citation: CORP § 25143

text:
(a) The commissioner may by order summarily postpone or suspend the effectiveness of any qualification pending final determination of any proceeding under this chapter. Upon the entry of the order, the commissioner shall promptly notify each person specified in subdivision (b) of this section that it has been entered and of the reasons therefor and that upon the receipt of a written request the matter will be set down for hearing to commence within 15 business days after such receipt unless the applicant consents to a later date. If no hearing is requested and none is ordered by the commissioner, the order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after notice and hearing in accordance with subdivision (b) of this section, may modify or vacate the order or extend it until final determination.

(b) No stop order may be entered under this chapter except under subdivision (a) of this section without appropriate prior notice to the applicant, the issuer, and the person on whose behalf the securities are to be or have been offered and hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, in connection with which the commissioner shall have all of the powers granted thereunder. In the case of qualification by permit, such hearing shall be held upon such notice within 20 business days after a written request therefor by the applicant unless the permit is issued prior to the expiration of such period or the applicant consents to a later date.

history: (History: Amended by Stats. 1973, Ch. 390.)

title: 4. SECURITIES


kind: section

code: CORP

citation: CORP § 25144

text: The commissioner may vacate or modify a stop order if he finds that the conditions which caused its entry have changed or that it is otherwise in the public interest to do so.

history: (History: Added by Stats. 1968, Ch. 88.)

division: 1. CORPORATE SECURITIES LAW OF 1968

title: 4. SECURITIES

chapter: 5. Authority of the Commissioner

path: 4. SECURITIES > 1. CORPORATE SECURITIES LAW OF 1968 > 5. Authority of the Commissioner


citation: CORP § 25145

text: Every issuer qualifying securities for sale in this state shall at all times keep and maintain a complete set of books, records, and accounts of such sales and the disposition of the proceeds thereof, and shall thereafter, at such times as are required by the commissioner, make and file in the office of the commissioner a report, setting forth the securities sold by it under such qualification, the proceeds derived therefrom and the disposition thereof.

title: 4. SECURITIES


citation: CORP § 25146

text: For a period of 18 months after the qualification is effective, the commissioner may by rule or order require an issuer who has filed an application to file reports not more often than semiannually for the purpose of keeping reasonably current the information contained in the application; provided, that the commissioner may not require the filing of any such report after completion of the offering if a nonissuer transaction in the security would be entitled to exemption under Section 25101.

history: (History: Amended by Stats. 1988, Ch. 598, Sec. 2.)

title: 4. SECURITIES


citation: CORP § 25147

text: The commissioner may by rule or order require as a condition of qualification that any security qualified under Section 25113 be sold only on a specified form of subscription or sale contract, and that a signed or conformed copy of each contract be preserved for any period up to three years specified in the rule or order.

title: 4. SECURITIES


citation: CORP § 25148

text: Except in cases where the delivery of a prospectus or proxy statement is required under the Securities Act of 1933 or the Securities Exchange Act of 1934, the commissioner may by rule or order require as a condition of qualification under Section 25112, 25113, 25122 or 25131 that a prospectus or proxy statement containing any designated part of the information required in the application be given to each person to whom an offer is made before the sale of the security to be issued under the permit or order.

history: (History: Amended by Stats. 1983, Ch. 442, Sec. 2.)

title: 4. SECURITIES


citation: CORP § 25149

text: The commissioner may act as escrow holder for securities required to be deposited in escrow by his order.

title: 4. SECURITIES


citation: CORP § 25150

text: The commissioner may accept and act upon the opinions, appraisements and reports of any engineers, appraisers, or other experts which may be presented by an applicant on any question of fact concerning or affecting the securities proposed to be offered and sold. In lieu of, or in addition to, such opinions, appraisements, and reports, the commissioner may have any or all matters concerning or affecting such securities investigated, appraised, passed upon and certified to him by engineers, appraisers, or other experts selected by him.

history: (History: Repealed and added by Stats. 1968, Ch. 88.)

title: 4. SECURITIES


citation: CORP § 25151

text:
(a) Upon the filing of a written request for the consent to transfer securities referred to in Section 25133, accompanied by such information and documents as the commissioner may by rule require, the commissioner shall issue such consent if the commissioner finds that the transfer requested will be fair, just, and equitable to the proposed transferees, and otherwise the commissioner shall deny such consent.

(b) The issuance of the commissioner’s consent pursuant to this section shall not be a qualification of the transaction pursuant to, nor an exemption from the qualification requirements of, Section 25110, 25120, or 25130.

history: (History: Amended by Stats. 1984, Ch. 577, Sec. 5.)

title: 4. SECURITIES


citation: CORP § 25160

text: Every application for qualification shall state (1) the maximum amount of securities proposed to be offered in this state; and (2) any adverse order, judgment, or decree entered in connection with the offering by the regulatory authority in any state or by any court or by the Securities and Exchange Commission. Verification of an application shall be in the manner provided in the Code of Civil Procedure for the verification of pleadings. All information required to be included in an application shall be true and complete as of the time the qualification of the sale of securities becomes effective; and an applicant shall promptly supply by amendment prior to the effectiveness of such qualification any information based on facts occurring after the original date of filing which is necessary to supplement or correct the information contained in the original application so as to make such information not materially misleading as of the effective date of such qualification.

title: 4. SECURITIES

chapter: 6. General Provisions

path: 4. SECURITIES > 1. CORPORATE SECURITIES LAW OF 1968 > 6. General Provisions


citation: CORP § 25161

text: Any document filed under this law or a predecessor statute may be incorporated by reference in a subsequent application or notice filing if it was filed within four years prior to the filing of the application or notice filing, or is otherwise available in the files of the commissioner, to the extent that the document is currently accurate.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 13. Effective January 1, 1998.)

title: 4. SECURITIES


citation: CORP § 25162

text: An amendment to an application filed after the effective date of the qualification of the sale of securities, if such amendment is approved by the commissioner, shall become effective on such date as the commissioner may determine, having due regard to the public interest and the protection of investors.

title: 4. SECURITIES


citation: CORP § 25163

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 § 25164

text:
(a) Neither (1) the fact that an application for qualification under this law has been filed nor (2) the fact that such qualification has become effective constitutes a finding by the commissioner that any document filed under this law is true, complete, or not misleading. Neither any such fact nor the fact that a notice is filed or an exemption is available for a security or a transaction means that the commissioner has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security or transaction (except as provided in Section 25142).

(b) It is unlawful to make or cause to be made to any prospective purchaser any representation inconsistent with subdivision (a) of this section.

