citation: CORP § 28714

text:
(a) If the commissioner finds that any of the factors set forth in Section 28709 is true with respect to any licensee and that it is necessary for the protection of the interests of the licensee or the accredited investors of the licensee, or for the protection of the public interest that the commissioner take immediate possession of the property and business of the licensee, the commissioner may forthwith take possession of the property and business of the licensee and retain possession until the licensee resumes business or is finally liquidated. The licensee may, with the consent of the commissioner, resume business upon any conditions that the commissioner may prescribe.

(b) Whenever the commissioner takes possession of the property and business of a licensee pursuant to subdivision (a), the licensee may apply within 10 days to the superior court in the county in which the head office of the licensee is located to enjoin further proceedings. The court, after citing the commissioner to show cause why further proceedings should not be enjoined and after a hearing, may dismiss the application or enjoin the commissioner from further proceedings and order the commissioner to surrender the property and business of the licensee to the licensee or make any further order that may be just.

(c) An appeal may be taken from the judgment of the superior court by the commissioner or by the licensee in the manner provided by law for appeals from the judgment of a superior court. An appeal from the judgment of the superior court shall operate as a stay of the judgment. No bond need be given if the appeal is taken by the commissioner, but if the appeal is taken by the licensee, a bond shall be given as required by the Code of Civil Procedure.

(d) Whenever the commissioner takes possession of the property and business of a licensee pursuant to subdivision (a), the commissioner shall conserve or liquidate the property and business of the licensee.

title: 4. SECURITIES


kind: section

code: CORP

citation: CORP § 28715

text: Sections 11041, 11042, and 11043 of the Government Code do not apply to the Commissioner of Financial Protection and Innovation.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 88. (SB 1498) Effective January 1, 2023.)

division: 3. CAPITAL ACCESS COMPANIES

title: 4. SECURITIES

chapter: 11. Enforcement

path: 4. SECURITIES > 3. CAPITAL ACCESS COMPANIES > 11. Enforcement


citation: CORP § 28716

text:
(a) It is unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the administration or enforcement of this division.

(b) It is unlawful for any person to knowingly make an untrue statement to the commissioner during the course of licensing, investigation, or examination, with the intent to impede, obstruct, or influence the administration or enforcement of any provision of this division.

history: (History: Added by Stats. 2007, Ch. 101, Sec. 8. Effective January 1, 2008.)

title: 4. SECURITIES


citation: CORP § 28800

text: It shall be unlawful for any person willfully to make any untrue statement of a material fact in any application, report, or other document filed with the commissioner under this division or under any regulation or order issued under this division, or willfully to omit to state in any application, report or other document filed with the commissioner under this division any material fact which is required to be stated therein.

history: (History: Added by Stats. 1998, Ch. 668, Sec. 3. Effective January 1, 1999. Operative July 1, 1999, by Sec. 4 of Ch. 668.)

title: 4. SECURITIES

chapter: 12. Crimes and Criminal Penalties

article: 1. General Provisions

path: 4. SECURITIES > 3. CAPITAL ACCESS COMPANIES > 12. Crimes and Criminal Penalties > 1. General Provisions


citation: CORP § 28801

text: It shall be unlawful for any person having custody of any of the books, accounts, or other records of a licensee willfully to refuse to allow the commissioner, upon request, to inspect or make copies of any of those books, accounts, or other records.

title: 4. SECURITIES

article: 1. General Provisions


citation: CORP § 28802

text: It shall be unlawful for any person, with intent to deceive any director, officer, employee, auditor, or attorney of a licensee, the commissioner or any governmental agency, to make any false entry in any of the books, accounts or other records of the licensee, to omit to make any entry in those books, accounts or other records which the person is required to make, or to alter, conceal, or destroy any of those books, accounts, or other records.

title: 4. SECURITIES

article: 1. General Provisions


citation: CORP § 28820

text:
In this article, unless the context otherwise requires:

(a) (1) “Associate,” when used with respect to a licensee, means all of the following:

(A) Any principal shareholder, director, officer, manager, agent, or adviser of the licensee.

(B) Any director, officer, partner, general manager, agent, employer, or employee of any person referred to in subparagraph (A).

(C) Any person who controls, is controlled by, or is under common control with, any person referred to in subparagraph (A), directly or indirectly, through one or more intermediaries.

(D) Any close relative of any person referred to in subparagraph (A).

(E) Any person of whom any person referred to in subparagraphs (A) to (D), inclusive, is a director or officer.

(F) Any person in whom any person referred to in subparagraphs (A) to (D), inclusive, or any combination of persons acting in concert owns or controls, directly or indirectly, a 10-percent or greater equity interest.

(2) For purposes of this subdivision, any person who is in any of the relationships referred to in subparagraphs (A) to (F), inclusive, of paragraph (1) within six months before or after a licensee provides financing assistance shall be deemed to be in the relationship as of the date when the licensee provides the financing assistance.

(3) For purposes of this subdivision, if a licensee, in order to protect its interests, designates any person to serve as a director of, officer of, or in any capacity in the management of, a small business firm to which the licensee provides financing assistance, the person shall not, on that account, be deemed to have any relationship with the small business firm. However, this paragraph shall not apply in any case where the person has, directly or indirectly, any other financial interest in the small business firm or where the person, at any time before the licensee provides the financing assistance, served as a director of, officer of, or in any other capacity in the management of, the small business firm for a period of 30 days or more.

(b) “Close relative” means ancestor, lineal descendant, brother or sister and lineal descendants of either, spouse, father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, or sister-in-law.

history: (History: Repealed and added by Stats. 2010, Ch. 516, Sec. 14. (SB 1155) Effective January 1, 2011.)

title: 4. SECURITIES

article: 2. Conflicts of Interest

path: 4. SECURITIES > 3. CAPITAL ACCESS COMPANIES > 12. Crimes and Criminal Penalties > 2. Conflicts of Interest


citation: CORP § 28821

text:
(a) A licensee shall not provide financial or managerial assistance to, or for the benefit of, any person to the detriment of a small business firm or smaller business firm, the licensee, its shareholders, or partners. Unless a licensee obtains a prior written exemption from the commissioner for special instances in which providing financial assistance may further the purposes of this division despite presenting a conflict of interest, a licensee shall not directly or indirectly do any of the following:

(1) Provide financial assistance to any of the licensee’s associates.

(2) Provide financial assistance to an associate of another licensee, if one of the licensee’s associates has received or will receive any direct or indirect financial assistance or a commitment from that licensee or a third licensee, including financial assistance or commitments received under any understanding, agreement, or cross dealing, reciprocal or circular arrangement.

(3) Borrow money from any of the following:

(A) A small business firm or smaller business firm to which the licensee has provided financial assistance.

(B) An officer, director, or owner of at least a 10-percent equity interest in the business.

(C) A close relative of a person described in subparagraph (B).

(4) Provide financial assistance to a small business firm or smaller business firm to discharge an obligation to a licensee’s associate or to make other funds available to pay the obligation, except if the obligation is to an associate lending institution and is a line of credit or other obligation incurred in the normal course of business.

(5) Provide financial assistance to a small business firm or smaller business firm for the purpose of purchasing property from a licensee’s associate.

(b) Without the commissioner’s prior written approval, a licensee’s associates shall not, directly or indirectly, do either of the following:

(1) Borrow money from any person described in paragraph (3) of subdivision (a).

(2) Receive from a small business firm or smaller business firm any compensation in connection with any financial assistance a licensee provides or anything of value for procuring, attempting to procure, or influencing a licensee’s action with respect to that financial assistance.

(c) (1) Without the commissioner’s prior written approval, a licensee shall not provide financial assistance to any business in which the licensee’s associate has either a voting equity interest, or total equity interests, including potential interests, of at least 5 percent.

(2) If a licensee and its associate provide financial assistance to the same small business firm or smaller business firm, whether at the same time or different times, a licensee shall demonstrate to the commissioner’s satisfaction that the terms and conditions are, or were, fair and equitable to the licensee, taking into account any differences in the timing of each party’s financial transactions.

(3) Financial assistance that meets either of the following criteria is exempt from the prior approval requirement in paragraph (1) and shall be presumed to be fair and equitable to the licensee for the purposes of paragraph (2):

(A) The licensee’s associate is a lending institution that is providing financing under a credit facility in order to meet the operational needs of a small business firm or smaller business firm, and the terms of that financing are usual and customary.

(B) The licensee’s associate invests in the small business firm or smaller business firm on the same terms and conditions and at the same time as the licensee.

(d) To protect a licensee’s investment, a licensee may designate an associate to serve as an officer, director, or other participant in the management of a small business firm or smaller business firm. The licensee shall identify this associate in the licensee’s records maintained and made available for the commissioner’s review. Without the commissioner’s prior written approval, the associate shall not do any of the following:

(1) Have any other direct or indirect financial interest in the small business firm or smaller business firm that exceeds, or has the potential to exceed, 5 percent of the firm’s equity.

(2) Have served for more than 30 days as an officer, director, or other participant in the management of the small business firm or smaller business firm before the licensee provided the financial assistance.

