BILL NUMBER: AB 667	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Wagner

                        FEBRUARY 24, 2015

   An act to amend Section 25004 of the Corporations Code, relating
to securities.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 667, as introduced, Wagner. Broker-dealers: finders.
   Under existing law, the Corporate Securities Law of 1968, the
Commissioner of Business Oversight regulates the activities of a
broker-dealer which is defined as, among other things, any person
engaged in the business of effecting securities transactions in
California for the account of others or his or her own account, and
it specifies those persons or entities excluded from the definition.
   This bill would add to the persons excluded from the definition of
a broker-dealer an individual who is a finder, as defined, who
satisfied specified requirements, including, among other things,
filing an initial statement of information with the Department of
Business Oversight and paying a filing fee.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 25004 of the Corporations Code is amended to
read:
   25004.  (a) "Broker-dealer" means any person engaged in the
business of effecting transactions in securities in this state for
the account of others or for his or her  own account.
"Broker-dealer" also includes a person engaged in the regular
business of issuing or guaranteeing options with regard to securities
not of his  or her  own issue. "Broker-dealer" does not
include any of the following:
   (1) Any other issuer.
   (2) An agent, when an employee of a broker-dealer or issuer.
   (3) A bank, trust company, or savings and loan association.
   (4) Any person insofar as he  or she  buys or sells
securities for his  or her  own account, either individually
or in some fiduciary capacity, but not as part of a regular
business.
   (5) A person who has no place of business in this state if he 
or she  effects transactions in this state exclusively with (A)
the issuers of the securities involved in the transactions or (B)
other broker-dealers.
   (6) A broker licensed by the Real Estate Commissioner of this
state when engaged in transactions in securities exempted by
subdivision (f) or (p) of Section 25100 or in securities the issuance
of which is subject to authorization by the Real Estate Commissioner
of this state or in transactions exempted by subdivision (e) of
Section 25102.
   (7) An exchange certified by the  Commissioner of
  Corporations   Commissioner 
pursuant to this section when it is issuing or guaranteeing options.
The commissioner may by order certify an exchange under this section
upon  such   any  conditions as he  or
she  by rule or order deems appropriate, and upon notice and
opportunity to be heard he  or she  may suspend or revoke
 such   that  certification, if he  or
she  finds  such   the  certification,
suspension, or revocation to be in the public interest and necessary
and appropriate for the protection of investors. 
   (8) (A) Any finder who satisfies all of the conditions set forth
in subparagraphs (B) to (E), inclusive. For purposes of this section,
a "finder" is a natural person who, for direct or indirect
compensation, introduces or refers one or more accredited investors,
as that term is defined in Rule 501(a) of Regulation D under the
Securities Act of 1933 (17 C.F.R. 230.501(a)), to an issuer or an
issuer to one or more accredited investors, solely for the purpose of
a potential offer or sale of securities of the issuer in an issuer
transaction in this state, and who does not do any of the following:
 
   (i) Provide services to an issuer for a transaction or a series of
related transactions for the offer or sale of securities of the
issuer that exceeds a securities purchase price of twenty-five
million dollars ($25,000,000) in the aggregate.  
   (ii) Participate in negotiating any of the terms of the offer or
sale of the securities.  
   (iii) Advise any party to the transaction regarding the value of
the securities or the advisability of investing in, purchasing, or
selling the securities.  
   (iv) Conduct any due diligence on the part of any party to the
transaction.  
   (v) Sell or offer for sale in connection with the issuer
transaction any securities of the issuer that are owned, directly or
indirectly, by the finder.  
   (vi) Receive, directly or indirectly, possession or custody of any
funds in connection with the issuer transaction.  
   (vii) Knowingly receive compensation in connection with any offer
or sale of securities unless the sale is qualified under this
division or unless the security or the transaction is exempt or not
otherwise subject to qualification.  
   (viii) Make any disclosure to a potential purchaser other than the
following:  
   (I) The name, address, and contact information of the issuer.
 
   (II) The name, type, price, and aggregate amount of any securities
being offered in the issuer transaction.  
   (III) The issuer's industry, location, and years in business.
 