(c) Every permit issued by the commissioner shall recite in bold type that the issuance thereof is permissive only and does not constitute a recommendation or endorsement of the securities permitted to be issued.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 14. Effective January 1, 1998.)

title: 4. SECURITIES


citation: CORP § 25165

text: Every applicant for qualification of the sale of securities under this law or every person filing an application or a notice under Sections 25100.1, 25101.1, 25102.1, and 25230.1 or a request for or notice of an exemption from qualification (other than a California corporation, California limited partnership, California limited liability company, or a person licensed as a broker-dealer in this state) shall file with the commissioner, in such form as prescribed by rule, an irrevocable consent appointing the commissioner or his or her successor in office to be the applicant’s or person’s attorney to receive service of any lawful process in any noncriminal suit, action or proceeding against the applicant or person or the successor, executor or administrator thereof, which arises under this law or any rule or order hereunder after the consent has been filed, with the same force and validity as if served personally on the person filing the consent. A person who has filed such a consent in connection with a previous qualification under this law (or application for a permit under any prior law if the application under this law states that such consent is still effective), or in connection with a notice filing under Section 25100.1, 25101.1, 25102.1, and 25230.1, need not file another. Service may be made by leaving a copy of the process in the office of the commissioner but it is not effective unless (1) the plaintiff, who may be the commissioner in a suit, action or proceeding instituted by him or her, forthwith sends notice of the service and a copy of the process by registered or certified mail to the defendant or respondent at the last address on file with the commissioner, and (2) the plaintiff’s affidavit of compliance with this section is filed in the case on or before the return day of the process, if any, or within such further time as the court allows.

history: (History: Amended by Stats. 2013, Ch. 335, Sec. 3. (SB 538) Effective January 1, 2014.)

title: 4. SECURITIES


citation: CORP § 25166

text: It is unlawful for any person willfully to make any untrue statement of a material fact in any application, notice, or report filed with the commissioner under this part or pursuant to subdivision (b) of Section 25507, or willfully to omit to state in any such application, notice, or report any material fact which is required to be stated therein.

history: (History: Amended by Stats. 1974, Ch. 1103.)

title: 4. SECURITIES


citation: CORP § 25200

text: A broker-dealer registered under the Securities Exchange Act of 1934, who has not previously had any certificate denied or revoked under this law or any predecessor statute, shall be exempted from the provisions of Section 25210 if he has no place of business in this state and he does not direct offers to sell or buy into this state in any manner to persons other than broker-dealers, banks, savings and loan associations, trust companies, insurance companies, investment companies registered under the Investment Company Act of 1940, pension or profit-sharing trusts (other than self-employed individual retirement plans), or other institutional investors or governmental agencies or instrumentalities designated by rule of the commissioner, or to more than 15 other customers (whether or not self-employed individual retirement plans) having an existing account with such broker-dealer prior to any offer made to them in this state, during any period of 12 consecutive months, whether or not the offeror or any of the offerees is then present in this state.

history: (History: Amended by Stats. 1978, Ch. 663.)

title: 4. SECURITIES

chapter: 1. Exemptions

path: 4. SECURITIES > 1. CORPORATE SECURITIES LAW OF 1968 > 1. Exemptions


citation: CORP § 25202

text:
(a) An investment adviser shall not be subject to Section 25230 if (1) the investment adviser does not have a place of business in this state and (2) during the preceding 12-month period has had fewer than six clients who are residents of this state.

(b) For the purpose of this section only, “client” has the same meaning as the term “client” is defined by the Securities and Exchange Commission under the rule adopted pursuant to Section 222(d) of the Investment Advisers Act of 1940, as amended. Also, for the purpose of this section only, “client” does not mean other investment advisers, broker-dealers, banks, savings and loan associations, trust companies, insurance companies, investment companies registered under the Investment Company Act of 1940, pension and profit-sharing trusts (other than self-employed individual retirement plans), or other institutional investors or governmental agencies or instrumentalities designated by rule or order of the commissioner.

history: (History: Amended by Stats. 1998, Ch. 48, Sec. 5. Effective January 1, 1999.)

title: 4. SECURITIES


citation: CORP § 25203

text: A person whose only clients are insurance companies shall be exempted from the provisions of Section 25230.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 19. Effective January 1, 1998.)

title: 4. SECURITIES


citation: CORP § 25204

text: The commissioner may by such rules as he deems necessary or appropriate in the public interest or for the protection of investors, either unconditionally or upon specified terms and conditions or for specified periods, exempt from the provisions of Section 25210 or Section 25230 any class of persons specified in such rules.

title: 4. SECURITIES


citation: CORP § 25206

text: A broker licensed by the Real Estate Commissioner is exempt from the provisions of Section 25210 when engaged in transactions in any interest in any general or limited partnership, joint venture, unincorporated association, or similar organization (but not a corporation) owned beneficially by no more than 100 persons and formed for the sole purpose of, and engaged solely in, investment in or gain from an interest in real property, including, but not limited to, a sale, exchange, trade, or development. An interest held by spouses shall be considered held by one person for the purposes of this section.

history: (History: Amended by Stats. 2016, Ch. 50, Sec. 26. (SB 1005) Effective January 1, 2017.)

title: 4. SECURITIES


text:
(a) For purposes of this section, a “finder” is a natural person who, for direct or indirect compensation, introduces or refers one or more accredited investors, as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933 (17 C.F.R. 230.501(a)), to an issuer or an issuer to one or more accredited investors, solely for the purpose of a potential offer or sale of securities of the issuer in an issuer transaction in this state, and who does not do any of the following:

(1) Provide services to an issuer for a transaction or a series of related transactions for the offer or sale of securities of the issuer that exceeds a securities purchase price of fifteen million dollars ($15,000,000) in the aggregate.

(2) Participate in negotiating any of the terms of the offer or sale of the securities.

(3) Advise any party to the transaction regarding the value of the securities or the advisability of investing in, purchasing, or selling the securities.

(4) Conduct any due diligence on the part of any party to the transaction.

(5) Sell or offer for sale in connection with the issuer transaction any securities of the issuer that are owned, directly or indirectly, by the finder.

(6) Receive, directly or indirectly, possession or custody of any funds in connection with the issuer transaction.

(7) Knowingly receive compensation in connection with any offer or sale of securities unless the sale is qualified under this division or unless the security or the transaction is exempt or not otherwise subject to qualification.

(8) Make any disclosure to a potential purchaser other than the following:

(A) The name, address, and contact information of the issuer.

(B) The name, type, price, and aggregate amount of any securities being offered in the issuer transaction.

(C) The issuer’s industry, location, and years in business.

(b) A finder who satisfies all of the conditions set forth in subdivisions (c) to (f), inclusive, shall be exempt from the provisions of Section 25210.

(c) (1) The finder shall file with the commissioner before engaging in any activities described in subdivision (a), on a form prescribed by the commissioner, an initial statement of information that shall include both of the following:

(A) The name and complete business or residential address of the finder.

(B) The mailing address of the finder, if different from the business or residential address.

(2) A filing fee of three hundred dollars ($300) shall be submitted to the Department of Financial Protection and Innovation along with the initial statement of information required by this subdivision.

(d) (1) In addition, the finder shall file with the commissioner within 30 days of the anniversary of the finder’s initial statement of information required by subdivision (c), and annually thereafter, on a form prescribed by the commissioner, a renewal statement of information that includes all of the following:

(A) The following affirmative representations by the finder:

(i) The finder has complied and will continue to comply with the conditions of subdivision (a).

(ii) The finder has not performed any acts or satisfied any circumstances prohibited by Section 25212 or by Rule 506(d) of Regulation D under the Securities Act of 1933 (17 C.F.R. 230.506(d)), and the finder has not been sanctioned by the commissioner pursuant to Section 25212.

(iii) The finder has obtained the written agreement described in subdivision (e) with respect to each transaction in which the finder has participated in the prior 12 months.

(B) An indication by the finder as to whether the finder has received transaction-based compensation that is subject to the actual sale of securities by the issuer in any transaction in which the finder has participated in the prior 12 months.

(2) A filing fee in the amount of two hundred seventy-five dollars ($275) shall accompany each renewal statement of information.

(e) (1) Concurrently with each introduction, the finder shall obtain the informed, written consent of each person introduced or referred by the finder to an issuer, in a written agreement signed by the finder, the issuer, and the person introduced or referred, disclosing the following:

(A) The type and amount of compensation that has been or will be paid to the finder in connection with the introduction or referral and the conditions for payment of that compensation.

(B) That the finder is not providing advice to the issuer or any person introduced or referred by the finder to an issuer as to the value of the securities or as to the advisability of investing in, purchasing, or selling the securities.

(C) Whether the finder is also an owner, directly or indirectly, of the securities being offered or sold.