(3) Receive any income or anything of value from the small business firm or smaller business firm unless it is for the licensee’s benefit, with the exception of director’s fees, expenses, and distributions based upon the associate’s ownership interest in the small business firm or smaller business firm.

title: 4. SECURITIES

article: 2. Conflicts of Interest


citation: CORP § 28880

text: Any person who willfully violates any provision under this chapter shall upon conviction be fined not more than two hundred fifty thousand dollars ($250,000) or be imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or in a county jail for not more than one year, or be punished by both that fine and imprisonment.

history: (History: Amended by Stats. 2011, Ch. 15, Sec. 50. (AB 109) Effective April 4, 2011. Operative October 1, 2011, by Sec. 636 of Ch. 15, as amended by Stats. 2011, Ch. 39, Sec. 68.)

title: 4. SECURITIES

article: 3. Criminal Penalties

path: 4. SECURITIES > 3. CAPITAL ACCESS COMPANIES > 12. Crimes and Criminal Penalties > 3. Criminal Penalties


citation: CORP § 28881

text: Nothing in this division limits the power of the state to punish any person for any act which constitutes a crime under any statute.

title: 4. SECURITIES

article: 3. Criminal Penalties


citation: CORP § 28900

text: If, after notice and a hearing, the commissioner finds that any person has violated any provision of this division or of any regulation or order issued under this division, the commissioner may order the person to pay to the commissioner a civil penalty in that amount as the commissioner may specify. However, the amount of the civil penalty shall not exceed two thousand five hundred dollars ($2,500) for each violation, or in the case of a continuing violation, two thousand five hundred dollars ($2,500) for each day for which the violation continues.

title: 4. SECURITIES

chapter: 13. Civil Penalties

path: 4. SECURITIES > 3. CAPITAL ACCESS COMPANIES > 13. Civil Penalties


citation: CORP § 28901

text: The provisions of Section 28900 are additional to, and not alternative to, other provisions of this division which authorize the commissioner to issue orders or to take other action on account of a violation of any provision of this division or of any regulation or order issued under this division. However, no person who has been finally convicted under Chapter 12 (commencing with Section 28800) of this division on account of a violation of any provision of Chapter 12 (commencing with Section 28800) shall be liable to pay a civil penalty under Section 28900 on account of the violation.

title: 4. SECURITIES


citation: CORP § 28950

text: No provision of this division imposing any liability applies to any act done or omitted in good faith in conformity with any rule, form, permit, order, or written interpretive opinion of the commissioner, or any written interpretive opinion of the Attorney General, notwithstanding that the rule, form, permit, order, or written interpretive opinion may later be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

title: 4. SECURITIES

chapter: 14. Miscellaneous Provisions

path: 4. SECURITIES > 3. CAPITAL ACCESS COMPANIES > 14. Miscellaneous Provisions


citation: CORP § 28951

text:
(a) The commissioner may from time to time make, amend, and rescind the rules, forms, and orders that are necessary to carry out this law, and define any terms, whether or not used in this law, insofar as the definitions are not inconsistent with this law. For the purpose of rules, the commissioner may, among other things, classify persons within the commissioner’s jurisdiction and may prescribe different requirements for different classes. The commissioner may, in the commissioner’s discretion, waive any requirement of any rule or form in situations where in his or her opinion the requirement is not necessary in the public interest.

(b) The commissioner may, by regulation or order, either unconditionally or upon specified terms and conditions or for specified periods, exempt from the provisions of this division any person or transaction or class of persons or transactions, if the commissioner finds that action to be in the public interest and that the regulation of those persons or transactions is not necessary for the purposes of this division.

title: 4. SECURITIES


citation: CORP § 28952

text: The commissioner may honor requests from interested persons for interpretive opinions.

title: 4. SECURITIES


citation: CORP § 28953

text: In any proceeding under this law, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

title: 4. SECURITIES


citation: CORP § 28954

text: Every final order, decision, license, or other official act of the commissioner is subject to judicial review in accordance with law.

title: 4. SECURITIES


citation: CORP § 28955

text: Nothing in this law, shall impair, derogate, or otherwise affect the authority or powers of the commissioner under the Corporate Securities Law of 1968 (Part 3 (commencing with Section 25000)) or the application of any provision thereof to any person or transaction subject thereto.

title: 4. SECURITIES


citation: CORP § 28956

text: If any provision of this division , or the application thereof to any person or circumstance, is held invalid, the invalidity shall not affect other provisions or applications of this law that can be given effect without the invalid provision or application, and to this end the provisions of this division are declared to be severable.

history: (History: Amended by Stats. 1999, Ch. 83, Sec. 27. Effective January 1, 2000.)

title: 4. SECURITIES


citation: CORP § 28957

text: Neither the commissioner nor any employee of the commissioner shall use any information which is filed with or obtained by the commissioner which is not public information for personal gain or benefit, nor shall the commissioner nor any employee of the commissioner engage in any securities transaction based on that information, even though public, if there has not been a sufficient period of time for the securities or commodity markets to assimilate that information.

title: 4. SECURITIES


citation: CORP § 28958

text:
(a) The program established by this division shall be supported from funds appropriated by the Legislature from the State Corporations Fund.

(b) The funds appropriated from the State Corporations Fund and made available for expenditure under subdivision (a) of this section shall come from fees collected under Section 28110, penalties collected under Sections 28880 and 28900, and securities application filing fees collected under subdivisions (e), (f), (h), and (i) of Section 25608 and notice filing fees collected under subdivision (a) of Section 25608.1.

title: 4. SECURITIES


citation: CORP § 29000

text: Unless the provision or the context otherwise requires, the definitions set forth in this chapter govern the construction of this division.

history: (History: Added by Stats. 1949, Ch. 386.)

division: 4. BUCKET SHOP LAW

title: 4. SECURITIES

chapter: 1. Definitions

path: 4. SECURITIES > 4. BUCKET SHOP LAW > 1. Definitions


citation: CORP § 29001

text: “Person” means an individual, partnership, corporation, limited liability company, or association, either domestic or foreign, whether acting in his or her own right or as the officer, agent, servant, employee, correspondent, or representative of another or as trustee.

history: (History: Amended by Stats. 1994, Ch. 1010, Sec. 93. Effective January 1, 1995.)

title: 4. SECURITIES


citation: CORP § 29002

text:
(a) “Trustee” means a person executing a trust, as defined in this section.

(b) “Trust” means any voluntary trust expressly created by or declared in an instrument in writing, other than a will or a judicial writ, order, decree, or judgment, to carry on any business or to secure the payment or repayment of money.

history: (History: Amended by Stats. 1986, Ch. 820, Sec. 23. Operative July 1, 1987, by Sec. 43 of Ch. 820.)

title: 4. SECURITIES


citation: CORP § 29003

text: “Contract” includes any agreement, trade, or transaction.

title: 4. SECURITIES


citation: CORP § 29004

text: “Securities” means all shares in any corporation or association or of trustees, bonds, coupons, scrip, rights, choses in action, and other evidences of debt or property and options for the purchase or sale thereof or of any right entitling the holder thereof to participate in profits or a division of assets.

title: 4. SECURITIES


citation: CORP § 29005

text: “Commodities” means anything movable that is bought and sold.

title: 4. SECURITIES


citation: CORP § 29006

text: “Bucket shop” means any room, office, store, building, or other place where any bucketing or bucket shopping contract is made or offered to be made.

title: 4. SECURITIES


citation: CORP § 29007

text: “Keeper” means any person owning, keeping, managing, operating, or promoting a bucket shop, or assisting to keep, manage, operate, or promote a bucket shop.

title: 4. SECURITIES


citation: CORP § 29008

text:
“Bucketing” or “bucket shopping” means any of the following:

(a) Making or offering to make any contract respecting the purchase or sale of any securities or commodities, wherein both parties intend, or the keeper intends, that the contract shall be, or may be, terminated, closed, or settled according to or upon the basis of the public market quotations of prices made on any board of trade or exchange upon which the securities or commodities are dealt in, without a bona fide purchase or sale of the securities or commodities.

(b) Making or offering to make any contract respecting the purchase or sale of any securities or commodities, wherein both parties intend, or the keeper intends, that the contract shall be, or may be, deemed terminated, closed, or settled when the public market quotations of prices for the securities or commodities named in the contract reach a certain figure without a bona fide purchase or sale of the securities or commodities.

(c) Making or offering to make any contract respecting the purchase or sale of any securities or commodities, wherein both parties do not intend, or such keeper does not intend, the actual or bona fide receipt or delivery of the securities or commodities, but do intend, or the keeper does intend, a settlement of the contract based upon the differences in the public market quotations of prices at which the securities or commodities are or are asserted to be bought and sold.

