrangement for a period of five years after the
termination unless, on the effective date of the act which amended
this section during the 1985-86 Regular Session, the person had on
file with the Department of Business Oversight a copy of a
subscription agreement signifying the person's agreement to transfer
membership or had paid a minimum of ten thousand dollars ($10,000) to
another interindemnity arrangement that was granted a permit to
organize prior to January 1, 1985.
(G) The board of trustees shall have the right to terminate the
membership of a participating member if the board of trustees
determines that the termination is in the best interests of the
interindemnity arrangement even though that person has complied with
all of the provisions of the trust agreement. A termination may be
effected only if at least two-thirds of the members of the
board of trustees indicate in writing
their decision to terminate. If the board of trustees proposes to
terminate a member, the member shall have the right to call a special
meeting of all participating members in accordance with the rules
established by the board of trustees for the purpose of voting on
whether or not the member shall be terminated. The member shall not
be terminated if at least two-thirds of the participating members
present, in person or by proxy, indicate that the member should not
be terminated. In the event a member is terminated, the person shall
elect either: (i) to request the return of his or her initial
contribution, in which case the contribution shall be repaid and the
indemnity coverage shall thereupon terminate as to all claims then
pending against the person and in respect to all occurrences prior to
the date of the termination of membership. However, in the event the
interindemnity arrangement is then providing legal defense services
to the person, the interindemnity arrangement shall continue to
provide those services for a period of 30 days to enable the person
to assume his or her own defense; or (ii) to release all rights to
the return of the initial contribution, in which case the indemnity
coverage shall continue for the benefit of the member in respect of
occurrences during the time the person was a participating member and
the person shall have no responsibility for assessments levied
following that termination. The interindemnity arrangement may
provide that if a member is terminated and fails to make the election
set forth herein within 45 days of the date of notification of
termination of membership, the participating member shall be deemed
to have elected to release all rights to a return of his or her
initial contribution, in which case indemnity coverage shall apply
for the benefit of the member with respect to occurrences occurring
prior to the termination.
(10) Each member participating in the interindemnity arrangement
shall have the right of access to, and the inspection of, the books
and records of the interindemnity arrangement, which rights shall be
similar to the corporate shareholders pursuant to Section 3003 of the
Corporations Code, or, commencing January 1, 1977, Sections 1600 to
1605, inclusive, of the Corporations Code.
(11) There shall be a meeting of all members participating in the
interindemnity arrangement, at least annually, after not less than 10
days' written notice has been given, at a location reasonably
convenient to the participating members and on a date that is within
a reasonable period of time following the distribution of the annual
financial statements.
(12) Notwithstanding Sections 12453 and 12703 of the Corporations
Code, on any matter to be voted upon by the membership at either a
regular or special meeting, a member shall have the right to vote in
person or by written proxy filed with the corporate secretary prior
to the meeting. No proxy shall be made irrevocable, nor be valid
beyond the earliest of the following dates:
(A) The date of expiration set forth in the proxy.
(B) The date of termination of membership.
(C) Eleven months from the date of execution of the proxy.
(D) Such time as may be specified in the bylaws, not to exceed 11
months.
(13) The interindemnity arrangement, and the reserve trust fund
incident thereto, shall be subject to termination at any time by the
vote or written consent of not less than three-fourths of the
participating members.
(c) The board of trustees shall cause to be recorded with the
office of the county recorder of the county of the principal place of
business of the interindemnity arrangement within 90 days following
the end of each fiscal year, a written statement, executed by a
majority of the board of trustees under penalty of perjury, reciting
that each member participating in the interindemnity arrangement was
mailed a copy of the annual financial statement and quarterly audit
certificates by first-class mail, postage prepaid, required pursuant
to paragraph (8) of subdivision (a).
(d) Each person solicited to become a participating member in an
interindemnity arrangement shall receive in writing, at least 48
hours prior to the execution by the prospective participating member
of the trust agreement, and at least 48 hours prior to the payment by
the prospective participating member of any consideration in
connection with the interindemnity arrangement, the following
information:
(1) A copy of the articles of incorporation and bylaws of the
cooperative corporation and a copy of the form of trust agreement to
be executed by the prospective participating member.
(2) A disclosure statement regarding the interindemnity
arrangement. The disclosure statement shall contain on the first or
cover page a legend in boldface type reading substantially as
follows:
"THE INTERINDEMNITY ARRANGEMENT CONTEMPLATED HEREIN PROVIDES THAT
PARTICIPATING MEMBERS HAVE UNLIMITED PERSONAL LIABILITY FOR
ASSESSMENTS THAT MAY BE LEVIED TO PAY FOR THE PROFESSIONAL NEGLIGENCE
OR OTHER LIABILITY AUTHORIZED BY THIS SECTION. NO ASSURANCES CAN BE
GIVEN REGARDING THE AMOUNT OR FREQUENCY OF ASSESSMENTS WHICH MAY BE
LEVIED, OR THAT ALL PARTICIPATING MEMBERS WILL MAKE TIMELY PAYMENT OF
THEIR ASSESSMENTS TO COVER THE PROFESSIONAL NEGLIGENCE OR OTHER
LIABILITY AUTHORIZED BY THIS SECTION."
(3) The disclosure statement shall further contain all of the
following information:
(A) The amount, nature, and terms and conditions of the
professional negligence or other liability relating to a member's
professional practice coverage available under the interindemnity
arrangement.
(B) The amount of the initial contribution required of each
participating member and a statement of the minimum number of members
and aggregate contributions required for the interindemnity
arrangement to commence.
(C) The names, addresses, and professional experience of each
member of the board of trustees.
(D) The requirements for admission as a participating member.