(D) Any actual and potential conflict of interest in connection with the finder’s activities related to the issuer transaction.

(E) That the parties to the agreement shall have the right to pursue any available remedies at law or otherwise for any breach of the agreement.

(2) To satisfy the requirements of this subdivision, the agreement shall also include a representation by the person introduced or referred by the finder to the issuer that the person is an accredited investor, as that term is defined in Rule 501(a) of Regulation D under the Securities Exchange Act of 1933 (17 C.F.R. 230.501(a)), and that the person knowingly consents to the payment of the compensation described therein.

(f) The finder shall maintain and preserve, for a period of five years from the date of filing of the notice prescribed in subdivision (d), a copy of the notice, the written agreement required in subdivision (e), and all other records relating to any offer or sale of securities in connection with which the finder receives compensation, as the commissioner may by rule require. The finder, upon written request of the commissioner, shall furnish to the commissioner any records required to be maintained and preserved under this subdivision.

(g) (1) A natural person who is engaged in the business of effecting transactions in securities and is not otherwise exempt from Section 25210 shall be subject to the requirements of Section 25210, if the individual fails to meet the definition of “finder” set forth in subdivision (a), or does not satisfy all the conditions set forth in subdivisions (c) to (f), inclusive.

(2) In the event a natural person does not meet the definition of “finder” set forth in subdivision (a) or does not satisfy all the conditions set forth in subdivisions (c) to (f), inclusive, any person introduced or referred by that natural person to an issuer, who purchases securities of that issuer in an issuer transaction following that introduction or referral, shall have the right to pursue any applicable remedy afforded under state law, including, without limitation, any applicable remedies pursuant to Section 25501.5.

(h) The commissioner may from time to time make, amend, and rescind such rules, forms, and orders as are necessary to carry out the provisions of this section, including rules and forms governing applications and reports, and defining any terms, whether or not used in this law, insofar as the definitions are not inconsistent with the provisions of this law. For the purpose of rules and forms, the commissioner may classify securities, persons, and matters within their jurisdiction, and may prescribe different requirements for different classes.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 73. (SB 1498) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 25207

text: A financial institution that undertakes activities with respect to an investment company pursuant to the provisions of Section 1514, 6524, 14652.5, or 18022.5 of the Financial Code shall not be subject to Section 25210 or 25230 in connection with such activities but shall be subject to Sections 25218, 25234, 25235, and 25237 and to subdivisions (a), (b), and (d) of Section 25216, and such rules thereunder as the commissioner may specify by rule. Nothing in this section shall affect the status of such a financial institution as a broker-dealer or investment adviser, or the employees of such persons, when engaged in the activities authorized by the provisions of the Financial Code specified above.

history: (History: Amended by Stats. 2015, Ch. 190, Sec. 15. (AB 1517) Effective January 1, 2016.)

title: 4. SECURITIES


citation: CORP § 25208

text: A person licensed as a capital access company under Division 3 (commencing with Section 28000) of Title 4 is exempt from the provisions of Section 25210 when engaged in the transaction of business pursuant to the requirements of the Capital Access Company Law and the regulations promulgated thereunder.

history: (History: Added by Stats. 1998, Ch. 668, Sec. 2. Effective January 1, 1999. Operative July 1, 1999, by Sec. 4 of Ch. 668.)

title: 4. SECURITIES


citation: CORP § 25209

text: Section 25210 shall not apply to an agent of an issuer when engaged in transactions exempted by subdivision (q) of Section 25102, provided that the agent is a life agent licensed in California or in the state of domicile of the purchaser.

history: (History: Added by Stats. 2000, Ch. 705, Sec. 5. Effective January 1, 2001.)

title: 4. SECURITIES


citation: CORP § 25210

text:
(a) Unless exempted under the provisions of Chapter 1 (commencing with Section 25200) of this part, no broker-dealer shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless the broker-dealer has first applied for and secured from the commissioner a certificate, then in effect, authorizing that person to act in that capacity.

(b) No person shall, on behalf of a broker-dealer licensed pursuant to Section 25211, or on behalf of an issuer, effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless that broker-dealer and agent have complied with any rules as the commissioner may adopt for the qualification and employment of those agents.

(c) The commissioner shall, consistent with Section 25213, review the disciplinary histories of agents upon the filing of notice of (1) the employment or transfer of an agent for a broker-dealer, (2) an amendment to the information filed by the agent at the time of employment or transfer, and (3) the termination of employment of the agent from the broker-dealer.

history: (History: Amended by Stats. 1998, Ch. 769, Sec. 2. Effective January 1, 1999.)

title: 4. SECURITIES

path: 4. SECURITIES > 1. CORPORATE SECURITIES LAW OF 1968 > 2. Licensing of Agents and Broker-Dealers


citation: CORP § 25211

text:
(a) The application for a certificate as a broker-dealer shall be accompanied by the consent to service of process specified in Section 25240 and, unless filed pursuant to subdivision (b), shall contain such information in such detail relating to the applicant and any persons associated with the applicant as the commissioner may by rule require.

(b) A broker-dealer registered under the Securities Exchange Act of 1934 who is a member of the New York Stock Exchange, the NYSE American, the NYSE Arca, or the Financial Industry Regulatory Authority, and who has not had any certificate as a broker-dealer, investment adviser or agent denied or revoked under this law or any predecessor statute, may be licensed by notification pursuant to this subdivision by filing with the commissioner an application setting forth the following information in such form and detail as the commissioner may by rule require:

(1) Such information as is necessary to identify the broker-dealer and its offices in this state, and the location of its records and principal office.

(2) Such information as is necessary to establish that the broker-dealer meets the requirements for licensure by notification under this subdivision.

(3) The consent to service of process specified in Section 25240.

(4) Such information as the commissioner may require as to the jurisdictions in which the broker-dealer is licensed or registered and as to the nature of the business conducted by the broker-dealer.

(c) Unless a proceeding has been instituted under Section 25212, a certificate under subdivision (b) shall become effective on the third business day after the application is filed with the commissioner or upon the day the certificate is issued, whichever first occurs. However, the commissioner may by order delay effectiveness for a period not exceeding 15 business days (or for an additional period with the consent of the applicant) if the commissioner believes that the delay is necessary in the public interest to determine if a proceeding should be instituted under Section 25212. The commissioner may by rule or order waive that provision of subdivision (b) which precludes application thereunder by a person who has had a certificate denied or revoked under this law or any predecessor statute if the commissioner finds the waiver to be in the public interest. The commissioner, after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), may by rule or order disqualify a self-regulatory organization specified in subdivision (b) from the provisions thereof. The commissioner may by rule establish standards or criteria pursuant to which disqualification may be made and the commissioner may disqualify upon a finding that the self-regulatory organization fails substantially to comply with those standards or criteria. Disqualification by the commissioner shall not affect a certificate which has become effective pursuant to this subdivision before the effective date of that rule or order of disqualification but each person licensed pursuant to subdivision (b) upon the basis of membership in that organization shall, within 90 days after the effective date of that rule or order, or such additional time as the commissioner may allow, file with the commissioner a complete and current application in the form required pursuant to subdivision (a). If a broker-dealer licensed pursuant to subdivision (b) ceases to meet the qualifications for licensing pursuant to that subdivision, they shall, within 10 days after that event, file with the commissioner a complete and current application in the form required pursuant to subdivision (a).