(d) The sale by a keeper of any security or commodity purchased by him for the account of or upon the order of another when the proceeds of the sale are not immediately credited by the keeper to the account of the other person and when a report or statement in writing of the sale is not rendered to the other person by the keeper on the next business day following the sale.

title: 4. SECURITIES


citation: CORP § 29100

text: Any person who makes or offers to make any contract constituting bucketing under Section 29008, or who makes any sale constituting bucketing under Section 29008, or who is the keeper of any bucket shop, is guilty of a felony.

title: 4. SECURITIES

chapter: 2. Prohibited Activities

path: 4. SECURITIES > 4. BUCKET SHOP LAW > 2. Prohibited Activities


citation: CORP § 29101

text: Any person who communicates, receives, exhibits, or displays in any manner any statement of quotations of prices of any securities or commodities, with an intent to make, or to offer to make, or to aid in making or offering to make, any contract constituting bucketing under Section 29008 is guilty of a felony.

title: 4. SECURITIES


citation: CORP § 29102

text: The felonies specified in this chapter are punishable, for each offense, if the offender is a corporation, by a fine of not less than one thousand dollars ($1,000) nor more than ten thousand dollars ($10,000) or, if the offender is not a corporation, by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code, or by a fine of not less than one thousand dollars ($1,000) nor more than ten thousand dollars ($10,000), or by both that imprisonment and fine.

history: (History: Amended by Stats. 2011, Ch. 15, Sec. 51. (AB 109) Effective April 4, 2011. Operative October 1, 2011, by Sec. 636 of Ch. 15, as amended by Stats. 2011, Ch. 39, Sec. 68.)

title: 4. SECURITIES


citation: CORP § 29103

text: The prosecution, conviction, and punishment of a corporation under any provision of this chapter shall not be deemed to be a prosecution, conviction, or punishment of any of its officers, directors, or shareholders.

title: 4. SECURITIES


citation: CORP § 29104

text: All contracts for the purchase or sale of shares of the capital stock of any corporation or association without any intention on the part of one party to deliver and of the other party to receive the shares, and contemplating merely the payment of differences between the contract and market prices on divers days, shall be void, and neither party to any such contract shall be entitled to recover any damages for failure to perform the same, or any money paid thereon, in any court of this state.

history: (History: Added by Stats. 1966, 1st Ex. Sess., Ch. 161.)

title: 4. SECURITIES


citation: CORP § 29105

text:
(a) It is unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the administration or enforcement of this division.

(b) It is unlawful for any person to knowingly make an untrue statement to the commissioner during the course of licensing, investigation, or examination, with the intent to impede, obstruct, or influence the administration or enforcement of any provision of this division.

history: (History: Added by Stats. 2007, Ch. 101, Sec. 9. Effective January 1, 2008.)

title: 4. SECURITIES


citation: CORP § 29200

text:
Every person doing business as a broker or making contracts as a broker or agent for the purchase or sale of any securities or commodities on any board of trade or exchange shall keep or cause to be kept at their office or place of business correct and permanent records or books of account showing each of such transactions as a separate item. The failure so to keep or cause to be kept such records or books of account is prima facie evidence that any such contract was bucketing or bucketshopping.

Such records or books of account shall at all times be open to inspection by the Commissioner of Financial Protection and Innovation or by any deputy, investigator, or auditor of the Department of Financial Protection and Innovation to whom the commissioner may delegate such authority in writing.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 89. (SB 1498) Effective January 1, 2023.)

title: 4. SECURITIES

chapter: 3. Required Records and Statements

path: 4. SECURITIES > 4. BUCKET SHOP LAW > 3. Required Records and Statements


citation: CORP § 29201

text: Every person shall, upon written demand therefor, furnish to any customer or principal for whom he has executed any order for the actual purchase or sale of any securities or commodities on any board of trade or exchange, either for immediate or future delivery, a written statement showing the name of the person from whom the property was bought or to whom it was sold, as the case may be, and the time when, place where, and the price at which it was either bought or sold. If any such person refuses or neglects to furnish such a statement within forty-eight hours after such demand, the refusal or neglect is prima facie evidence that the transaction was bucketing or bucket shopping within the terms of this division.

title: 4. SECURITIES


citation: CORP § 29500

text: This division shall be known and may be cited as the “California Commodity Law of 1990.” References herein to “this law” refer to the applicable provisions of this division unless the context otherwise requires. The definitions in this chapter govern the construction of this law.

history: (History: Added by Stats. 1990, Ch. 969, Sec. 2.)

division: 4.5. COMMODITIES

title: 4. SECURITIES

path: 4. SECURITIES > 4.5. COMMODITIES > 1. Definitions


citation: CORP § 29501

text: “Board of trade” means any person or group of persons engaged in buying or selling any commodity or receiving the same for sale on consignment, whether the person or group of persons is characterized as a board of trade, exchange, or other form of marketplace.

title: 4. SECURITIES


citation: CORP § 29502

text: “Business days” are all days other than every Saturday, every Sunday and such other days as are specified or provided for as holidays in the Government Code.

title: 4. SECURITIES


citation: CORP § 29503

text: “Commissioner” means the Commissioner of Financial Protection and Innovation.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 90. (SB 1498) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 29504

text: “Commodity” means, except as otherwise specified by the commissioner by rule or order, any agricultural, grain, or livestock product or byproduct, any metal or mineral (including a precious metal set forth in Section 29515), any gem or gemstone (whether characterized as precious, semiprecious, or otherwise), any fuel (whether liquid, gaseous, or otherwise), any foreign currency, and all other goods, articles, products, or items of any kind. However, the term “commodity” shall not include (a) a numismatic coin whose fair market value is at least 15 percent higher than the value of the metal it contains, or (b) any work of art offered or sold by art dealers, at public auction, or through a private sale by the owner of the work of art.

history: (History: Amended by Stats. 1991, Ch. 262, Sec. 1.)

title: 4. SECURITIES


citation: CORP § 29505

text:
(a) “Commodity contract” means any account, agreement, or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties, and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract, or otherwise. A “commodity contract” includes a commodity option as defined in Section 29510, unless otherwise specified. Any “commodity contract” offered or sold shall, in the absence of evidence to the contrary, be presumed to be offered or sold for speculation or investment purposes.

(b) A “commodity contract” shall not include any contract or agreement which requires, and under which the purchaser personally receives, or at the request of the purchaser a family member or an individual (which individual is other than the seller or any affiliate of the seller, including any officer, director, or employee of the seller or any affiliate of the seller) with whom the purchaser has a preexisting close personal or preexisting business relationship personally receives, within 28 calendar days from the full payment in good funds of the purchase price, actual physical delivery of the quantity of each commodity purchased under the contract or agreement. In the case of a seller who requires a partial payment of the total purchase price before obligating itself to actually physically deliver the quantity of each commodity purchased under the contract or agreement described in this subdivision, both the amount remaining on the total purchase price shall be paid in good funds and actual physical delivery of the quantity of each commodity purchased under the contract or agreement shall be personally received (by the purchaser or above-described individual) within 28 calendar days from the date of the partial payment in good funds. Otherwise, for the purposes of this exclusion from the definition of a “commodity contract,” a partial payment of, or an installment payment on, the purchase price is not a full payment in good funds of the purchase price.

history: (History: Amended by Stats. 1991, Ch. 262, Sec. 2.)

title: 4. SECURITIES


citation: CORP § 29506

text: “Commodity Exchange Act” means the federal statute so named, as amended before or after January 1, 1991.

title: 4. SECURITIES


citation: CORP § 29507

text: “Commodity Futures Trading Commission” means the independent regulatory agency established by Congress to administer the Commodity Exchange Act.

title: 4. SECURITIES


citation: CORP § 29508

text: “CFTC Rule” means any rule, regulation, or order of the Commodity Futures Trading Commission in effect on January 1, 1991, and all subsequent amendments, additions, or other revisions thereto, unless the commissioner, within 10 days following the effective date of any amendment, addition, or revision, disallows the application thereof to this law or to any provision thereof by rule or order.

title: 4. SECURITIES


citation: CORP § 29509

text:
“Commodity merchant” means any of the following, as defined or described in the Commodity Exchange Act or by CFTC Rule:

(a) Futures commission merchant.

(b) Commodity pool operator.

(c) Commodity trading advisor.

(d) Introducing broker.

(e) Leverage transaction merchant.

(f) An associated person of any person specified in subdivisions (a) to (d), inclusive.

(g) Floor broker.

(h) Any other person (other than a futures association) required to register with the Commodity Futures Trading Commission.

history: (History: Amended by Stats. 1991, Ch. 262, Sec. 3.)

title: 4. SECURITIES


citation: CORP § 29510

text: “Commodity option” means any account, agreement, or contract giving a party thereto the right but not the obligation to purchase or sell one or more commodities or one or more commodity contracts, or both, whether characterized as an option, privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise, but shall not include an option traded on a national securities exchange registered with the United States Securities and Exchange Commission.

title: 4. SECURITIES


citation: CORP § 29511

text: “Financial institution” means (a) a national bank or a bank or trust company incorporated under the laws of this state, (b) a federal savings and loan association or federal savings bank, or (c) a federally insured bank chartered by a state of the United States when the commodity depository activities of the bank are supervised by the bank regulator of that state.

title: 4. SECURITIES


citation: CORP § 29512

text: “Good funds” means the verified receipt of immediately available funds according to the applicable requirements of federal Regulation CC.

title: 4. SECURITIES


citation: CORP § 29513

text: “Offer” includes every offer to sell, offer to purchase, or offer to enter into a commodity contract or commodity option.

title: 4. SECURITIES


citation: CORP § 29514

text: “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, an unincorporated organization, a government, or a political subdivision of a government.

history: (History: Amended by Stats. 1994, Ch. 1010, Sec. 94. Effective January 1, 1995.)

title: 4. SECURITIES


citation: CORP § 29515

text:
“Precious metal” means the following in either coin, bullion, or other form:

(a) Silver.

(b) Gold.

(c) Platinum.

(d) Palladium.

(e) Copper.