(E) A statement of the services to be provided under the
interindemnity arrangement to each participating member.
(F) A statement regarding the obligation of each member to pay
assessments and the consequences for failure to do so.
(G) A statement of the rights and obligations of a participating
member in the event the member dies, retires, becomes disabled, or
terminates participation for any reason, or the interindemnity
arrangement terminates for any reason.
(H) A statement regarding the services to be provided, indicating
whether these services will be delegated to others pursuant to a
contractual arrangement. For those services delegated to others
pursuant to a contractual arrangement, a statement fully disclosing
and itemizing all consideration received directly or indirectly under
the arrangement, and indicating what the consideration is for, and
how, when, and to whom the consideration will be paid.
(I) A statement of the voting rights of the members and the
circumstances under which participation of a member may be terminated
and under which the interindemnity arrangement may be terminated.
(J) If any statement of estimated or projected financial
information for the interindemnity arrangement is used, a statement
of the estimation or projection and a summary of the data and
assumptions upon which it is based.
(4) A list with the names and addresses of current participating
members of the interindemnity arrangement.
(e) No officer, director, trustee, employee, or member of the
interindemnity arrangement or the cooperative corporation shall
receive, or be entitled to receive, any payment, bonus, salary,
income, compensation, or other benefit whatsoever, either from the
reserve trust fund or the income therefrom or from any other funds of
the interindemnity arrangement or the members thereof based on the
number of participating members, or the amount of the reserve trust
fund or other funds of the interindemnity arrangement.
(f) A peer review committee or committees shall be established by
the trust agreement to review the qualifications of any physician and
surgeon to participate or continue to participate in the
interindemnity arrangement, and to review the quality of medical
services rendered by any participating member, as well as the
validity of medical malpractice claims made against participating
members. Any physician and surgeon, prior to becoming a participating
member of the interindemnity arrangement, shall be reviewed and
approved by a majority of the members of the peer review committee.
No peer review committee, or any of its members, shall be liable for
any action taken by the committee in reviewing the qualifications of
a physician and surgeon to participate or continue to participate, or
the quality of medical services rendered, or the validity of a
medical malpractice claim, unless it is alleged and proved that the
action was taken with actual malice.
(g) The following are hereby defined as unfair methods of
competition and deceptive acts or practices with respect to
cooperative corporations or interindemnity arrangements provided for
in this section:
(1) Making any false or misleading statement as to, or issuing,
circulating, or causing to be made, issued, or circulated, any
estimate, illustration, circular, or statement misrepresenting the
terms of any interindemnity arrangement or the benefits or advantages
promised thereby, or making any misleading representation or any
misrepresentation as to the financial condition of the interindemnity
arrangement, or making any misrepresentation to any participating
member for the purpose of inducing or tending to induce the member to
lapse, forfeit, or surrender his or her rights to indemnification
under the interindemnity arrangement. It shall be a false or
misleading statement to state or represent that a cooperative
corporation or interindemnity arrangement is or constitutes
"insurance" or an "insurance company" or an "insurance policy."
(2) Making or disseminating or causing to be made or disseminated
before the public in this state, in any newspaper or other
publication, or any advertising device, or by public outcry or
proclamation, or in any other manner or means whatsoever, any
statement containing any assertion, representation, or statement with
respect to those cooperative corporations or interindemnity
arrangements, or with respect to any person in the conduct of those
cooperative corporations or interindemnity arrangements, which is
untrue, deceptive, or misleading, and which is known, or which by the
exercise of reasonable care should be known, to be untrue,
deceptive, or misleading. It shall be a false or misleading statement
to state or represent that a cooperative corporation or
interindemnity arrangement is or constitutes "insurance" or an
"insurance company" or an "insurance policy."
(3) Entering into any agreement to commit, or by any concerted
action committing, any act of boycott, coercion, or intimidation
resulting in or tending to result in an unreasonable restraint of, or
monopoly in, those cooperative corporations or interindemnity
arrangements.
(4) Filing with any supervisory or other public official, or
making, publishing, disseminating, circulating, or delivering to any
person, or placing before the public, or causing directly or
indirectly, to be made, published, disseminated, circulated, or
delivered to any person, or placed before the public any false
statement of financial condition of a cooperative corporation or
interindemnity arrangement with intent to deceive.
(5) Making any false entry in any book, report, or statement of a
cooperative corporation or interindemnity arrangement with intent to
deceive any agent or examiner lawfully appointed to examine into its
condition or into any of its affairs, or any public official to whom
a cooperative corporation or interindemnity arrangement is required
by law to report, or who has authority by law to examine into its
condition or into any of its affairs, or, with like intent, willfully
omitting to make a true entry of any material fact pertaining to a
cooperative corporation or interindemnity arrangement in any book,
report, or statement of a cooperative corporation or interindemnity
arrangement.
(6) Making or disseminating, or causing to be made or
disseminated, before the public in this state, in any newspaper or
other publication, or any other advertising device, or by public
outcry or proclamation, or in any other manner or means whatsoever,
whether directly or by implication, any statement that a cooperative
corporation or interindemnity arrangement is a member of the
California Insurance Guarantee Association, or insured against
insolvency as defined in Section 119.5. This paragraph shall not be
interpreted to prohibit any activity of the California Insurance
Guarantee Association or of the commissioner authorized, directly or
by implication, by Article 14.2 (commencing with Section 1063) of
Chapter 1.
(7) Knowingly committing or performing with a frequency as to
indicate a general business practice any of the following unfair
claims settlement practices:
(A) Misrepresenting to claimants pertinent facts or provisions
relating to any coverage at issue.
(B) Failing to acknowledge and act promptly upon communications
with respect to claims arising under those interindemnity
arrangements.