(d) An application for a certificate as a broker-dealer, with respect to a broker-dealer to be formed or organized, may be made by a licensed broker-dealer to which the broker-dealer to be formed or organized is to be the successor. The application shall contain such information in such detail relating to the applicant and to the successor and any person associated with the applicant or the successor as the commissioner may by rule require. The application shall become effective and the successor may transact business as a broker-dealer 30 days after the receipt of the application by the commissioner or within such shorter period of time as the commissioner may determine, unless an order has been entered under Section 25212 denying a certificate to the successor or a proceeding looking toward an order has been instituted under that section. The certificate shall terminate on the 45th day after the effective date thereof, unless prior thereto the successor shall, in accordance with such rules as the commissioner may prescribe, adopt the application as its own and file the consent to service of process specified in Section 25240.

history: (History: Amended by Stats. 2022, Ch. 617, Sec. 130. (SB 1202) Effective January 1, 2023.)

title: 4. SECURITIES

chapter: 2. Licensing of Agents and Broker-Dealers


text: A broker-dealer acting pursuant to a certificate which is then in effect and which is issued pursuant to Section 25211, shall be exempt from the usury provisions of the State Constitution. This section creates and authorizes a class of persons pursuant to Section 1 of Article XV of the Constitution.

history: (History: Added by Stats. 1983, Ch. 859, Sec. 2. Effective September 16, 1983.)

title: 4. SECURITIES


citation: CORP § 25212

text:
The commissioner may, after appropriate notice and opportunity for hearing, by order censure, deny a certificate to, suspend for a period not exceeding 12 months or revoke the certificate of, any broker-dealer if the commissioner finds that the censure, denial, suspension, or revocation is in the public interest and that the broker-dealer, whether prior or subsequent to becoming a broker-dealer, or any partner, officer, director, or branch manager of the broker-dealer, whether prior or subsequent to becoming associated with the broker-dealer, or any person directly or indirectly controlling the broker-dealer, whether prior or subsequent to becoming such, or any agent employed by the broker-dealer while so employed has done any of the following:

(a) Has willfully made or caused to be made in any application for a certificate or in any report required to be filed with the commissioner under this law, or in any proceeding before the commissioner, any statement which was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or has willfully omitted to state in the application or report any material fact which is required to be stated therein.

(b) Has been either (1) convicted of or has pled nolo contendere to a felony or misdemeanor, or (2) held liable in a civil action by final judgment of a court based upon conduct showing moral turpitude, and the commissioner finds that the felony, misdemeanor, or civil action (A) involved the purchase or sale of any security, (B) arose out of the conduct of the business of a broker-dealer or investment adviser, (C) involved theft, or (D) involved the violation of Section 1341, 1342, or 1343 of Title 18 of the United States Code.

(c) Is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter, or broker-dealer, or as an affiliated person or employee of any investment company, bank, or insurance company, or from engaging in or continuing any conduct or practice in connection with that activity or in connection with the purchase or sale of any security.

(d) Is or has been subject to (1) any order of the Securities and Exchange Commission or the securities administrator of any other state denying registration to, or revoking or suspending the registration of, the person as a broker, dealer, agent, or investment adviser, (2) any order of any national securities association or national securities exchange (registered under the Securities Exchange Act of 1934) suspending or expelling that person from membership in the association or exchange or from association with any member thereof, or (3) any other order of the commission or any administrator, association, or exchange referred to in this subdivision which is or has been necessary for the protection of any investor.

(e) Has willfully violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Commodity Exchange Act, or Title 4 (commencing with Section 25000), including the Franchise Investment Law, Division 5 (commencing with Section 31000), or the California Commodity Law of 1990, Division 4.5 (commencing with Section 29500), or of any rule or regulation under any of those statutes, or any order of the commissioner which is or has been necessary for the protection of any investor.

(f) Is or has been subject to (1) any order of the Commodity Futures Trading Commission denying registration to, or revoking or suspending the registration of, that person under the Commodity Exchange Act, (2) any order of any board of trade or commodity exchange, including, but not limited to, the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, or the Chicago Board Options Exchange, suspending or expelling that person from membership in the board of trade or commodity exchange or from association with any member thereof, or (3) any other order of the commission or any board or exchange referred to in this subdivision which is or has been necessary for the protection of any investor.

(g) Has willfully aided, abetted, counseled, commanded, induced, or procured the violation by any other person of any of the statutes or rules or regulations referred to in subdivision (e) above, or has failed reasonably to supervise, with a view to preventing violations of those statutes, rules and regulations, another person who commits a violation, if the other person is subject to his or her supervision; for the purposes of this subdivision, no person shall be deemed to have failed reasonably to supervise any person if (1) there have been established procedures, and a system for applying those procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any violation by the other person, and (2) that person has reasonably discharged the duties and obligations incumbent upon him or her by reason of those procedures and system without reasonable cause to believe that those procedures and system were not being complied with.

(h) Is subject to any currently effective order of the commissioner entered pursuant to Section 25213 revoking or suspending the certificate of the person as an agent.

(i) Has violated any provision of this division or the rules thereunder or, in the case of an applicant only, any similar regulatory scheme of the State of California or a foreign jurisdiction.

history: (History: Amended by Stats. 2003, Ch. 473, Sec. 2. Effective January 1, 2004.)

title: 4. SECURITIES


text: The commissioner may immediately revoke by order the certificate of any broker-dealer if the broker-dealer fails to comply with any currently effective order of the commissioner which is necessary for the protection of any investor, unless the broker-dealer secures a court order restraining the enforcement of the commissioner’s revocation order within 10 days of the date the order is issued.

history: (History: Amended by Stats. 2002, Ch. 772, Sec. 2. Effective January 1, 2003.)

title: 4. SECURITIES


citation: CORP § 25213

text: The commissioner may, after appropriate notice and opportunity for hearing, by order censure, or suspend for a period not exceeding 12 months, or deny or bar from any position of employment, management or control of any broker-dealer or investment adviser, any officer, director, partner, agent, employee of, or person performing similar functions for, a broker-dealer, or any other person, if the commissioner finds that the censure, suspension, denial, or bar is in the public interest and that the person has committed any act or omission enumerated in subdivision (a), (e), (f), or (g) of Section 25212 or has been convicted of, or pled nolo contendere to, any offense or been held liable in any civil action specified in subdivision (b) of Section 25212, or is enjoined from any act, conduct or practice specified in subdivision (c) of Section 25212 or is subject to any order specified in subdivision (d) of Section 25212.

history: (History: Amended by Stats. 2002, Ch. 772, Sec. 3. Effective January 1, 2003.)

title: 4. SECURITIES


text: The commissioner shall, after appropriate notices and opportunity for hearing, by order suspend, for a period not exceeding 12 months, or bar from any position of employment, management or control of any broker-dealer, any officer, director, partner, agent, employee of, or person performing similar functions for, a broker-dealer, or any other person, if the person has been convicted of, or has pleaded nolo contendere to, a felony or misdemeanor in violation of Section 25541 that was committed on or after January 1, 1989.

history: (History: Amended by Stats. 2002, Ch. 772, Sec. 4. Effective January 1, 2003.)

title: 4. SECURITIES


citation: CORP § 25214

text:
(a) It is unlawful for any person, as to whom an order suspending or barring employment or control is in effect pursuant to Section 25213 or 25213.3, willfully to become or to be employed by any broker-dealer or investment adviser, contrary to the terms of that order, without the consent of the commissioner; and it is unlawful for any broker-dealer to permit a person as to whom an order is in effect pursuant to Section 25213, 25213.3, or 25232.1 to become or to remain a person employed by the broker-dealer, contrary to the terms of that order, without the consent of the commissioner, if the broker-dealer knew, or in the exercise of reasonable care should have known, of the order.