(f) Other items that the commissioner may specify by rule or order.

title: 4. SECURITIES


text: “Purchase price” means all funds paid by or on behalf of a purchaser to a seller of a commodity contract or a commodity option (or to another person at the request or direction of a seller), including, but not limited to, the sale price of a commodity, an administrative charge or fee, assessment, deposit, dues, handling charge or fee, holding charge or fee, membership charge or fee, reservation charge or fee, or any charge, fee, or other payment made or paid in connection with the sale of a commodity contract or a commodity option.

history: (History: Added by Stats. 1991, Ch. 262, Sec. 4.)

title: 4. SECURITIES


citation: CORP § 29516

text: “Sale” or “sell” includes every sale, contract of sale, contract to sell, or disposition, for value.

title: 4. SECURITIES


citation: CORP § 29520

text: Except as otherwise provided in Section 29530, 29531, or 29532, no person shall sell or purchase or offer to sell or purchase any commodity under any commodity contract or under any commodity option, or offer to enter into, or enter into, as seller or purchaser any commodity contract or any commodity option.

title: 4. SECURITIES

chapter: 2. Unlawful Commodity Transactions

path: 4. SECURITIES > 4.5. COMMODITIES > 2. Unlawful Commodity Transactions


citation: CORP § 29530

text:
(a) The prohibitions in Section 29520 shall not apply to any transaction offered by and in which any of the following persons (or any employee, officer, or director thereof acting solely in that capacity) is the purchaser or seller:

(1) A person registered with the Commodity Futures Trading Commission as a futures commission merchant or as a leverage transaction merchant whose activities require registration.

(2) A person affiliated with, and whose obligations and liabilities under the transaction are guaranteed by, a person referred to in subdivision (a).

(3) A person who is a member of a contract market designated by the Commodity Futures Trading Commission (or any clearinghouse thereof) when the transaction at issue requires membership in and is subject to the regulatory jurisdiction of that contract market.

(4) A financial institution.

(5) A broker-dealer licensed under Section 25211, or exempt from licensure under Section 25200, when engaging in activities subject to the exclusive regulatory jurisdiction of the Commodity Futures Trading Commission.

(6) A person licensed pursuant to Chapter 14 (commencing with Section 1800) of Division 1 of the Financial Code to receive money for transmittal to foreign countries if (A) the license has not expired or been surrendered, suspended, or revoked, (B) the licensed person has a tangible net worth of at least 3 million dollars ($3,000,000) according to its audited financial statements prepared by an independent certified public accountant for each of the immediately preceding three fiscal years, and (C) pursuant to the provisions of subdivision (b) of Section 29531, the licensed person issues and a purchaser receives a certificate, document of title, confirmation, or other instrument evidencing that the purchased quantity of precious metals or foreign currencies has been delivered to a depository which is a financial institution located in a state of the United States.

(b) The exemption provided by subdivision (a) shall not apply to any transaction or activity which is prohibited by the Commodity Exchange Act or CFTC Rule.

history: (History: Amended by Stats. 2000, Ch. 705, Sec. 7. Effective January 1, 2001.)

title: 4. SECURITIES

chapter: 3. Exemptions

path: 4. SECURITIES > 4.5. COMMODITIES > 3. Exemptions


citation: CORP § 29531

text:
The prohibitions in Section 29520 shall not apply to the following:

(a) An account, agreement, or transaction within the exclusive regulatory jurisdiction of the Commodity Futures Trading Commission as granted under Section 2 of Title 42 of the United States Code (Section 2(a)(1)(A) of the Commodity Exchange Act).

(b) A commodity contract for the purchase of one or more precious metals or foreign currencies which requires full payment in good funds of the purchase price and under which the purchaser receives, within 28 calendar days from the full payment in good funds of the purchase price, substitute delivery of the quantity of the precious metals or foreign currencies purchased, or a commodity contract for the purchase of one or more precious metals or foreign currencies which allows partial payment in good funds of the purchase price and under which the purchaser receives within 28 calendar days from the partial payment in good funds of the purchase price, substitute delivery of the quantity of precious metals or foreign currencies purchased by that payment; provided that, for purposes of this subdivision, substitute delivery shall be deemed to have occurred if, within the 28-day period, the quantity of precious metals or foreign currencies purchased by the full or partial payment is actually physically delivered (whether in specifically segregated or fungible bulk form) into the possession of a depository (other than the seller) which is either (1) a financial institution, (2) a depository, the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the Commodity Futures Trading Commission, (3) a storage facility licensed or regulated by the United States or any agency thereof, or (4) a facility for the storage of precious metals or foreign currencies located within a state of the United States and operated by an armored contract carrier defined under subdivision (e), or (5) a depository designated by the commissioner. The depository (or other person which itself qualifies as a depository) enumerated in this subdivision shall issue and the purchaser shall receive a certificate, document of title, confirmation or other instrument evidencing that the quantity of precious metals has been delivered to the depository and is being and will continue to be held by the depository on the purchaser’s behalf, free and clear of all liens and encumbrances, other than liens of the purchaser, tax liens, liens agreed to by the purchaser, or liens of the depository for fees and expenses, which have previously been disclosed to the purchaser.

(c) A commodity contract solely between persons engaged in producing, processing, using commercially or handling as merchants, each commodity subject thereto, or any byproduct thereof.

(d) A commodity contract under which the offeree or the purchaser is a person referred to in Section 29530, an insurance company, or an investment company as defined in Section 80a-3 of Title 15 of the United States Code (Section 3 of Title I of the federal Investment Company Act of 1940).

(e) For the purposes of this section, “armored contract carrier” means a person who: (1) is operating as a carrier transporting coin, currency, precious metals, securities, or negotiable items pursuant to a currently effective permit as a highway contract carrier and a city carrier issued by the Public Utilities Commission of this state and is also operating a facility for the storage of precious metals or foreign currencies pursuant to a commodity contract; (2) has purchased and maintains sufficient amounts of insurance coverage for all risks associated with the operation of a facility for the storage of precious metals or foreign currencies from an insurance company admitted in this state; (3) has continuously operated as a carrier under its permit and has continuously operated a facility for the storage of precious metals or foreign currencies for at least five years; (4) has a tangible net worth of at least five million dollars ($5,000,000) for each of the immediately preceding five fiscal years according to its financial statements prepared on an individual company basis, or on a combining or consolidating basis with any affiliates, which financial statements have been audited by an independent certified public accountant; and (5) provides the following disclosure to a purchaser in 10-point boldface type with the certificate, document of title, confirmation, or other instrument evidencing that the purchased quantity of precious metals or foreign currencies has been delivered to or is on deposit with the storage facility: “(Name of carrier) is not licensed, regulated, or supervised as a depository or storage facility by the United States Government or the State of California.”

history: (History: Amended by Stats. 1991, Ch. 262, Sec. 5.)

title: 4. SECURITIES


citation: CORP § 29532

text: The commissioner may by rule or order prescribe the terms and conditions of all transactions and contracts covered by this law and exempt any person or transaction from this law conditionally or unconditionally.

title: 4. SECURITIES


citation: CORP § 29535

text:
(a) No person shall engage in a trade or business or otherwise act as a commodity merchant unless the person (1) is registered or temporarily licensed with the Commodity Futures Trading Commission for each activity constituting that person as a commodity merchant and the registration or temporary license shall not have expired, been suspended, or revoked; or (2) is exempt from the registration by virtue of the Commodity Exchange Act (7 U.S.C. Sec. 1 et seq.) or of a CFTC rule.

(b) No board of trade shall trade, or provide a place for the trading of, any commodity contract required to be traded on or subject to the rules of a contract market designated by the Commodity Futures Trading Commission, unless the board of trade has been so designated for the commodity contract and that designation shall not have been vacated, suspended, or revoked.

title: 4. SECURITIES

path: 4. SECURITIES > 4.5. COMMODITIES > 4. Unlawful Activities and Fraudulent Conduct


citation: CORP § 29536

text:
It is unlawful for any person, directly or indirectly, in connection with the purchase or sale of, the offer to sell, the offer to purchase, the offer to enter into, or the entry into, a commodity, commodity contract, or commodity option to do any of the following:

(a) To willfully employ any device, scheme, or artifice to defraud.

(b) To willfully make any false report, enter any false record, make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

(c) To willfully engage in any transaction, act, practice, or course of business which operates or would operate as a fraud or deceit upon any persons.

(d) To willfully misappropriate or convert the funds, security, or property of any other person.

title: 4. SECURITIES

chapter: 4. Unlawful Activities and Fraudulent Conduct


citation: CORP § 29537

text:
(a) Sections 29520, 29535, and 29536 apply to persons who sell or offer to sell when either of the following occur:

(1) An offer to sell is made in this state.

(2) An offer to buy is made and accepted in this state.

(b) Sections 29520, 29535, and 29536 apply to persons who buy or offer to buy when either of the following occur:

(1) An offer to buy is made in this state.

(2) An offer to sell is made and accepted in this state.

(c) For the purpose of this section, an offer to sell or to buy is made in this state, whether or not either party is then present in this state, when the offer:

(1) Originates from this state.

(2) Is directed by the offeror to this state and received at the place to which it is directed (or at any post office in this state in the case of a mailed offer).

(d) For the purpose of this section, an offer to buy or to sell is accepted in this state when acceptance:

(1) Is communicated to the offeror in this state.

(2) Has not previously been communicated to the offeror, orally or in writing, outside this state. Acceptance is communicated to the offeror in this state, whether or not either party is then present in this state, when the offeree directs it to the offeror in this state, reasonably believing the offeror to be in this state and it is received at the place to which it is directed (or at any post office in this state in the case of a mailed acceptance).

(e) An offer to sell or to buy is not made in this state when either of the following occur:

(1) The publisher circulates or there is circulated on his or her behalf in this state any bona fide newspaper or other publication of general, regular, and paid circulation which is not published in this state, or which is published in this state but has had more than two-thirds of its circulation outside this state during the past 12 months.