(C) Failing to adopt and implement reasonable standards for the
prompt investigation and processing of claims arising under those
interindemnity arrangements.
(D) Failing to affirm or deny coverage of claims within a
reasonable time after proof of claim requirements have been completed
and submitted by the participating member.
(E) Not attempting in good faith to effectuate prompt, fair, and
equitable settlements of claims in which liability has become
reasonably clear.
(F) Compelling participating members to institute litigation to
recover amounts due under an interindemnity arrangement by offering
substantially less than the amounts ultimately recovered in actions
brought by those participating members when those participating
members have made claims under those interindemnity arrangements for
amounts reasonably similar to the amounts ultimately recovered.
(G) Attempting to settle a claim by a participating member for
less than the amount to which a reasonable person would have believed
he or she was entitled by reference to written or printed
advertising material accompanying or made part of an application for
membership in an interindemnity arrangement.
(H) Attempting to settle claims on the basis of an interindemnity
arrangement that was altered without notice to the participating
member.
(I) Failing, after payment of a claim, to inform participating
members, upon request by them, of the coverage under which payment
has been made.
(J) Making known to claimants a practice of the cooperative
corporation or interindemnity arrangement of appealing from
arbitration awards in favor of claimants for the purpose of
compelling them to accept settlements or compromises less than the
amount awarded in arbitration.
(K) Delaying the investigation or payment of claims by requiring a
claimant, or his or her physician, to submit a preliminary claim
report, and then requiring the subsequent submission of formal proof
of loss forms, both of which submissions contain substantially the
same information.
(L) Failing to settle claims promptly, where liability has become
apparent, under one portion of an interindemnity arrangement in order
to influence settlements under other portions of the interindemnity
arrangement.
(M) Failing to provide promptly a reasonable explanation of the
basis relied on in the interindemnity arrangement, in relation to the
facts of applicable law, for the denial of a claim or for the offer
of a compromise settlement.
(N) Directly advising a claimant not to obtain the services of an
attorney.
(O) Misleading a claimant as to the applicable statute of
limitations.
(h) Notwithstanding any contrary provisions of Part 2 (commencing
with Section 12200) of Division 3 of Title 1 of the Corporations
Code, it shall not be necessary to hold a meeting of members of the
cooperative corporation for the purpose of electing directors if the
bylaws provide the election may be held by first-class mail
balloting. First-class mail balloting may also be used in conjunction
with a meeting at which directors are to be elected and all mail
ballots shall count toward establishing a quorum for the meeting for
the limited purpose of the issues set forth in the mail ballot.
Directors shall be elected as follows:
(1) The candidates receiving the highest number of votes, up to
the number of directors to be elected, by a specified date at least
45 days but not later than 60 days after the ballots are first
mailed, postage prepaid, to the members (or the date of a meeting of
members held in conjunction therewith) shall be elected.
(2) In the event that no candidate receives a majority of the
votes cast for a vacant office, a runoff election shall be held
between the two candidates receiving the highest number of votes
cast. The runoff election shall be held at least 45 days but not more
than 60 days after the ballots for the election are mailed, postage
prepaid. In the event that there is more than one office for which no
candidate receives a majority of the votes cast, the candidates for
the runoff shall be twice the number of vacant offices, and shall be
those persons who received the highest number of votes therefor.
Those first-class mail ballots shall be kept on file for a period
of three months after all vacant board positions have been filled,
and shall be subject to inspection at any reasonable time by any
members of the cooperative corporation.
(i) No officer, director, trustee, or member of the interindemnity
arrangement or the cooperative corporation, or any entity in which
that person has a material financial interest, shall enter into or
renew any transaction or contract with the trust unless the material
facts as to the transaction or contract and as to the interest of the
person are fully disclosed to the participating members, and the
transaction or contract is approved by an affirmative vote of at
least 75 percent of the membership present at a meeting, in person or
by proxy. If any transaction or contract is to be submitted to
members at a properly called meeting, the membership shall be
notified of the meeting and of the transaction or contract by
first-class mail, postage prepaid, at least 45 days prior to the
meeting.
(j) Services provided to the trust pursuant to a delegated
contractual arrangement shall be embodied in a written contract. Each
written contract shall provide for reasonable consideration to the
parties. In addition, each written contract shall be disclosed
annually to participating members in a disclosure report containing
the information described in subparagraph (H) of paragraph (3) of
subdivision (d). The disclosure report shall be sent to participating
members by first-class mail, postage prepaid, and shall be mailed
separately from any statements, records, or other documents. The
disclosure requirements of this subdivision shall apply to all
existing and future written contracts.
(k) Upon request of the Commissioner of Business Oversight, an
interindemnity arrangement shall immediately forward to the
commissioner a current list of participating members, including the
names, addresses, and telephone numbers of those members.
(l) Notwithstanding any provision to the contrary, whenever the
membership of a cooperative organization, organized pursuant to Part
2 (commencing with Section 12200) of Division 3 of Title 1 of the
Corporations Code and consisting solely of physicians and surgeons
licensed in this state amounts to 2,000 or more members and the trust
fund is at least forty million dollars ($40,000,000), which is
available to the public for malpractice claims or other claims
authorized by this section, the cooperative is authorized to admit
members without a contribution to that trust fund if assessments are
charged to each of those members within the first 50 months in an
amount equal to the amount of the contribution to the reserve fund
that would otherwise be required.
SEC. 67. Section 12693.35 of the Insurance Code is amended to
read:
12693.35. Participating health, dental, and vision plans shall
have, but need not be limited to, all of the following operating
characteristics satisfactory to the board in consultation with the
plan's licensing or regulatory oversight agency:
(a) Strong financial condition, including the ability to assume
the risk of providing and paying for covered services. A
participating plan may utilize reinsurance, provider risk sharing,
and other appropriate mechanisms to share a portion of the risk.