(b) Any person as to whom an order suspending or barring employment or control is issued pursuant to Section 25213 or 25213.3 may petition the commissioner for reinstatement or reduction of penalty, or for modification of the order, as provided in and subject to the provisions of Section 11522 of the Government Code. The commissioner may, at any time and with the consent of that person without hearing, modify such order.

history: (History: Amended by Stats. 1988, Ch. 1339, Sec. 2.)

title: 4. SECURITIES


citation: CORP § 25215

text: No order may be entered under Section 25212, 25213, 25213.3, or 25252 except after notice to any person affected thereby (and, in the case of an agent, to his or her employer or prospective employer if known to the commissioner) of the intention of the commissioner to enter that order and of the reasons therefor and that upon receipt of a request the matter will be set down for hearing to commence within 15 business days after that receipt unless the person affected consents to a later date. If no hearing is requested within 30 days after the mailing of the notice and none is ordered by the commissioner, the order may be entered without hearing to remain in effect until it is modified or vacated by the commissioner. In the case of an original application for a certificate, that hearing shall be set down to commence within 15 business days after receipt of a written request by the applicant made 30 days or more after the filing of the application, even though no notice by the commissioner has been given, unless the applicant consents to a later date. If a hearing is requested or ordered, it shall be held in accordance with the provisions of the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and the commissioner shall have all of the powers granted thereunder.

history: (History: Amended by Stats. 1998, Ch. 391, Sec. 1. Effective January 1, 1999.)

title: 4. SECURITIES


citation: CORP § 25216

text:
(a) No broker-dealer or agent shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state by means of any manipulative, deceptive or other fraudulent scheme, device, or contrivance. The commissioner shall, for the purposes of this subdivision, by rule define such schemes, devices or contrivances as are manipulative, deceptive, or otherwise fraudulent.

(b) No broker-dealer or agent shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in connection with which such broker-dealer or agent engages in any fraudulent, deceptive or manipulative act or practice or makes any fictitious quotation. The commissioner shall, for the purposes of this subdivision, by rule define and prescribe means reasonably designed to prevent such acts and practices as are fraudulent, deceptive, or manipulative and such quotations as are fictitious.

(c) No broker-dealer or agent shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in contravention of such rules as the commissioner may prescribe as necessary or appropriate in the public interest or for the protection of investors to provide safeguards with respect to the financial responsibility of broker-dealers. Subject to the limitations of Section 15(h) of the Securities Exchange Act of 1934, those rules may require a minimum capital for broker-dealers or prescribe a ratio between net capital and aggregate indebtedness or both and a fidelity bond.

(d) No broker-dealer or agent shall effect or attempt to effect in this state, in contravention of such rules as the commissioner may prescribe as necessary or appropriate in the public interest or for the protection of investors, (1) any transaction in connection with any security whereby any party to such transaction acquires any put, call, straddle, or other option or privilege (A) of buying or selling the security, (B) on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the market value thereof), (C) entered into on a national securities exchange relating to foreign currency, or (2) any transaction in connection with any security with relation to which the broker-dealer or agent has, directly or indirectly, any interest in any such put, call, straddle, option, or privilege, or (3) any transaction in any security for the account of any person who the broker-dealer or agent has reason to believe has, and who actually has, directly or indirectly, any interest in any such put, call, straddle, option, or privilege with relation to such security.

(e) The commissioner may by rule require any issuer who employs agents in connection with any security or transaction not exempted by Chapter 1 (commencing with Section 25100) of Part 2 of this division to post a surety bond in an amount not exceeding ten thousand dollars ($10,000), conditioned that the issuer will comply with the provisions of this law and the rules and orders issued thereunder. The bond, unless previously canceled, shall cover for the entire period that the qualification is in effect. If a deposit in lieu of a bond is made pursuant to Article 7 (commencing with Section 995.710) of Chapter 2 of Title 14 of Part 2 of the Code of Civil Procedure, the deposit may include an appropriate deposit of securities. No suit may be maintained to enforce any liability on the bond unless brought within two years after the contract of sale or other act upon which the suit is based.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 20. Effective January 1, 1998.)

title: 4. SECURITIES


citation: CORP § 25217

text:
(a) A broker-dealer licensed under this chapter shall not effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless that broker-dealer and all agents employed by that broker-dealer meet specified and appropriate standards with respect to training, experience, supervision, terms of employment, and other qualifications as the commissioner finds necessary or desirable. The commissioner may establish those standards by rules, which may: (1) appropriately classify broker-dealers and agents (taking into account relevant matters, including types of business done and nature of securities sold); (2) specify that all or any portion of those standards shall be applicable to any class; (3) require persons in any class to pass examinations prescribed in accordance with those rules; and (4) provide that persons in any class, other than a broker-dealer and partners, officers and supervisory employees (which term may be defined by the commissioner’s rules and as so defined shall include branch managers of broker-dealers) of broker-dealers, may be qualified solely on the basis of compliance with such specified standards of training and such other qualifications as the commissioner finds appropriate.

(b) In addition to the fees imposed by Section 25608, the commissioner may prescribe by rule reasonable fees and charges to defray the cost of any examination administered by the commissioner or under the commissioner’s direction. The commissioner may cooperate with national securities associations and national securities exchanges and with the Securities and Exchange Commission in administering examinations and may require broker-dealers and agents to pass examinations administered by or on behalf of any association or exchange or by the Securities and Exchange Commission and to pay to that association or exchange or that commission reasonable fees or charges to defray the costs incurred by that association or exchange or commission in administering the examinations.

history: (History: Amended by Stats. 2019, Ch. 143, Sec. 48. (SB 251) Effective January 1, 2020.)

title: 4. SECURITIES


citation: CORP § 25218

text: No broker-dealer licensed under this chapter shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in contravention of such rules as the commissioner may prescribe designed to promote just and equitable principles of trade, to provide safeguards against unreasonable profits or unreasonable rates of commissions or other charges, and in general to protect investors and the public interest, and to remove impediments to and perfect the mechanism of a free and open market.

history: (History: Amended by Stats. 1979, Ch. 665.)

title: 4. SECURITIES


citation: CORP § 25219

text: Notwithstanding any other provision of this division, if in his or her opinion the public interest and the protection of investors so require, the commissioner is authorized summarily to suspend all over-the-counter trading in this state by broker-dealers and agents in any security or summarily to suspend all trading on a national securities exchange located in this state in any security (provided, in the case of trading on that exchange, that the security is not listed on any national securities exchange located outside this state on which trading has not been suspended) for a period not exceeding 90 days, and for successive periods of 90 days. No broker-dealer or agent shall effect any transaction (other than an unsolicited brokerage transaction effected on a national securities exchange located outside this state) in, or induce or attempt to induce the purchase or sale of, any security in this state in which trading is in any manner suspended under this section, except in performance of a contract previously entered into.

history: (History: Amended by Stats. 2009, Ch. 131, Sec. 13. (AB 991) Effective January 1, 2010.)

title: 4. SECURITIES


citation: CORP § 25220

text: At any time after the issuance of an order under Section 25219, any interested person (including, but not limited to, the issuer of the security and any broker-dealer who has been making a market in the security) may in writing request that the suspension of trading be rescinded. Upon the receipt of such a written request, the matter shall be set down for hearing to commence within 15 business days after such receipt unless the person making the request consents to a later date. After such hearing, which shall be conducted in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and in connection with which the commissioner shall have all of the powers granted thereunder, the commissioner may order such suspension to be continued until modified or rescinded by further order of the commissioner if he finds that trading in the security will be unfair, unjust, or inequitable to investors or will tend to work a fraud upon the purchasers or sellers of such security. Otherwise, he shall rescind the suspension of trading and no further orders may be entered under Section 25219 with respect to the same security in the absence of changed circumstances justifying such order.

history: (History: Amended by Stats. 1973, Ch. 390.)

title: 4. SECURITIES


citation: CORP § 25221

text:
(a) Notwithstanding any other provision of law, a broker-dealer, or any affiliate thereof, licensed under this chapter, or any officer or employee thereof, may submit to the Department of Justice fingerprints of an applicant for employment for the purpose of obtaining information as to the existence and nature of a record of a conviction and of an arrest for which the Department of Justice establishes that the applicant was released on bail or on his or her own recognizance pending trial. Fingerprints taken pursuant to this section include fingerprints taken by the use of fingerprint live-scan technology, as described in Section 1596.871 of the Health and Safety Code.