(2) A radio or television program originating outside this state is received in this state.

title: 4. SECURITIES


citation: CORP § 29538

text:
(a) It is unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the administration or enforcement of this division.

(b) It is unlawful for any person to knowingly make an untrue statement to the commissioner during the course of licensing, investigation, or examination, with the intent to impede, obstruct, or influence the administration or enforcement of any provision of this division.

history: (History: Added by Stats. 2007, Ch. 101, Sec. 10. Effective January 1, 2008.)

title: 4. SECURITIES


citation: CORP § 29540

text:
(a) 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 this law or any rule or order under this law, the commissioner may in his or her 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 this law or any rule or order under this law. Upon a proper showing, a permanent or preliminary injunction, restraining order, or writ of mandate shall be granted and a monitor, receiver, conservator, or other designated fiduciary or officer of the court may be appointed for the defendant or the defendant’s assets, or other ancillary relief may be granted as appropriate.

A receiver, monitor, conservator, or other designated fiduciary or officer of the court appointed by the superior court pursuant to this section may, with the approval of the court, exercise all of the powers of the defendant’s officers, directors, partners, trustees, or persons who exercise similar powers and perform similar duties, including the filing of a petition for bankruptcy. No action at law or in equity may be maintained by any party against the commissioner, or a receiver, monitor, conservator, or other designated fiduciary or officer of the court by reason of their exercising these powers or performing these duties pursuant to the order of, or with the approval of, the superior court.

(b) If the commissioner determines it is in the public interest, the commissioner may include in any action authorized by subdivision (a) a claim for ancillary relief, including, but not limited to, a claim for restitution, disgorgement, or damages on behalf of the person injured by the act or practice constituting the subject matter of the action, and the court shall have jurisdiction to award additional relief.

title: 4. SECURITIES

chapter: 5. Powers of the Commissioner

path: 4. SECURITIES > 4.5. COMMODITIES > 5. Powers of the Commissioner


citation: CORP § 29541

text:
(a) The commissioner in his or her discretion (1) may make public or private investigations within or outside of this state that the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of this law or any rule or order hereunder, or to aid the enforcement of this law or in the prescribing of rules and forms under this law, and (2) may publish information concerning any violation of this law or a rule or order hereunder.

(b) For the purpose of any investigation or proceeding under this law, 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.

(c) 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 him or her 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.

(d) No person is excused from attending and 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 him or her may tend to incriminate him or her or subject him or her to a penalty or forfeiture. However, no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he or she is compelled, after validly claiming his or her 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.

title: 4. SECURITIES


citation: CORP § 29542

text:
(a) If, in the opinion of the commissioner, any person is engaging or has engaged 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.

history: (History: Amended by Stats. 2022, Ch. 188, Sec. 4. (AB 2433) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 29543

text: The commissioner may refer the evidence that is available concerning any violation of this law, or of any rule or order under this law, to the Attorney General or the district attorney of the county in which the violation occurred, who may, with or without such a reference, institute appropriate criminal proceedings under this law. The commissioner and the commissioner’s counsel, deputies, or assistants may, upon request of the Attorney General or the district attorney, assist the prosecutor in presenting the law or facts at the trial.

title: 4. SECURITIES


citation: CORP § 29544

text:
(a) Any person who willfully violates any provision of this law, or who willfully violates any rule or order under this law, shall be liable for a civil penalty not to exceed twenty-five thousand dollars ($25,000) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the commissioner in any court of competent jurisdiction.

The penalty collected shall be paid to the State Corporations Fund to be used for the support of this division.

(b) As applied to the penalties for acts in violation of this division, the remedies provided by this section and by other sections of this division are not exclusive, and may be sought and employed in any combination to enforce this division.

(c) No action shall be maintained to enforce any liability created under subdivision (a) unless brought before the expiration of four years after the act or transaction constituting the violation.

history: (History: Amended by Stats. 2003, Ch. 876, Sec. 3. Effective January 1, 2004.)

title: 4. SECURITIES


citation: CORP § 29545

text:
(a) The commissioner may take actions that are authorized by Section 13a-2 of Title 7 of the United States Code (Section 6d of the federal Commodity Exchange Act) as amended before or after the effective date of this section.

(b) Nothing in this section shall be construed as a limitation on the powers of the commissioner under this act or any other law administered by the commissioner.

history: (History: Amended by Stats. 2013, Ch. 335, Sec. 12. (SB 538) Effective January 1, 2014.)

title: 4. SECURITIES


citation: CORP § 29546

text: The commissioner in his or her discretion may honor requests from interested parties for interpretive opinions.

title: 4. SECURITIES


citation: CORP § 29550

text:
(a) Except as provided in subdivision (b), any person who willfully violates any provision of this law, or who willfully violates any rule or order under this law, shall upon conviction be fined not more than two hundred fifty thousand dollars ($250,000) or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or in a county jail for not more than one year, or be punished by both a fine and imprisonment; but no person may be imprisoned for the violation of any rule or order if that person proves that he or she had no knowledge of the rule or order.

(b) Any person who willfully violates Section 29536 shall upon conviction be fined not more than two hundred fifty thousand dollars ($250,000), or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code for two, three, or four years, or be punished by both that fine and imprisonment.

(c) One-half of the fines collected under this section shall be paid to the State Corporations Fund to be used for the support of this division. The remainder of the fines collected under this section shall be paid to the state or local agency which brought the criminal prosecution.

history: (History: Amended by Stats. 2011, Ch. 15, Sec. 52. (AB 109) Effective April 4, 2011. Operative October 1, 2011, by Sec. 636 of Ch. 15, as amended by Stats. 2011, Ch. 39, Sec. 68.)

title: 4. SECURITIES

chapter: 6. Crimes and Civil Liability

path: 4. SECURITIES > 4.5. COMMODITIES > 6. Crimes and Civil Liability


citation: CORP § 29551

text: Nothing in this law limits the power of the state to punish any person for any conduct which constitutes a crime under any other statute.

title: 4. SECURITIES


citation: CORP § 29552

text: Any person who materially assists in any violation of this law, or any rule or order of the commissioner under this law, is jointly and severally liable with any other person liable under this law for the violation.

title: 4. SECURITIES


citation: CORP § 29553

text: No action shall be maintained to enforce any liability under Section 29552 unless brought before the expiration of four years after the act or transaction constituting the violation or within one year after the discovery by the plaintiff of the facts constituting the violation, whichever occurs last.

title: 4. SECURITIES


citation: CORP § 29554

text: Every cause of action under this law survives the death of any person who might have been a plaintiff or defendant.

title: 4. SECURITIES


citation: CORP § 29555

text: Except as explicitly provided in this law, no civil liability in favor of any private party shall arise against any person by implication from, or as a result of, the violation of any provision of this law or any rule or order under this law. Nothing in this law shall limit any liability which may exist by virtue of any other statute or under common law if this law were not in effect.

title: 4. SECURITIES


citation: CORP § 29560

text: No provision of this law imposing any liability applies to any act done or omitted in good faith in conformity with any rule, form, permit, order, or written interpretive opinion of the commissioner, or any written interpretive opinion of the Attorney General, notwithstanding that the rule, form, permit, order, or written interpretive opinion may later be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

title: 4. SECURITIES

chapter: 7. Miscellaneous Provisions

path: 4. SECURITIES > 4.5. COMMODITIES > 7. Miscellaneous Provisions


citation: CORP § 29561

text: The commissioner may from time to time make, amend, and rescind the rules, forms, and orders that are necessary to carry out this law, and define any terms, whether or not used in this law, insofar as the definitions are not inconsistent with this law. For the purpose of rules, the commissioner may classify commodities, commodity contracts, commodity options, and persons within the commissioner’s jurisdiction and may prescribe different requirements for different classes. The commissioner may, in the commissioner’s discretion, waive any requirement of any rule or form in situations where in his or her opinion the requirement is not necessary in the public interest.

title: 4. SECURITIES


citation: CORP § 29562

text: In any proceeding under this law, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

title: 4. SECURITIES


citation: CORP § 29563

text: Every final order, decision, certificate, registration, or other official act of the commissioner is subject to judicial review in accordance with law.

title: 4. SECURITIES


citation: CORP § 29564

text: Nothing in this law, shall impair, derogate, or otherwise affect the authority or powers of the commissioner under the Corporate Securities Law of 1968 (Part 3 (commencing with Section 25000)) or the application of any provision thereof to any person or transaction subject thereto.

title: 4. SECURITIES


citation: CORP § 29565

text: If any provision of this law or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this law which can be given effect without the invalid provision or application, and to this end this law is declared to be severable.

title: 4. SECURITIES


citation: CORP § 29566

text: Neither the commissioner nor any employee of the commissioner shall use any information which is filed with or obtained by the commissioner which is not public information for personal gain or benefit, nor shall the commissioner nor any employee of the commissioner engage in any securities or commodity transaction based on that information, even though public, if there has not been a sufficient period of time for the securities or commodity markets to assimilate that information.

title: 4. SECURITIES


citation: CORP § 29567

text:
(a) The program established by this division shall be supported from funds appropriated by the Legislature from the State Corporations Fund.