(b) Adequate administrative management.
(c) A satisfactory grievance procedure.
(d) Participating plans that contract with or employ health care
providers shall have mechanisms to accomplish all of the following,
in a manner satisfactory to the board:
(1) Review the quality of care covered.
(2) Review the appropriateness of care covered.
(3) Provide accessible health care services.
(e) (1) Before the effective date of the contract, the
participating health plan shall have devised a system for identifying
in a simple and clear fashion both in its own records and in the
medical records of subscribers the fact that the services provided
are provided under the program.
(2) Throughout the duration of the contract, the plan shall use
the system described in paragraph (1).
(f) Plans licensed by the Department of Managed Health Care shall
be deemed to meet the requirements of subdivisions (a) to (d),
inclusive, of this section.
SEC. 68. Section 14053 of the Insurance Code is amended to read:
14053. In lieu of the surety bond required by this article there
may be deposited with the State of California the sum of two thousand
dollars ($2,000) in cash, or evidence of deposit of the sum of two
thousand dollars ($2,000) in banks authorized to do business in this
state and insured by the Federal Deposit Insurance Corporation, or
investment certificates or share accounts in the amount of two
thousand dollars ($2,000) issued by a savings association doing
business in this state and insured by the Federal Deposit Insurance
Corporation, or evidence of a certificate of funds or share account
of the sum of two thousand dollars ($2,000) in a credit union, as
defined in Section 14000 of the Financial Code, whose share deposits
are guaranteed by the National Credit Union Administration or
guaranteed by any other agency approved by the Department of Business
Oversight.
SEC. 69. Section 15036 of the Insurance Code is amended to read:
15036. In lieu of the surety bond required by this chapter there
may be deposited with the State of California the sum of twenty
thousand dollars ($20,000) in cash, or evidence of deposit of the sum
of twenty thousand dollars ($20,000) in banks authorized to do
business in this state and insured by the Federal Deposit Insurance
Corporation, or investment certificates or share accounts in the
amount of twenty thousand dollars ($20,000) issued by a savings
association doing business in this state and insured by the Federal
Deposit Insurance Corporation, or evidence of a certificate of funds
or share account of the sum of twenty thousand dollars ($20,000) in a
credit union as defined in Section 14000 of the Financial Code whose
share deposits are guaranteed by the National Credit Union
Administration or guaranteed by any other agency approved by the
Department of Business Oversight.
SEC. 70. Section 4600.5 of the Labor Code is amended to read:
4600.5. (a) Any health care service plan licensed pursuant to the
Knox-Keene Health Care Service Plan Act, a disability insurer
licensed by the Department of Insurance, or any entity, including,
but not limited to, workers' compensation insurers and third-party
administrators authorized by the administrative director under
subdivision (e), may make written application to the administrative
director to become certified as a health care organization to provide
health care to injured employees for injuries and diseases
compensable under this article.
(b) Each application for certification shall be accompanied by a
reasonable fee prescribed by the administrative director, sufficient
to cover the actual cost of processing the application. A certificate
is valid for the period that the director may prescribe unless
sooner revoked or suspended.
(c) If the health care organization is a health care service plan
licensed pursuant to the Knox-Keene Health Care Service Plan Act, and
has provided the Managed Care Unit of the Division of Workers'
Compensation with the necessary documentation to comply with this
subdivision, that organization shall be deemed to be a health care
organization able to provide health care pursuant to Section 4600.3,
without further application duplicating the documentation already
filed with the Department of Managed Health Care. These plans shall
be required to remain in good standing with the Department of Managed
Health Care, and shall meet the following additional requirements:
(1) Proposes to provide all medical and health care services that
may be required by this article.
(2) Provides a program involving cooperative efforts by the
employees, the employer, and the health plan to promote workplace
health and safety, consultative and other services, and early return
to work for injured employees.
(3) Proposes a timely and accurate method to meet the requirements
set forth by the administrative director for all carriers of workers'
compensation coverage to report necessary information regarding
medical and health care service cost and utilization, rates of return
to work, average time in medical treatment, and other measures as
determined by the administrative director to enable the director to
determine the effectiveness of the plan.
(4) Agrees to provide the administrative director with
information, reports, and records prepared and submitted to the
Department of Managed Health Care in compliance with the Knox-Keene
Health Care Service Plan Act, relating to financial solvency,
provider accessibility, peer review, utilization review, and quality
assurance, upon request, if the administrative director determines
the information is necessary to verify that the plan is providing
medical treatment to injured employees in compliance with the
requirements of this code.
Disclosure of peer review proceedings and records to the
administrative director shall not alter the status of the proceedings
or records as privileged and confidential communications pursuant to
Sections 1370 and 1370.1 of the Health and Safety Code.
(5) Demonstrates the capability to provide occupational medicine
and related disciplines.
(6) Complies with any other requirement the administrative
director determines is necessary to provide medical services to
injured employees consistent with the intent of this article,
including, but not limited to, a written patient grievance policy.
(d) If the health care organization is a disability insurer
licensed by the Department of Insurance, and is in compliance with
subdivision (d) of Sections 10133 and 10133.5 of the Insurance Code,
the administrative director shall certify the organization to provide
health care pursuant to Section 4600.3 if the director finds that
the plan is in good standing with the Department of Insurance and
meets the following additional requirements:
(1) Proposes to provide all medical and health care services that
may be required by this article.