(b) The Department of Justice shall provide the following information to the broker-dealer, affiliate, or officer or employee thereof pursuant to subdivision (a):

(1) Every conviction rendered against the applicant.

(2) Every arrest for which the Department of Justice establishes that the applicant was released on bail or on his or her own recognizance pending trial.

history: (History: Added by Stats. 2001, Ch. 547, Sec. 1. Effective January 1, 2002.)

title: 4. SECURITIES


citation: CORP § 25230

text:
(a) It is unlawful for any investment adviser to conduct business as an investment adviser in this state unless the investment adviser has first applied for and secured from the commissioner a certificate, then in effect, authorizing the investment adviser to do so or unless the investment adviser is exempted by the provisions of Chapter 1 (commencing with Section 25200) of this part or unless the investment adviser is subject to Section 25230.1.

(b) No person, on behalf of an investment adviser that has obtained a certificate pursuant to Section 25231, may, in this state: offer or negotiate for the sale of investment advisory services of the investment adviser; determine which recommendations shall be made to, make recommendations to, or manage the accounts of, clients of the investment adviser; or determine the reports or analyses concerning securities to be published by the investment adviser, unless the investment adviser and that person have complied with rules that the commissioner may adopt for the qualification and employment of those persons.

(c) The commissioner may, consistent with Section 25232.1, review the disciplinary history of an investment adviser representative upon the filing of notice of any of the following:

(1) The employment, association, or transfer of the investment adviser representative.

(2) An amendment to the information filed by the investment adviser representative at the time of employment, association, or transfer.

(3) The termination of employment or association of the investment adviser representative.

history: (History: Amended by Stats. 2003, Ch. 473, Sec. 3. Effective January 1, 2004.)

title: 4. SECURITIES

path: 4. SECURITIES > 1. CORPORATE SECURITIES LAW OF 1968 > 3. Licensing and Notice Filing Requirements of Investment Adviser Representatives and Investment Advisers


text:
(a) A person that is registered under Section 203 of the Investment Advisers Act of 1940 as an investment adviser is not subject to the requirement of obtaining a certificate under Section 25230, but may not conduct business in this state unless the person has fewer than six clients as specified in Section 25202 or unless the person first complies with subdivision (b). An investment adviser representative that has a place of business in this state may be required to obtain a certificate pursuant to Section 25231.

(b) A person subject to subdivision (a) shall:

(1) File with the commissioner an annual notice, consisting of those documents filed with the Securities and Exchange Commission pursuant to the securities laws that the commissioner by rule or order deems appropriate or, in lieu thereof, a form prescribed by the commissioner, and a consent to service of process under Section 25240.

(2) Pay the notice filing fee provided for in subdivision (d) of Section 25608.1.

(c) No investment adviser representative, on behalf of an investment adviser subject to subdivision (a), may, in this state: offer or negotiate for the sale of investment advisory services of the investment adviser; determine which recommendations shall be made to, make recommendations to, or manage the accounts of, clients of the investment adviser; or determine the reports or analysis concerning securities to be published by the investment adviser, unless the investment adviser representative has complied with rules that the commissioner may adopt for the qualification and employment of investment adviser representatives.

(d) Subdivision (a) does not prohibit the commissioner from investigating and bringing enforcement actions with respect to fraud or deceit, including and without limitation, fraud or deceit under Section 25235 and the rules of the commissioner adopted thereunder, against an investment adviser or an investment adviser representative.

history: (History: Amended by Stats. 1998, Ch. 48, Sec. 6. Effective January 1, 1999.)

title: 4. SECURITIES

chapter: 3. Licensing and Notice Filing Requirements of Investment Adviser Representatives and Investment Advisers


citation: CORP § 25231

text:
(a) Any investment adviser, or any person who contemplates becoming an investment adviser, may apply for a certificate to act as an investment adviser by filing with the commissioner an application. The application shall be accompanied by the consent to service of process specified in Section 25240 and shall contain information, in such form and detail, as the commissioner may by rule prescribe.

(b) Unless otherwise provided by rule or order of the commissioner, all investment adviser and investment adviser representative applications, amendments, reports, notices, related filings, and fees required to be filed with the commissioner pursuant to this title shall be filed electronically with and transmitted to the Web-based Investment Adviser Registration Depository operated by the Financial Industry Regulatory Authority.

history: (History: Amended by Stats. 2009, Ch. 131, Sec. 14. (AB 991) Effective January 1, 2010.)

title: 4. SECURITIES


citation: CORP § 25232

text:
The commissioner may, after appropriate notice and opportunity for hearing, by order censure, deny a certificate to, or suspend for a period not exceeding 12 months or revoke the certificate of, an investment adviser, if the commissioner finds that the censure, denial, suspension, or revocation is in the public interest and that the investment adviser, whether prior or subsequent to becoming such, or any partner, officer or director thereof or any person performing similar functions or any person directly or indirectly controlling the investment adviser, whether prior or subsequent to becoming such, or any employee of the investment adviser while so employed has done any of the following:

(a) Has willfully made or caused to be made in any application for a certificate or any report filed with the commissioner under this division, or in any proceeding before the commissioner, any statement which was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or has willfully omitted to state in the application or report any material fact which is required to be stated therein.

(b) Has been either (1) convicted of or has pled nolo contendere to any felony or misdemeanor, or (2) held liable in a civil action by final judgment of a court based upon conduct showing moral turpitude, and the commissioner finds that the felony, misdemeanor or civil action (A) involved the purchase or sale of any security, (B) arose out of the conduct of the business of a broker-dealer or investment adviser, (C) involved theft, or (D) involved the violation of Section 1341, 1342, or 1343 of Title 18 of the United States Code.

(c) Is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter or broker-dealer or as an affiliated person or employee of any investment company, bank, or insurance company, or from engaging in or continuing any conduct or practice in connection with that activity, or in connection with the purchase or sale of any security.

(d) Is or has been subject to (1) any order of the Securities and Exchange Commission or the securities administrator of any other state denying or revoking or suspending his or her registration as an investment adviser, or investment adviser representative, or as a broker or dealer or agent, (2) any order of any national securities association or national securities exchange (registered under the Securities Exchange Act of 1934) suspending or expelling him or her from membership in that association or exchange or from association with any member thereof, or (3) any other order of the commission or any administrator, association, or exchange referred to in this subdivision which is or has been necessary for the protection of any investor.

(e) Has willfully violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Commodity Exchange Act, or Title 4 (commencing with Section 25000), including the Franchise Investment Law, Division 5 (commencing with Section 31000), or the California Commodity Law of 1990, Division 4.5 (commencing with Section 29500), or of any rule or regulation under any of those statutes, or any order of the commissioner which is or has been necessary for the protection of any investor.