(b) The funds appropriated from the State Corporations Fund and made available for expenditure under subdivision (a) of this section shall come from securities application filing fees collected under subdivisions (e), (f), (h), and (i) of Section 25608 of the Corporations Code.

history: (History: Added by Stats. 1996, Ch. 466, Sec. 3. Effective January 1, 1997.)

title: 4. SECURITIES


citation: CORP § 31000

text: This division may be known as the “Franchise Investment Law.” References in this division to “this law” refer to the applicable provisions of this division.

history: (History: Added by Stats. 1970, Ch. 1400.)

division: 5. FRANCHISE INVESTMENT LAW

part: 1. DEFINITIONS

title: 4. SECURITIES

path: 4. SECURITIES > 5. FRANCHISE INVESTMENT LAW > 1. DEFINITIONS


citation: CORP § 31001

text:
The Legislature hereby finds and declares that the widespread sale of franchises is a relatively new form of business which has created numerous problems both from an investment and a business point of view in the State of California. Prior to the enactment of this division, the sale of franchises was regulated only to the limited extent to which the Corporate Securities Law of 1968 applied to those transactions. California franchisees have suffered substantial losses where the franchisor or his or her representative has not provided full and complete information regarding the franchisor-franchisee relationship, the details of the contract between franchisor and franchisee, and the prior business experience of the franchisor.

It is the intent of this law to provide each prospective franchisee with the information necessary to make an intelligent decision regarding franchises being offered. Further, it is the intent of this law to prohibit the sale of franchises where the sale would lead to fraud or a likelihood that the franchisor’s promises would not be fulfilled, and to protect the franchisor and franchisee by providing a better understanding of the relationship between the franchisor and franchisee with regard to their business relationship.

history: (History: Amended by Stats. 2004, Ch. 458, Sec. 1. Effective September 10, 2004. Operative January 1, 2005, by Sec. 19 of Ch. 458.)

title: 4. SECURITIES


text:
(a) To enhance the uniform and efficient administration, and the effective enforcement, of this division, it is the intent of the Legislature that the commissioner shall maintain a risk-based process of reviewing franchise applications as described in this section.

(b) Under the risk-based review process, the commissioner shall focus on reviewing application information posing the most risk to prospective franchisees in accordance with Section 31115, with emphasis on risks associated with the franchisor’s financial condition, the franchisor’s compliance record, and significant deficiencies with the franchisor’s application.

(c) When reviewing franchise filings under this section, the commissioner shall concentrate on helping to prevent misappropriation, mismanagement, and misrepresentation in connection with the offer or sale of any franchise subject to this division.

(d) The commissioner shall consider guidelines, or other information developed by the North American Securities Administrators Association that are in effect, to assist in the implementation of the risk-based review process. The risk-based review procedures implemented by the commissioner shall be considered internal management criteria and guidelines within the meaning of subdivisions (d) and (e) of Section 11340.9 of the Government Code.

history: (History: Added by Stats. 2004, Ch. 458, Sec. 2. Effective September 10, 2004. Operative January 1, 2005, by Sec. 19 of Ch. 458.)

title: 4. SECURITIES


citation: CORP § 31002

text: Unless the context otherwise requires, the definitions in this part apply throughout this division.

title: 4. SECURITIES


citation: CORP § 31003

text: “Advertisement” means any written or printed communication or any communication by means of recorded telephone messages or spoken on radio, television, or similar communications media, published in connection with an offer or sale of a franchise.

title: 4. SECURITIES


text: “Business days” are all days other than every Saturday, every Sunday, and such other days as are specified or provided for as holidays in the Government Code.

history: (History: Added by Stats. 1973, Ch. 539.)

title: 4. SECURITIES


citation: CORP § 31004

text: “Commissioner” means the Commissioner of Financial Protection and Innovation.

history: (History: Amended by Stats. 2022, Ch. 728, Sec. 5. (AB 676) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 31005

text:
(a) “Franchise” means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which:

(1) A franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor; and

(2) The operation of the franchisee’s business pursuant to such plan or system is substantially associated with the franchisor’s trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor or its affiliate; and

(3) The franchisee is required to pay, directly or indirectly, a franchise fee.

(b) For the purposes of this division, the term “franchise” also means the following:

(1) Any contractual agreement between a petroleum corporation or distributor and a gasoline dealer, or between a petroleum corporation and distributor, under which the petroleum distributor or the gasoline dealer is granted the right to use a trademark, trade name, service mark, or other identifying symbol or name owned by the other party to the agreement, or any agreement between a petroleum corporation or distributor and a gasoline dealer, or between a petroleum corporation and distributor, under which the petroleum distributor or the gasoline dealer is granted the right to occupy premises owned, leased, or controlled by the other party to the agreement, for the purposes of engaging in the retail sale of petroleum and other products of the other party to the agreement.

(2) Any contract between a refiner and a petroleum distributor, between a refiner and a petroleum retailer, between a petroleum distributor and another petroleum distributor, or between a petroleum distributor and a petroleum retailer, under which a refiner or petroleum distributor authorizes or permits a petroleum retailer or petroleum distributor to use, in connection with the sale, consignment, or distribution of gasoline, diesel, gasohol, or aviation fuel, a trademark which is owned or controlled by such refiner or by a refiner which supplies fuel to the petroleum distributor which authorizes or permits such use. The term “franchise” as defined in this paragraph includes the following:

(A) Any contract under which a petroleum retailer or petroleum distributor is authorized or permitted to occupy leased marketing premises, which premises are to be employed in connection with the sale, consignment, or distribution of fuel under a trademark which is owned or controlled by such refiner or by a refiner which supplies fuel to the petroleum distributor which authorizes or permits such occupancy.

(B) Any contract pertaining to the supply of fuel which is to be sold, consigned, or distributed under a trademark owned or controlled by a refiner, or under a contract which has existed continuously since May 15, 1973, and pursuant to which, on May 15, 1973, fuel was sold, consigned, or distributed under a trademark owned and controlled on such date by a refiner.

(C) The unexpired portion of any franchise, as defined by the preceding provisions of this subdivision, which is transferred or assigned as authorized by the provisions of such franchise or by any applicable provision of state law which permits such transfer or assignment without regard to any provision of the franchise.

(c) For purposes of this division, the term “franchise” does not include a nonprofit organization operated on a cooperative basis by and for independent retailers which wholesales goods and services primarily to its member retailers and to which all of the following is applicable:

(1) Control and ownership of each member is substantially equal.

(2) Membership is limited to those who will avail themselves of the services furnished by the organization.

(3) Transfer of ownership is prohibited or limited.

(4) Capital investment receives no return.

(5) Substantially equal benefits pass to the members on the basis of patronage of the organization.

(6) Members are not personally liable for obligations of the organization in the absence of a direct undertaking or authorization by them.

(7) Services of the organization are furnished primarily for the use of the members.

(8) Each member and prospective member is provided with an offering circular which complies with the specifications of Section 31111.

(9) No part of the receipts, income, or profit of the organization is paid to any profitmaking entity, except for arms-length payments for necessary goods and services, and members are not required to purchase goods or services from any designated profitmaking entity.

(d) The nonprofit organization is subject to an action for rescission or damages under Section 3343.7 of the Civil Code if the organization fraudulently induced the plaintiff to join the organization.

history: (History: Amended by Stats. 1989, Ch. 1380, Sec. 3.)

title: 4. SECURITIES


text:
For the purposes of this division and in respect only to a franchise as defined in subdivision (b) of Section 31005, the following terms shall have the following meanings:

(a) “Franchisor” means a refiner or petroleum distributor who authorizes or permits, under a franchise, a petroleum retailer or petroleum distributor to use a trademark in connection with the sale, consignment, or distribution of fuel.

(b) “Franchisee” means a petroleum retailer or petroleum distributor who is authorized or permitted, under a franchise, to use a trademark in connection with the sale, consignment, or distribution of fuel.

(c) “Refiner” means any person engaged in the refining of crude oil to produce fuel, and includes any affiliate of such person.

(d) “Petroleum distributor” means any person, including any affiliate of such person, who either purchases fuel for sale, consignment, or distribution to another, or receives fuel on consignment for consignment or distribution to his or her own fuel accounts or to accounts of his or her supplier, but shall not include a person who is an employee of, or merely serves as a common carrier providing transportation service for, such supplier.

(e) “Petroleum retailer” means any person who purchases fuel for sale to the general public for ultimate consumption.

(f) “Marketing premises” means, in the case of any franchise, premises which, under such franchise, are to be employed by the franchisee in connection with the sale, consignment, or distribution of fuel.

(g) “Leased marketing premises” means marketing premises owned, leased, or in any way controlled by a franchisor and which the franchisee is authorized or permitted, under the franchise, to employ in connection with the sale, consignment, or distribution of fuel.

(h) “Contract” means any oral or written agreement. For supply purposes, delivery levels during the same month of the previous year shall be prima facie evidence of an agreement to deliver such levels.

(i) “Trademark” means any trademark, trade name, service mark, or other identifying symbol or name.

(j) “Fuel” means gasoline, diesel, gasohol, or aviation fuel.

(k) “Affiliate” means any person who, other than by means of a franchise, controls, is controlled by, or is under common control with, any other person.