(2) Provides a program involving cooperative efforts by the
employees, the employer, and the health plan to promote workplace
health and safety, consultative and other services, and early return
to work for injured employees.
(3) Proposes a timely and accurate method to meet the requirements
set forth by the administrative director for all carriers of workers'
compensation coverage to report necessary information regarding
medical and health care service cost and utilization, rates of return
to work, average time in medical treatment, and other measures as
determined by the administrative director to enable the director to
determine the effectiveness of the plan.
(4) Agrees to provide the administrative director with
information, reports, and records prepared and submitted to the
Department of Insurance in compliance with the Insurance Code
relating to financial solvency, provider accessibility, peer review,
utilization review, and quality assurance, upon request, if the
administrative director determines the information is necessary to
verify that the plan is providing medical treatment to injured
employees consistent with the intent of this article.
Disclosure of peer review proceedings and records to the
administrative director shall not alter the status of the proceedings
or records as privileged and confidential communications pursuant to
subdivision (d) of Section 10133 of the Insurance Code.
(5) Demonstrates the capability to provide occupational medicine
and related disciplines.
(6) Complies with any other requirement the administrative
director determines is necessary to provide medical services to
injured employees consistent with the intent of this article,
including, but not limited to, a written patient grievance policy.
(e) If the health care organization is a workers' compensation
insurer, third-party administrator, or any other entity that the
administrative director determines meets the requirements of Section
4600.6, the administrative director shall certify the organization to
provide health care pursuant to Section 4600.3 if the director finds
that it meets the following additional requirements:
(1) Proposes to provide all medical and health care services that
may be required by this article.
(2) Provides a program involving cooperative efforts by the
employees, the employer, and the health plan to promote workplace
health and safety, consultative and other services, and early return
to work for injured employees.
(3) Proposes a timely and accurate method to meet the requirements
set forth by the administrative director for all carriers of workers'
compensation coverage to report necessary information regarding
medical and health care service cost and utilization, rates of return
to work, average time in medical treatment, and other measures as
determined by the administrative director to enable the director to
determine the effectiveness of the plan.
(4) Agrees to provide the administrative director with
information, reports, and records relating to provider accessibility,
peer review, utilization review, quality assurance, advertising,
disclosure, medical and financial audits, and grievance systems, upon
request, if the administrative director determines the information
is necessary to verify that the plan is providing medical treatment
to injured employees consistent with the intent of this article.
Disclosure of peer review proceedings and records to the
administrative director shall not alter the status of the proceedings
or records as privileged and confidential communications pursuant to
subdivision (d) of Section 10133 of the Insurance Code.
(5) Demonstrates the capability to provide occupational medicine
and related disciplines.
(6) Complies with any other requirement the administrative
director determines is necessary to provide medical services to
injured employees consistent with the intent of this article,
including, but not limited to, a written patient grievance policy.
(7) Complies with the following requirements:
(A) An organization certified by the administrative director under
this subdivision may not provide or undertake to arrange for the
provision of health care to employees, or to pay for or to reimburse
any part of the cost of that health care in return for a prepaid or
periodic charge paid by or on behalf of those employees.
(B) Every organization certified under this subdivision shall
operate on a fee-for-service basis. As used in this section, fee for
service refers to the situation where the amount of reimbursement
paid by the employer to the organization or providers of health care
is determined by the amount and type of health care rendered by the
organization or provider of health care.
(C) An organization certified under this subdivision is prohibited
from assuming risk.
(f) (1) A workers' compensation health care provider organization
authorized by the Department of Business Oversight on December 31,
1997, shall be eligible for certification as a health care
organization under subdivision (e).
(2) An entity that had, on December 31, 1997, submitted an
application with the Commissioner of Business Oversight under Part
3.2 (commencing with Section 5150) shall be considered an applicant
for certification under subdivision (e) and shall be entitled to
priority in consideration of its application. The Commissioner of
Business Oversight shall provide complete files for all pending
applications to the administrative director on or before January 31,
1998.
(g) The provisions of this section shall not affect the
confidentiality or admission in evidence of a claimant's medical
treatment records.
(h) Charges for services arranged for or provided by health care
service plans certified by this section and that are paid on a
per-enrollee-periodic-charge basis shall not be subject to the
schedules adopted by the administrative director pursuant to Section
5307.1.
(i) Nothing in this section shall be construed to expand or
constrict any requirements imposed by law on a health care service
plan or insurer when operating as other than a health care
organization pursuant to this section.
(j) In consultation with interested parties, including the
Department of Business Oversight and the Department of Insurance, the
administrative director shall adopt rules necessary to carry out
this section.
(k) The administrative director shall refuse to certify or may
revoke or suspend the certification of any health care organization
under this section if the director finds that:
(1) The plan for providing medical treatment fails to meet the
requirements of this section.
(2) A health care service plan licensed by the Department of
Managed Health Care, a workers' compensation health care provider
organization authorized by the Department of Business Oversight, or a
carrier licensed by the Department of Insurance is not in good
standing with its licensing agency.
(3) Services under the plan are not being provided in accordance
with the terms of a certified plan.
( l ) (1) When an injured employee requests
chiropractic treatment for work-related injuries, the health care
organization shall provide the injured worker with access to the
services of a chiropractor pursuant to guidelines for chiropractic
care established by paragraph (2). Within five working days of the
employee's request to see a chiropractor, the health care
organization and any person or entity who directs the kind or manner
of health care services for the plan shall refer an injured employee
to an affiliated chiropractor for work-related injuries that are
within the guidelines for chiropractic care established by paragraph
(2). Chiropractic care rendered in accordance with guidelines for
chiropractic care established pursuant to paragraph (2) shall be
provided by duly licensed chiropractors affiliated with the plan.