(f) Is or has been subject to (1) any order of the Commodity Futures Trading Commission denying registration to, or revoking or suspending the registration of, that person under the Commodity Exchange Act, (2) any order of any board of trade or commodity exchange, including, but not limited to, the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, or the Chicago Board Options Exchange, suspending or expelling that person from membership in the board of trade or commodity exchange or from association with any member thereof, or (3) any other order of the commission or any board or exchange referred to in this subdivision which is or has been necessary for the protection of any investor.

(g) Has aided, abetted, counseled, commanded, induced, or procured the violation by any other person of any statute or rule or regulation referred to in subdivision (e).

(h) Has violated any provision of this division or the rules thereunder or, in the case of an applicant only, any similar regulatory scheme of the State of California or a foreign jurisdiction.

history: (History: Amended by Stats. 2003, Ch. 473, Sec. 4. Effective January 1, 2004.)

title: 4. SECURITIES


text: The commissioner may, after appropriate notice and opportunity for hearing, by order censure, or suspend for a period not exceeding 12 months, or bar from any position of employment, management or control of any investment adviser, broker-dealer or commodity adviser, any officer, director, partner, employee of, or person performing similar functions for, an investment adviser, or any other person, if he or she finds that the censure, suspension or bar is in the public interest and that the person has committed any act or omission enumerated in subdivision (a), (e), (f), or (g) of Section 25232 or has been convicted of any offense or held liable in any civil action specified in subdivision (b) of Section 25232 or is enjoined from any act, conduct or practice specified in subdivision (c) of Section 25232 or is subject to any order specified in subdivision (d) of Section 25232.

history: (History: Amended by Stats. 2002, Ch. 772, Sec. 5. Effective January 1, 2003.)

title: 4. SECURITIES


text:
(a) It is unlawful for any person, as to whom an order suspending or revoking the person’s certificate as an investment adviser is in effect pursuant to Section 25232 or as to whom an order suspending or barring employment is in effect pursuant to Section 25232.1, willfully to become or to be employed by any investment adviser, broker-dealer or commodity adviser, without the consent of the commissioner, and it is unlawful for any investment adviser to permit a person as to whom an order is in effect pursuant to Section 25212.1 or 25232.1 to become or to remain employed by the investment adviser, without the consent of the commissioner, if such investment adviser knew, or in the exercise of reasonable care should have known, of such order.

(b) Any person as to whom an order suspending or barring employment with or participation is issued pursuant to Section 25232.1 may petition the commissioner for reinstatement or reduction of penalty as provided in and subject to the provisions of Section 11522 of the Government Code.

history: (History: Amended by Stats. 1981, Ch. 1120, Sec. 5. Effective October 2, 1981. Operative November 1, 1981, by Sec. 15 of Ch. 1120.)

title: 4. SECURITIES


text: The commissioner may immediately revoke the certificate of any investment adviser if the investment adviser fails to comply with any currently effective order of the commissioner which is necessary for the protection of any investor, unless the investment adviser secures a court order restraining the enforcement of the commissioner’s revocation order within 10 days of the date the order is issued.

history: (History: Amended by Stats. 2002, Ch. 772, Sec. 6. Effective January 1, 2003.)

title: 4. SECURITIES


citation: CORP § 25233

text: No order may be entered under Section 25232, 25232.1, or 25252 except after notice to the person affected thereby of the intention of the commissioner to enter that order and of the reasons therefor and that upon receipt of a request the matter shall be set down for hearing to commence within 15 business days after that receipt unless the person affected consents to a later date. If no hearing is requested within 30 days after the mailing of that notice and none is ordered by the commissioner, the order may be entered without hearing to remain in effect until it is modified or vacated by the commissioner. In the case of an original application for a certificate, such a hearing shall be set down to commence within 15 business days after receipt of a written request by the applicant made 30 days or more after the filing of the application, even though no such notice by the commissioner has been given, unless the applicant consents to a later date. If a hearing is requested or ordered, it shall be held in accordance with the provisions of the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and the commissioner shall have all of the powers granted thereunder.

history: (History: Amended by Stats. 1998, Ch. 391, Sec. 2. Effective January 1, 1999.)

title: 4. SECURITIES


citation: CORP § 25234

text:
(a) No investment adviser licensed under this chapter shall in this state enter into, extend or renew any investment advisory contract, or in any way perform any investment advisory contract entered into, extended or renewed on or after the effective date of this law, if that contract:

(1) Provides for compensation to the investment adviser on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client, except as may be permitted by rule or order of the commissioner;

(2) Fails to provide, in substance, that no assignment of the contract shall be made by the investment adviser without the consent of the other party to the contract;

(3) Fails to provide, in substance, that the investment adviser, if a partnership, will notify the other party to the contract of any change in the membership of the partnership within a reasonable time after the change.

(b) As used in this section, “investment advisory contract” means any contract or agreement whereby a person agrees to act as investment adviser or to manage any investment or trading account for a person other than an investment company. Paragraph (1) of subdivision (a) of this section does not prohibit an investment advisory contract that provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates, or taken as of a definite date.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 24. Effective January 1, 1998.)

title: 4. SECURITIES


citation: CORP § 25235

text:
It is unlawful for any investment adviser, directly or indirectly, in this state:

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

(b) To engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon any client or prospective client.

(c) Acting as principal for his own account, knowingly to sell any security to or purchase any security from a client for whom he is acting as investment adviser, or, acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of the transaction the capacity in which he is acting and obtaining the written consent of the client to such transaction.

(d) To engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative. The commissioner shall, for the purpose of this subdivision, by rule define and prescribe means reasonably designed to prevent such acts, practices, and courses of business as are fraudulent, deceptive, or manipulative.

(e) To represent that he is an investment counsel or to use the name “investment counsel” as descriptive of his business unless his principal business consists of acting as investment adviser and a substantial part of his business consists of rendering investment advisory services on the basis of the individual needs of his clients.

history: (History: Added by Stats. 1968, Ch. 88.)

title: 4. SECURITIES


citation: CORP § 25236

text:
(a) No investment adviser licensed under this chapter shall conduct any business as such investment adviser in this state unless the investment adviser and all natural persons associated with such investment adviser meet such specified and appropriate standards with respect to training, experience and other qualifications as the commissioner finds necessary or desirable. The commissioner may establish such standards by rule, which may

(1) Appropriately classify investment advisers and persons associated with investment advisers;

(2) Specify that all or any portion of such standards shall be applicable to any such class; and

(3) Require persons in any such class to pass examinations prescribed in accordance with such rules.

(b) In addition to the fees imposed by Section 25608, the commissioner may prescribe by rule reasonable fees and charges to defray the costs of carrying out this section, including, but not limited to, fees for any examination administered by him or under his direction.

title: 4. SECURITIES


citation: CORP § 25237

text: The commissioner shall prescribe rules with respect to investment advisers licensed under this chapter who have custody of their clients’ securities or funds or who have any power of attorney from their clients to execute transactions as he or she finds to be necessary or appropriate in the public interest or for the protection of investors. The rules may require a minimum capital for those investment advisers or prescribe a minimum ratio between net capital and aggregate indebtedness or both, and may require a fidelity bond.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 25. Effective January 1, 1998.)

title: 4. SECURITIES


citation: CORP § 25238

text: No investment adviser licensed under this chapter and no natural person associated with the investment adviser shall engage in investment advisory activities, or attempt to engage in investment advisory activities, in this state in contradiction of such rules as the commissioner may prescribe designed to promote fair, equitable and ethical principles.

history: (History: Added by Stats. 1986, Ch. 698, Sec. 4.)