(l) “Petroleum corporation” means any corporation or person owning, managing, or controlling the exploration, production, processing, transportation, or sale of crude or refined petroleum or any petroleum product.

history: (History: Added by Stats. 1981, Ch. 90, Sec. 11.)

title: 4. SECURITIES


citation: CORP § 31006

text: A “franchisee” is a person to whom a franchise is granted.

title: 4. SECURITIES


citation: CORP § 31007

text: A “franchisor” is a person who grants a franchise.

title: 4. SECURITIES


citation: CORP § 31008

text: “Area franchise” means any franchise between a franchisor and a franchisee whereby the franchisee is granted the right to operate more than one unit within a specified geographical area.

history: (History: Amended by Stats. 1988, Ch. 562, Sec. 1.)

title: 4. SECURITIES


text: “Subfranchise” means any contract or agreement between a franchisor and a subfranchisor whereby the subfranchisor is granted the right, for consideration given in whole or in part for that right, to sell or negotiate the sale of franchises in the name or on behalf of the franchisor. A contract or agreement which is a franchise does not become a subfranchise merely because under its terms a person is granted the right to receive compensation for referrals to a franchisor or subfranchisor or to receive compensation for acting as a sales representative on their behalf.

history: (History: Added by Stats. 1988, Ch. 562, Sec. 2.)

title: 4. SECURITIES


citation: CORP § 31009

text: A “subfranchisor” is a person to whom a subfranchise is granted.

history: (History: Amended by Stats. 1988, Ch. 562, Sec. 3.)

title: 4. SECURITIES


citation: CORP § 31010

text: Where used in this law, unless specifically stated otherwise, “franchise” includes “area franchise” and “subfranchise.”

history: (History: Amended by Stats. 1988, Ch. 562, Sec. 4.)

title: 4. SECURITIES


citation: CORP § 31011

text:
“Franchise fee” means any fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business under a franchise agreement, including, but not limited to, any payment for goods and services.

However, the following shall not be considered the payment of a franchise fee:

(a) The purchase or agreement to purchase goods at a bona fide wholesale price if no obligation is imposed upon the purchaser to purchase or pay for a quantity of the goods in excess of that which a reasonable businessperson normally would purchase by way of a starting inventory or supply or to maintain a going inventory or supply.

(b) The payment of a reasonable service charge to the issuer of a credit card by an establishment accepting or honoring that credit card.

(c) Amounts paid to a trading stamp company under Chapter 3 (commencing with Section 17750) of Part 3 of Division 7 of the Business and Professions Code by a person issuing trading stamps in connection with the retail sale of merchandise or service.

history: (History: Amended by Stats. 2002, Ch. 664, Sec. 54. Effective January 1, 2003.)

title: 4. SECURITIES


citation: CORP § 31012

text: “Fraud” and “deceit” are not limited to common law fraud or deceit.

title: 4. SECURITIES


citation: CORP § 31013

text:
(a) An offer or sale of a franchise is made in this state when an offer to sell is made in this state, or an offer to buy is accepted in this state, or if the franchise business is intended to or will be operated in this state.

(b) An offer to sell is made in this state when the offer either originates from this state or is directed by the offeror to this state and received at the place to which it is directed. An offer to sell is accepted in this state when acceptance is communicated to the offeror in this state, and acceptance is communicated to the offeror in this state when the offeree directs it to the offeror in this state reasonably believing the offeror to be in this state and it is received at the place to which it is directed.

(c) An offer to sell is not made in this state merely because (1) the publisher circulates or there is circulated on their behalf in this state any bona fide newspaper or other publication of general, regular, and paid circulation that has had more than two-thirds of its circulation outside this state during the past 12 months, or (2) a radio or television program originating outside this state is received in this state.

history: (History: Amended by Stats. 2022, Ch. 728, Sec. 6. (AB 676) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 31014

text: “Order” means a consent, authorization, approval, prohibition or requirement applicable to a specific case issued by the commissioner.

title: 4. SECURITIES


citation: CORP § 31015

text: “Person” means an individual, a corporation, a partnership, a limited liability company, a joint venture, an association, a joint stock company, a trust or an unincorporated organization.

history: (History: Amended by Stats. 1994, Ch. 1010, Sec. 95. Effective January 1, 1995.)

title: 4. SECURITIES


citation: CORP § 31016

text: “Publish” means publicly to issue or circulate by newspaper, mail, radio or television, or otherwise to disseminate to the public.

title: 4. SECURITIES


citation: CORP § 31017

text: “Rule” means any published regulation or standard of general application issued by the commissioner.

title: 4. SECURITIES


citation: CORP § 31018

text:
(a) “Sale” or “sell” includes every contract or agreement of sale of, a contract to sell, or disposition of, a franchise or interest in a franchise for value.

(b) “Offer” or “offer to sell” includes every attempt to dispose of, or solicitation of an offer to buy, a franchise or interest in a franchise for value.

(c) The terms defined in this section do not include the renewal or extension of an existing franchise where there is no interruption in the operation of the franchised business by the franchisee; provided, that a material modification of an existing franchise, whether upon renewal or otherwise, is a “sale” within the meaning of this section.

history: (History: Amended by Stats. 1977, Ch. 762.)

title: 4. SECURITIES


citation: CORP § 31019

text: “State” means any state, territory, or possession of the United States, the District of Columbia and Puerto Rico.

title: 4. SECURITIES


citation: CORP § 31020

text:
(a) “Franchise broker” means a person who directly or indirectly engages in the business of the offer or sale of a franchise, regardless of the title used by the person or any organization with which they are affiliated, and receives or is promised a fee, commission, or other form of consideration from a franchisor, subfranchisor, franchisee, or affiliate of a franchisor, subfranchisor, or franchisee. Common titles franchise brokers use include, but are not limited to, franchise seller, broker network, broker organization, franchise sales organization, consultant, and coach.

(b) A “franchise broker” does not include any of the following:

(1) A franchisor or its officers, directors, or employees.

(2) A subfranchisor or its officers, directors, or employees.

(3) An area representative or its officers, directors, or employees.

(4) An employee of an affiliate of a franchisor or subfranchisor.

(5) A franchisee of the franchise offering being presented to a prospective franchisee, unless the franchisee operates a franchised broker business.

history: (History: Added by Stats. 2024, Ch. 518, Sec. 1. (SB 919) Effective January 1, 2025.)

title: 4. SECURITIES


citation: CORP § 31100

text: There shall be exempted from any or all of the provisions of Chapter 2 (commencing with Section 31110) any other transaction which the commissioner by rule exempts as not being comprehended within the purposes of this law and the registration of which the commissioner finds is not necessary or appropriate in the public interest or for the protection of investors.

history: (History: Amended by Stats. 1989, Ch. 1026, Sec. 1.)

title: 4. SECURITIES

chapter: 1. Exemptions

path: 4. SECURITIES > 5. FRANCHISE INVESTMENT LAW > 1. Exemptions


citation: CORP § 31101

text:
There shall be exempted from the provisions of Chapter 2 (commencing with Section 31110) of this part the offer and sale of a franchise if the franchisor complies with each of the following minimum net worth, experience, disclosure, and notice filing requirements:

(a) Net worth. The franchisor and, when necessary, a corporation owning at least 80 percent of the franchisor (parent) meet one of the following net worth requirements, according to financial statements for the fiscal year just ended. The franchisor and the parent, when necessary, may rely upon the immediately preceding fiscal year’s audited financial statement for 15 months from that fiscal year end date.

(1) The franchisor has a net worth on a consolidated basis of not less than five million dollars ($5,000,000), according to its audited financial statement.

(2) The franchisor has a net worth of not less than one million dollars ($1,000,000) and its parent has a net worth of five million dollars ($5,000,000), according to the audited financial statements of the franchisor and its parent, respectively.

(3) The franchisor has a net worth of one million dollars ($1,000,000), according to its unaudited financial statement, and the parent has a net worth on a consolidated basis of not less than five million dollars ($5,000,000), according to its audited financial statement, and the parent absolutely and unconditionally guarantees to assume the duties and obligations of the franchisor under the franchise agreement should the franchisor become unable to perform its duties and obligations.

(b) Experience. The franchisor or a corporation owning at least 80 percent of the franchisor (parent) complies with one or more of the following conditions throughout the five-year period immediately preceding the offer and sale of the franchise, or complies with one of the following conditions during part of the period and one or more of the following conditions during the balance of the period:

(1) The franchisor has had at least 25 franchisees conducting business which is the subject of the franchise.

(2) The franchisor has conducted business which is the subject of the franchise.

(3) The parent has had at least 25 franchisees conducting business which is the subject of the franchise.

(4) The parent has conducted business which is the subject of the franchise.

(c) Disclosure. (1) Except as provided in paragraph (2), the franchisor discloses in writing to each prospective franchisee, at least 14 days prior to the execution by the prospective franchisee of any binding franchise or other agreement, or at least 14 days prior to the receipt of any consideration, the following information:

(A) The name of the franchisor, the name under which the franchisor is doing or intends to do business, and the name of any parent or affiliated company that will engage in business transactions with franchisees.

(B) The franchisor’s principal business address and the name and address of its agent in the State of California authorized to receive service of process.

(C) The business form of the franchisor, whether corporate, partnership, or otherwise.

(D) The business experience of the franchisor, including the length of time the franchisor (i) has conducted a business of the type to be operated by the franchisees, (ii) has granted franchises for such business, and (iii) has granted franchises in other lines of business.

(E) A copy of the typical franchise contract or agreement proposed for use or in use in this state.

(F) A statement of the franchise fee charged, the proposed application of the proceeds of such fee by the franchisor, and the formula by which the amount of the fee is determined if the fee is not the same in all cases.

(G) A statement describing any payments or fees other than franchise fees that the franchisee or subfranchisor is required to pay to the franchisor, including royalties and payments or fees which the franchisor collects in whole or in part on behalf of a third party or parties.

(H) A statement of the conditions under which the franchise agreement may be terminated or renewal refused, or repurchased at the option of the franchisor.