(2) The health care organization shall establish guidelines for
chiropractic care in consultation with affiliated chiropractors who
are participants in the health care organization's utilization review
process for chiropractic care, which may include qualified medical
evaluators knowledgeable in the treatment of chiropractic conditions.
The guidelines for chiropractic care shall, at a minimum, explicitly
require the referral of any injured employee who so requests to an
affiliated chiropractor for the evaluation or treatment, or both, of
neuromusculoskeletal conditions.
(3) Whenever a dispute concerning the appropriateness or necessity
of chiropractic care for work-related injuries arises, the dispute
shall be resolved by the health care organization's utilization
review process for chiropractic care in accordance with the health
care organization's guidelines for chiropractic care established by
paragraph (2).
Chiropractic utilization review for work-related injuries shall be
conducted in accordance with the health care organization's approved
quality assurance standards and utilization review process for
chiropractic care. Chiropractors affiliated with the plan shall have
access to the health care organization's provider appeals process
and, in the case of chiropractic care for work-related injuries, the
review shall include review by a chiropractor affiliated with the
health care organization, as determined by the health care
organization.
(4) The health care organization shall inform employees of the
procedures for processing and resolving grievances, including those
related to chiropractic care, including the location and telephone
number where grievances may be submitted.
(5) All guidelines for chiropractic care and utilization review
shall be consistent with the standards of this code that require care
to cure or relieve the effects of the industrial injury.
(m) Individually identifiable medical information on patients
submitted to the division shall not be subject to the California
Public Records Act (Chapter 3.5 (commencing with Section 6250) of
Division 7 of Title 1 of the Government Code).
(n) (1) When an injured employee requests acupuncture treatment
for work-related injuries, the health care organization shall provide
the injured worker with access to the services of an acupuncturist
pursuant to guidelines for acupuncture care established by paragraph
(2). Within five working days of the employee's request to see an
acupuncturist, the health care organization and any person or entity
who directs the kind or manner of health care services for the plan
shall refer an injured employee to an affiliated acupuncturist for
work-related injuries that are within the guidelines for acupuncture
care established by paragraph (2). Acupuncture care rendered in
accordance with guidelines for acupuncture care established pursuant
to paragraph (2) shall be provided by duly licensed acupuncturists
affiliated with the plan.
(2) The health care organization shall establish guidelines for
acupuncture care in consultation with affiliated acupuncturists who
are participants in the health care organization's utilization review
process for acupuncture care, which may include qualified medical
evaluators. The guidelines for acupuncture care shall, at a minimum,
explicitly require the referral of any injured employee who so
requests to an affiliated acupuncturist for the evaluation or
treatment, or both, of neuromusculoskeletal conditions.
(3) Whenever a dispute concerning the appropriateness or necessity
of acupuncture care for work-related injuries arises, the dispute
shall be resolved by the health care organization's utilization
review process for acupuncture care in accordance with the health
care organization's guidelines for acupuncture care established by
paragraph (2).
Acupuncture utilization review for work-related injuries shall be
conducted in accordance with the health care organization's approved
quality assurance standards and utilization review process for
acupuncture care. Acupuncturists affiliated with the plan shall have
access to the health care organization's provider appeals process
and, in the case of acupuncture care for work-related injuries, the
review shall include review by an acupuncturist affiliated with the
health care organization, as determined by the health care
organization.
(4) The health care organization shall inform employees of the
procedures for processing and resolving grievances, including those
related to acupuncture care, including the location and telephone
number where grievances may be submitted.
(5) All guidelines for acupuncture care and utilization review
shall be consistent with the standards of this code that require care
to cure or relieve the effects of the industrial injury.
SEC. 71. Section 11604.5 of the Probate Code is amended to read:
11604.5. (a) This section applies when distribution from a
decedent's estate is made to a transferee for value who acquires any
interest of a beneficiary in exchange for cash or other
consideration.
(b) For purposes of this section, a transferee for value is a
person who satisfies both of the following criteria:
(1) He or she purchases the interest from a beneficiary for
consideration pursuant to a written agreement.
(2) He or she, directly or indirectly, regularly engages in the
purchase of beneficial interests in estates for consideration.
(c) This section does not apply to any of the following:
(1) A transferee who is a beneficiary of the estate or a person
who has a claim to distribution from the estate under another
instrument or by intestate succession.
(2) A transferee who is either the registered domestic partner of
the beneficiary, or is related by blood, marriage, or adoption to the
beneficiary or the decedent.
(3) A transaction made in conformity with the California Finance
Lenders Law (Division 9 (commencing with Section 22000) of the
Financial Code) and subject to regulation by the Department of
Business Oversight.
(4) A transferee who is engaged in the business of locating
missing or unknown heirs and who acquires an interest from a
beneficiary solely in exchange for providing information or services
associated with locating the heir or beneficiary.
(d) A written agreement is effective only if all of the following
conditions are met:
(1) The executed written agreement is filed with the court not
later than 30 days following the date of its execution or, if
administration of the decedent's estate has not commenced, then
within 30 days of issuance of the letters of administration or
letters testamentary, but in no event later than 15 days prior to the
hearing on the petition for final distribution. Prior to filing or
serving that written agreement, the transferee for value shall redact
any personally identifying information about the beneficiary, other
than the name and address of the beneficiary, and any financial
information provided by the beneficiary to the transferee for value
on the application for cash or other consideration, from the
agreement.
(2) If the negotiation or discussion between the beneficiary and
the transferee for value leading to the execution of the written
agreement by the beneficiary was conducted in a language other than
English, the beneficiary shall receive the written agreement in
English, together with a copy of the agreement translated into the
language in which it was negotiated or discussed. The written
agreement and the translated copy, if any, shall be provided to the
beneficiary.