   (B) (i) The finder shall file with the Department of Business
Oversight before engaging in any activities described in subparagraph
(A), on a form prescribed by the commissioner, an initial statement
of information that shall include both of the following:  
   (I) The name and complete business or residential address of the
finder.  
   (II) The mailing address of the finder, if different from the
business or residential address.  
   (ii) A filing fee of not more than three hundred dollars ($300)
may be required to be submitted, as determined by the commissioner by
rule, to the Department of Business Oversight along with the initial
statement of information required by this subparagraph.  
   (C) (i) For each issuer transaction, the finder shall file with
the Department of Business Oversight, on a form prescribed by the
commissioner, a notice that shall include all of the following: 

   (I) The following affirmative representations by the finder: 

   (ia) The finder has complied and will continue to comply with the
provisions of subparagraph (A).  
   (ib) The finder has not performed any acts or satisfied any
circumstances prohibited by Section 25212, nor been sanctioned by the
commissioner pursuant to Section 25212.  
   (ic) The finder has obtained the written agreement described in
subparagraph (D).  
   (II) An indication by the finder as to whether the finder is
receiving transaction-based compensation that is subject to the
actual sale of securities by the issuer in the transaction. 

   (ii) A separate notice shall be filed for each new issuer
transaction, no later than 20 business days following the first sale
of securities. The commissioner may by rule require the finder to pay
a filing fee in connection with the notice required in this
subparagraph of up to fifty dollars ($50).  
   (D) (i) Concurrently with each introduction, the finder shall
obtain the informed, written consent of each person introduced or
referred by the finder to an issuer, in a written agreement signed by
the finder, the issuer, and the person introduced or referred,
disclosing the following:  
   (I) The type and amount of compensation that has been or will be
paid to the finder in connection with the introduction or referral
and the conditions for payment of that compensation.  
   (II) That the finder is not providing advice to the issuer or any
person introduced or referred by the finder to an issuer as to the
value of the securities or as to the advisability of investing in,
purchasing, or selling the securities.  
   (III) Whether the finder is also an owner, directly or indirectly,
of the securities being offered or sold.  
   (IV) Any actual and potential conflict of interest in connection
with the finder's activities related to the issuer transaction. 

   (V) That the parties to the agreement shall have the right to
pursue any available remedies at law or otherwise for any breach of
the agreement.  
   (ii) To satisfy the requirements of this subparagraph, the
agreement shall also include a representation by the person
introduced or referred by the finder to the issuer that the person is
an accredited investor, as that term is defined in Rule 501(a) of
Regulation D under the Securities Exchange Act of 1933 (17 C.F.R.
230.501(a)), and that the person knowingly consents to the payment of
the compensation described therein.  
   (E) The finder shall maintain and preserve, for a period of five
years from the date of filing of the notice prescribed in
subparagraph (C), a copy of the notice, the written agreement
required in subparagraph (D), and all other records relating to any
offer or sale of securities in connection with which the finder
receives compensation, as the commissioner may by rule require. The
finder, upon written request of the commissioner, shall furnish to
the commissioner any records required to be maintained and preserved
under this subparagraph.  
   (F) (i) A natural person who does not meet the definition of
"finder" set forth in subparagraph (A) and does not satisfy all the
conditions set forth in subparagraphs (B) to (E), inclusive, may be
determined to be a broker-dealer by the commissioner.  
   (ii) In the event a natural person does not meet the definition of
"finder" set forth in subparagraph (A) and does not satisfy all the
conditions set forth in subparagraphs (B) to (E), inclusive, any
person introduced or referred by that natural person to an issuer,
who purchases securities of that issuer in an issuer transaction
following that introduction or referral, shall have the right to
pursue any applicable remedy afforded under state law, including,
without limitation, any applicable remedies pursuant to Section
25501.5. 
   (b) For purposes of this section, an agent is an employee of a
broker-dealer under paragraph (2) of subdivision (a) when the agent
is employed by or associated with the broker-dealer under all of the
following conditions:
   (1) The agent is subject to the supervision and control of the
broker-dealer.
   (2) The agent performs under the name, authority, and marketing
policies of the broker-dealer.
   (3) The agent discloses to investors the identity of the
broker-dealer.
   (4) The agent is reported pursuant to subdivision (c) of Section
25210 and the rules adopted thereunder.