(I) A statement as to whether, by the terms of the franchise agreement or by other device or practice, the franchisee or subfranchisor is required to purchase from the franchisor or his or her designee services, supplies, products, fixtures, or other goods relating to the establishment or operation of the franchise business, together with a description thereof.

(J) A statement as to whether, by the terms of the franchise agreement or other device or practice, the franchisee is limited in the goods or services offered by him or her to his or her customers.

(K) A statement of the terms and conditions of any financing arrangements when offered directly or indirectly by the franchisor or his or her agent or affiliate.

(L) A statement of any past or present practice or of any intent of the franchisor to sell, assign, or discount to a third party any note, contract, or other obligation of the franchisee or subfranchisor in whole or in part.

(M) If any statement of estimated or projected franchisee earnings is used, a statement of such estimation or projection and the data upon which it is based.

(N) A statement as to whether franchisees or subfranchisors receive an exclusive area or territory.

(O) A copy of the financial statement or statements required by subdivision (a).

(P) A copy of the unconditional guaranty, if applicable, required by paragraph (3) of subdivision (a).

(2) In the case of a material modification of an existing franchise, the franchisor discloses in writing to each franchisee information concerning the specific sections of the franchise agreement proposed to be modified and such additional information as may be required by rule or order of the commissioner. Any agreement by such franchisee to such material modifications shall not be binding upon the franchisee if the franchisee, within 14 days after the receipt of such writing identifying the material modification, notifies the franchisor in writing that the agreement to such modification is rescinded. A writing identifying the material modification is received when delivered to the franchisee. A written notice by the franchisee rescinding an agreement to a material modification is effective when delivered to the franchisor or when deposited in the mail, postage prepaid, and addressed to the franchisor in accordance with any notice provisions in the franchise agreement, or when delivered or mailed to the person designated in the franchise agreement for the receipt of notices on behalf of the franchisor.

(d) Notice filing. The franchisor has filed with the commissioner a notice of exemption and paid the fee required by subdivision (f) of Section 31500 prior to an offer or sale of a franchise in this state during any calendar year in which one or more franchises are sold, excluding any material modification.

history: (History: Amended by Stats. 2013, Ch. 334, Sec. 1. (SB 537) Effective January 1, 2014.)

title: 4. SECURITIES


citation: CORP § 31102

text: The offer or sale of a franchise by a franchisee for his own account or the offer or sale of the entire area franchise owned by a subfranchisor for his own account, is exempted from the provisions of Section 31110 if the sale is not effected by or through a franchisor. A sale is not effected by or through a franchisor merely because a franchisor has a right to approve or disapprove a different franchisee.

history: (History: Added by Stats. 1970, Ch. 1400.)

title: 4. SECURITIES


citation: CORP § 31103

text: This division shall not be applicable to any transaction relating to a bank credit card plan. “Bank credit card plan” means a credit card plan in which the issuers of credit cards, as defined in subdivision (a) of Section 1747.02 of the Civil Code are only: banks regulated by or under the supervision of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Comptroller of the Currency of the United States, or the Commissioner of Financial Institutions of this state under Division 1 (commencing with Section 99) of the Financial Code; or, persons controlling these banks, provided that the assets of such a bank or banks represent a majority of the assets on a consolidated basis of any holding company system of which the card issuers may be a party; or, persons controlled by these banks.

history: (History: Amended by Stats. 1996, Ch. 1064, Sec. 20. Effective January 1, 1997. Operative July 1, 1997, by Sec. 814 of Ch. 1064.)

title: 4. SECURITIES


citation: CORP § 31104

text:
There shall be exempted from the provisions of Chapter 2 (commencing with Section 31110) of this part the offer and sale of a franchise if the franchisor:

(a) Is a petroleum corporation or distributor who is a wholesale distributor or marketer of petroleum products; doing business continuously for the past five years and who does not require an advance of funds in the nature of a fee or lease for such franchise agreements; not engaged in the production or the refining of petroleum; and

(b) Complies with the provisions of subdivisions (c) and (d) of Section 31101.

(c) For the purposes of subdivision (a) of this section:

(1) A “wholesale distributor” or “marketer” means any entity which, for wholesale, purchases or receives through transfer, or otherwise obtains, by consignment or otherwise, refined petroleum products and resells or otherwise transfers such products, without substantially changing their form, to other purchasers.

(2) An “advance of funds” means (A) a fee or lease for a franchise agreement, and (B) does not mean rent for the possession or use, or both, of premises or property, the purchase of inventory for resale or supplies, utility deposits, and other consideration or expenditures for the formation or operation, or both, of a wholesale distributor or marketer entity.

history: (History: Amended by Stats. 1991, Ch. 379, Sec. 1.)

title: 4. SECURITIES


citation: CORP § 31105

text: Any offer, sale, or other transfer of a franchise, or any interest in a franchise, to a resident of another state or any territory or foreign country, shall be exempted from the provisions of Chapter 2 (commencing with Section 31110) of this part, if all locations from which sales, leases or other transactions between the franchised business and its customers are made, or goods or services are distributed, are physically located outside this state.

history: (History: Added by Stats. 1996, Ch. 477, Sec. 4. Effective January 1, 1997.)

title: 4. SECURITIES


citation: CORP § 31106

text:
There shall be exempted from the provisions of Chapter 2 (commencing with Section 31110) of this part, any offer, sale, or other transfer of a franchise or any interest in a franchise, provided that the offer, sale or transfer meets the requirements in subdivisions (a) and (b):

(a) Any of the following conditions apply:

(1) One or more of the owners of the prospective franchisee owning at least a 50 percent interest in the prospective franchisee meet both of the following:

(A) The owner or owners have had, within the seven years before the date of the sale or other transaction, at least 24 months’ experience being responsible for the financial and operational aspects of a business offering products or services substantially similar to those offered by the franchised business.

(B) The owner or owners are not controlled by the franchisor.

(2) One or more of the owners of the prospective franchisee owning at least a 50 percent interest in the prospective franchisee meet both of the following:

(A) The owner or owners are, or have been within 60 days prior to the sale or other transaction, an officer, director, managing agent, or an owner of at least a 25 percent interest in the franchisor for at least 24 months.

(B) The owner or owners are not controlled by the franchisor.

(3) The offer, sale, or other transfer is of an additional franchise to an existing franchisee of the franchisor, or to an entity, one or more of the officers, directors, managing agents or owners of at least a 25 percent interest of which is an existing franchisee of the franchisor; provided that, in either case, for 24 months or more the franchisee, or the qualifying person, has been engaged in a business offering products or services substantially similar to those to be offered by the franchise being sold, or otherwise transferred.

(b) The franchisor files with the commissioner a notice of exemption and pays the fee prescribed in subdivision (f) of Section 31500 no later than 15 calendar days after the sale of a franchise in this state pursuant to this section.

history: (History: Added by Stats. 1996, Ch. 477, Sec. 5. Effective January 1, 1997.)

title: 4. SECURITIES


citation: CORP § 31107

text:
There shall be exempted from the provisions of Chapter 2 (commencing with Section 31110) of this part, any offer (but not the sale) by a franchisor of a franchise while an application for renewal or amendment is pending if the prospective franchisee receives all of the following:

(a) The franchise disclosure document and its exhibits as filed with the commissioner with the application for renewal or amendment.

(b) A written statement from the franchisor that (1) the filing has been made but is not effective, (2) the information in the franchise disclosure document and exhibits has not been reviewed by the commissioner, and (3) the franchisor will deliver to the prospective franchisee an effective franchise disclosure document and exhibits at least 14 days prior to execution by the prospective franchisee of a binding agreement or payment of any consideration to the franchisor, or any person affiliated with the franchisor, whichever occurs first, showing all material changes from the franchise disclosure document and exhibits received by the prospective franchisee under subdivision (a) of this section.

(c) The franchise disclosure document and exhibits in accordance with paragraph (3) of subdivision (b) of this section.

history: (History: Amended by Stats. 2013, Ch. 334, Sec. 2. (SB 537) Effective January 1, 2014.)

title: 4. SECURITIES


citation: CORP § 31108

text:
There shall be exempted from the provisions of Chapter 2 (commencing with Section 31110), any offer or sale of a franchise if the franchise involves the adding of a new product or service line to the existing business of a prospective franchisee, provided all of the following requirements are met:

(a) For at least the last 24 months prior to the date of sale of the franchise, the prospective franchisee, or if the prospective franchisee is not a natural person, an existing officer, director, or managing agent of the prospective franchisee who has held that position with the prospective franchisee for at least the last 24 months, has been engaged in a business offering products or services substantially similar or related to those to be offered by the franchised business.

(b) The new product or service is substantially similar or related to the product or service being offered by the prospective franchisee’s existing business.

(c) The franchised business is to be operated from the same business location as the prospective franchisee’s existing business.

(d) The parties anticipated, in good faith, at the time the agreement establishing the franchise relationship was reached, that sales resulting from the franchised business will not represent more than 20 percent of the total sales in dollar volume of the franchisee on an annual basis.

(e) The prospective franchisee is not controlled by the franchisor.

(f) The franchisor files with the commissioner a notice of exemption and pays the fee prescribed in subdivision (f) of Section 31500 prior to an offer or sale of such a franchise in this state during any calendar year in which one or more of those franchises are sold.

history: (History: Added by Stats. 1999, Ch. 325, Sec. 1. Effective January 1, 2000.)

title: 4. SECURITIES