(3) The documents signed by, or provided to, the beneficiary are
printed in at least 10-point type.
(4) The transferee for value executes a declaration or affidavit
attesting that the requirements of this section have been satisfied,
and the declaration or affidavit is filed with the court within 30
days of execution of the written agreement or, if administration of
the decedent's estate has not commenced, then within 30 days of
issuance of the letters of administration or letters testamentary,
but in no event later than 15 days prior to the hearing on the
petition for final distribution.
(5) Notice of the assignment is served on the personal
representative or the attorney of record for the personal
representative within 30 days of execution of the written agreement
or, if general or special letters of administration or letters
testamentary have not been issued, then within 30 days of issuance of
the letters of administration or letters testamentary, but in no
event later than 15 days prior to the hearing on the petition for
final distribution.
(e) The written agreement shall include the following terms, in
addition to any other terms:
(1) The amount of consideration paid to the beneficiary.
(2) A description of the transferred interest.
(3) If the written agreement so provides, the amount by which the
transferee for value would have its distribution reduced if the
beneficial interest assigned is distributed prior to a specified
date.
(4) A statement of the total of all costs or fees charged to the
beneficiary resulting from the transfer for value, including, but not
limited to, transaction or processing fees, credit report costs,
title search costs, due diligence fees, filing fees, bank or
electronic transfer costs, or any other fees or costs. If all the
costs and fees are paid by the transferee for value and are included
in the amount of the transferred interest, then the statement of
costs need not itemize any costs or fees. This subdivision shall not
apply to costs, fees, or damages arising out of a material breach of
the agreement or fraud by or on the part of the beneficiary.
(f) A written agreement shall not contain any of the following
provisions and, if any such provision is included, that provision
shall be null and void:
(1) A provision holding harmless the transferee for value, other
than for liability arising out of fraud by the beneficiary.
(2) A provision granting to the transferee for value agency powers
to represent the beneficiary's interest in the decedent's estate
beyond the interest transferred.
(3) A provision requiring payment by the beneficiary to the
transferee for value for services not related to the written
agreement or services other than the transfer of interest under the
written agreement.
(4) A provision permitting the transferee for value to have
recourse against the beneficiary if the distribution from the estate
in satisfaction of the beneficial interest is less than the
beneficial interest assigned to the transferee for value, other than
recourse for any expense or damage arising out of the material breach
of the agreement or fraud by the beneficiary.
(g) The court on its own motion, or on the motion of the personal
representative or other interested person, may inquire into the
circumstances surrounding the execution of, and the consideration
for, the written agreement to determine that the requirements of this
section have been satisfied.
(h) The court may refuse to order distribution under the written
agreement, or may order distribution on any terms that the court
considers equitable, if the court finds that the transferee for value
did not substantially comply with the requirements of this section,
or if the court finds that any of the following conditions existed at
the time of transfer:
(1) The fees, charges, or consideration paid or agreed to be paid
by the beneficiary were grossly unreasonable.
(2) The transfer of the beneficial interest was obtained by
duress, fraud, or undue influence.
(i) In addition to any remedy specified in this section, for any
willful violation of the requirements of this section found to be
committed in bad faith, the court may require the transferee for
value to pay to the beneficiary up to twice the value paid for the
assignment.
(j) Notice of the hearing on any motion brought under this section
shall be served on the beneficiary and on the transferee for value
at least 15 days before the hearing in the manner provided in Section
415.10 or 415.30 of the Code of Civil Procedure.
(k) If the decedent's estate is not subject to a pending court
proceeding under the Probate Code in California, but is the subject
of a probate proceeding in another state, the transferee for value
shall not be required to submit to the court a copy of the written
agreement as required under paragraph (1) of subdivision (d). If the
written agreement is entered into in California or if the beneficiary
is domiciled in California, that written agreement shall otherwise
conform to the provisions of subdivisions (d), (e), and (f) in order
to be effective.
SEC. 72. Section 408 of the Revenue and Taxation Code is amended
to read:
408. (a) Except as otherwise provided in subdivisions (b), (c),
(d), (e), and (g), any information and records in the assessor's
office that are not required by law to be kept or prepared by the
assessor, disabled veterans' exemption claims, and homeowners'
exemption claims, are not public documents and shall not be open to
public inspection. Property receiving the homeowners' exemption shall
be clearly identified on the assessment roll. The assessor shall
maintain records which shall be open to public inspection to identify
those claimants who have been granted the homeowners' exemption.
(b) The assessor may provide any appraisal data in his or her
possession to the assessor of any county.
The assessor shall disclose information, furnish abstracts, or
permit access to all records in his or her office to law enforcement
agencies, the county grand jury, the board of supervisors or their
duly authorized agents, employees, or representatives when conducting
an investigation of the assessor's office pursuant to Section 25303
of the Government Code, the county recorder when conducting an
investigation to determine whether a documentary transfer tax is
imposed, the Controller, employees of the Controller for property tax
postponement purposes, probate referees, employees of the Franchise
Tax Board for tax administration purposes only, staff appraisers of
the Department of Financial Institutions, the Department of
Transportation, the Department of General Services, the State Board
of Equalization, the State Lands Commission, the State Department of
Social Services, the Department of Child Support Services, the
Department of Water Resources, and other duly authorized legislative
or administrative bodies of the state pursuant to their authorization
to examine the records. Whenever the assessor discloses information,
furnishes abstracts, or permits access to records in his or her
office to staff appraisers of the Department of Business Oversight,
the Department of Transportation, the Department of General Services,
the State Lands Commission, or the Department of Water Resources
pursuant to this section, the department shall reimburse the assessor
for any costs incurred as a result thereof.
(c) Upon the request of the tax collector, the assessor shall
disclose and provide to the tax collector information used in the
preparation of that portion of the unsecured roll for which the taxes
thereon are delinquent. The tax collector shall certify to the
assessor that he or she needs the information requested for the
enforcement of the tax lien in collecting those delinquent taxes.
Information requested by the tax collector may include social
security numbers, and the assessor shall recover from the tax
collector his or her actual and reasonable costs for providing the
information. The tax collector shall add the costs described in the
preceding sentence to the assessee's delinquent tax lien and collect
those costs subject to subdivision (e) of Section 2922.
(d) The assessor shall, upon the request of an assessee or his or
her designated representative, permit the assessee or representative
to inspect or copy any market data in the assessor's possession. For
purposes of this subdivision, "market data" means any information in
the assessor's possession, whether or not required to be prepared or
kept by him or her, relating to the sale of any property comparable
to the property of the assessee, if the assessor bases his or her
assessment of the assessee's property, in whole or in part, on that
comparable sale or sales. The assessor shall provide the names of the
seller and buyer of each property on which the comparison is based,
the location of that property, the date of the sale, and the
consideration paid for the property, whether paid in money or
otherwise. However, for purposes of providing market data, the
assessor may not display any document relating to the business
affairs or property of another.
(e) (1) With respect to information, documents, and records, other
than market data as defined in subdivision (d), the assessor shall,
upon request of an assessee of property, or his or her designated
representative, permit the assessee or representative to inspect or
copy all information, documents, and records, including auditors'
narrations and workpapers, whether or not required to be kept or
prepared by the assessor, relating to the appraisal and the
assessment of the assessee's property, and any penalties and interest
thereon.
(2) After enrolling an assessment, the assessor shall respond to a
written request for information supporting the assessment,
including, but not limited to, any appraisal and other data requested
by the assessee.
(3) Except as provided in Section 408.1, an assessee, or his or
her designated representative, may not be permitted to inspect or
copy information and records that also relate to the property or
business affairs of another, unless that
disclosure is ordered by a competent court in a
proceeding initiated by a taxpayer seeking to challenge the legality
of the assessment of his or her property.
(f) (1) Permission for the inspection or copying requested
pursuant to subdivision (d) or (e) shall be granted as soon as
reasonably possible to the assessee or his or her designated
representative.
(2) If the assessee, or his or her designated representative,
requests the assessor to make copies of any of the requested records,
the assessee shall reimburse the assessor for the reasonable costs
incurred in reproducing and providing the copies.
(3) If the assessor fails to permit the inspection or copying of
materials or information as requested pursuant to subdivision (d) or
(e) and the assessor introduces any requested materials or
information at any assessment appeals board hearing, the assessee or
his or her representative may request and shall be granted a
continuance for a reasonable period of time. The continuance shall
extend the two-year period specified in subdivision (c) of Section
1604 for a period of time equal to the period of continuance.
(g) Upon the written request of the tax collector, the assessor
shall provide to the tax collector information for the preparation
and enforcement of Part 6 (commencing with Section 3351). The tax
collector shall certify to the assessor that he or she needs the
contact information to assist with the preparation and enforcement of
Part 6 (commencing with Section 3351). The assessor shall provide
the information, which may not include social security numbers. Any
information provided to the tax collector pursuant to this
subdivision shall not become a public record and shall not be open to
public inspection. The tax collector shall reimburse the assessor
for the actual and reasonable costs incurred by the assessor for
providing the information to administer this subdivision. The tax
collector shall add the costs described in the preceding sentence to
the assessee's delinquent taxes and include the costs incurred
subject to Sections 4112 and 4672.2. The tax collector or his or her
designated employee shall, under penalty of perjury, certify to the
assessor that he or she needs the information to assist with the
preparation and enforcement of Part 6 (commencing with Section 3351),
and that the information provided pursuant to this subdivision that
is not public record and that is not open to public inspection shall
not become public record and shall not be open to public inspection.
SEC. 73. Section 22005.1 of the Welfare and Institutions Code is
amended to read:
22005.1. (a) The State Department of Health Care Services shall
only certify a long-term care insurance policy that substantially
meets the requirements of Chapter 2.6 (commencing with Section 10230)
of Part 2 of Division 2 of the Insurance Code, except the
requirements of Sections 10232.1, 10232.2, 10232.8, 10232.9, and
10232.92 of the Insurance Code, and that provides all of the items
specified in subdivision (b). The State Department of Health Care
Services shall only certify a health care service plan contract that
has been approved by the Department of Managed Health Care pursuant
to Chapter 2.2 (commencing with Section 1340) of Division 2 of the
Health and Safety Code as providing substantially equivalent coverage
to that required by Chapter 2.6 (commencing with Section 10230) of
Part 2 of Division 2 of the Insurance Code, and that provides all of
the items specified in subdivision (b). Policies issued by
organizations subject to the Insurance Code and regulated by the
Department of Insurance shall also be approved by the Department of
Insurance.
(b) Only policies and contracts that provide all of the following
items shall be certified by the department:
(1) Individual assessment and case management by a coordinating
entity designated and approved by the department.
(2) Levels and durations of benefits that meet minimum standards
set by the State Department of Health Care Services pursuant to
Section 22009.
(3) Protection against loss of benefits due to inflation.
(4) A periodic record issued to the insured including an
explanation of insurance payments or benefits paid that count toward
Medi-Cal asset protection under this division.
(5) Compliance with any other requirements imposed by regulations
adopted by the State Department of Health Care Services or the State
Department of Social Services and consistent with the purposes of
this division.