title: 4. SECURITIES


citation: CORP § 25240

text: Every applicant for a certificate as a broker-dealer or an investment adviser (other than a California corporation), and every investment adviser subject to Section 25230.1, shall file with the commissioner, in such form as the commissioner by rule prescribes, an irrevocable consent appointing the commissioner or the commissioner’s successor in office to be the person’s attorney to receive service of any lawful process in any noncriminal suit, action or proceeding against the person or the person’s successor, executor, or administrator, which arises under this law or any rule or order hereunder after the consent has been filed, with the same force and validity as if served personally on the person filing the consent. A person who has filed such a consent in connection with a previous application under this law (or under any prior law if the application states that such consent is still effective), or a person who has filed such a consent in connection with a previous notice filed under Section 25230.1, need not file another. Service may be made by leaving a copy of the process in the office of the commissioner, but it is not effective unless (1) the plaintiff, who may be the commissioner in a suit, action or proceeding instituted by the commissioner, forthwith sends notice of the service and a copy of the process by registered or certified mail to the defendant or respondent at the person’s last address on file with the commissioner, and (2) the plaintiff’s affidavit of compliance with this section is filed in the case on or before the return day of the process, if any, or within such further time as the court allows.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 26. Effective January 1, 1998.)

title: 4. SECURITIES

chapter: 4. General Provisions

path: 4. SECURITIES > 1. CORPORATE SECURITIES LAW OF 1968 > 4. General Provisions


citation: CORP § 25241

text:
(a) Every broker-dealer and every investment adviser licensed under Section 25230 shall make and keep accounts, correspondence, memorandums, papers, books, and other records and shall file financial and other reports as the commissioner by rule requires, subject to the limitations of Section 15(h) of the Securities Exchange Act of 1934 with respect to broker-dealers and Section 222 of the Investment Advisers Act of 1940 with respect to investment advisers.

(b) All records so required shall be preserved for the time specified in the rule.

(c) All records referred to in this section are subject at any time and from time to time to reasonable periodic, special, or other examinations by the commissioner, within or without this state, as the commissioner deems necessary or appropriate in the public interest or for the protection of investors.

(d) For the purpose of avoiding unnecessary duplications of examinations, the commissioner, insofar as he or she deems it practicable in administering this section, may cooperate with the securities administrators of other states, the Securities and Exchange Commission and any national securities exchange or national securities association.

(e) Unless otherwise provided by rule, every investment adviser subject to Section 25230 and every broker-dealer, including an applicant for a license under Section 25210 or 25230, shall furnish an authorization for disclosure to the commissioner of financial records of the licensee’s broker-dealer or investment adviser business pursuant to Section 7473 of the Government Code.

history: (History: Amended by Stats. 2003, Ch. 473, Sec. 5. Effective January 1, 2004.)

title: 4. SECURITIES


citation: CORP § 25242

text:
(a) Surrender of a certificate as a broker-dealer or investment adviser becomes effective 30 days after receipt of an application to surrender that certificate or within a shorter period of time as the commissioner may determine, unless a revocation or suspension proceeding is pending when the application is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted within 30 days after the application is filed. If a proceeding is pending or instituted, withdrawal becomes effective at a time and upon any conditions as the commissioner by order determines.

(b) If the commissioner finds that any broker-dealer or investment adviser is no longer in existence, or has ceased to do business as a broker-dealer or investment adviser, or is subject to an adjudication of mental incompetence or to the control of a committee or conservator or guardian, or cannot be located after reasonable search, the commissioner may by order summarily revoke the certificate of that broker-dealer or investment adviser.

(c) The commissioner may summarily suspend or revoke the certificate of a broker-dealer or investment adviser if he or she (1) fails to pay any fee required by Section 25608 or imposed pursuant to Section 25217, 25218 or 25236 within 10 days after notice by the commissioner that the fee is due and unpaid, (2) fails to file any report required under Section 25241 within 10 days after notice by the commissioner that the report is due, (3) fails to maintain any bond required by subdivision (e) of Section 25216 or by Section 25237, (4) fails to file an application pursuant to subdivision (a) of Section 25211 when required by subdivision (c) of that section, within the time specified therein or within 10 days after notice by the commissioner that the application is required, whichever last occurs, (5) fails to maintain any capital required by subdivision (c) of Section 25216 or by Section 25237, or (6) fails to maintain records as required by Section 25241.

history: (History: Amended by Stats. 1998, Ch. 391, Sec. 3. Effective January 1, 1999.)

title: 4. SECURITIES


citation: CORP § 25243

text: It is unlawful for any person holding a certificate as a broker-dealer or investment adviser under this part to represent or imply in any manner whatsoever that such person has been sponsored, recommended, or approved or that the person’s abilities or qualifications have in any respect been passed upon by the commissioner. Nothing in this section prohibits a statement (other than in a paid advertisement) that a person holds a certificate under this law, if such statement is true in fact and if the effect of such licensing is not misrepresented.

history: (History: Amended by Stats. 1981, Ch. 1120, Sec. 8. Effective October 2, 1981. Operative November 1, 1981, by Sec. 15 of Ch. 1120.)

title: 4. SECURITIES


text:
(a) A broker-dealer or investment adviser, or an agent or representative thereof, shall not use a senior-specific certification, credential, or professional designation in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the broker-dealer, investment adviser, or an agent or representative thereof, has special certification or training in advising or servicing senior citizens or retirees, in such a way as to mislead any person.

(b) The prohibited use of these certifications, credentials, or professional designations includes, but is not limited to, the following:

(1) The use of a certification, credential, or professional designation by a person who has not actually earned or is otherwise ineligible to use the certification, credential, or designation.

(2) The use of a nonexistent or self-conferred certification, credential, or professional designation.

(3) The use of a certification, credential, or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the person using the certification, credential, or professional designation does not have.

(4) The use of a certification, credential, or professional designation that was obtained from a designating, credentialing, or certifying organization where any of the following apply:

(A) The organization is primarily engaged in the business of instruction in sales marketing.

(B) The organization does not have reasonable standards or procedures for assuring the competency of individuals to whom it grants a certification, credential, or professional designation.

(C) The organization does not have reasonable standards or procedures for monitoring and disciplining individuals with a certification, credential, or professional designation for improper or unethical conduct.

(D) The organization does not have reasonable continuing education requirements for individuals with a certification, credential, or professional designation in order to maintain the certificate, credential, or professional designation.

(c) There is a rebuttable presumption that a designating, credentialing, or certifying organization is not disqualified solely for the purposes of paragraph (4) of subdivision (b) when the organization has been accredited by the American National Standards Institute, the National Commission for Certifying Agencies, or an organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the certification, credential, or professional designation issued therefrom does not primarily apply to sales and/or marketing.

(d) In determining whether a combination of words, or an acronym standing for a combination of words, constitutes a certification, credential, or professional designation indicating or implying that a person has special certification or training in advising or serving senior citizens or retirees, factors to be considered shall include both of the following:

(1) Use of one or more word such as “senior,” “retirement,” “elder,” or like words combined with one or more words such as “certified,” “registered,” “chartered,” “adviser,” “specialist,” “consultant,” “planner,” or like words, in the name of the certification, credential, or professional designation or credential.

(2) The manner in which those words are combined.

(e) This section shall not apply to the use of a job title by a person within an organization that is licensed or registered by the Department of Financial Protection and Innovation or a federal financial services regulatory agency, when that job title indicates seniority or standing within the organization, or specifies a person’s area of specialization within the organization. For the purposes of this subdivision, federal financial services regulatory agency includes, but is not limited to, an agency that regulates brokers or dealers, investment advisers, or investment companies as described under the Investment Company Act of 1940 (15 U.S.C. Sec. 809-1 et seq.).

(f) (1) This section shall not apply to a broker or agent who is licensed by the Department of Insurance and is in compliance with the requirements of Section 787.1 of the Insurance Code.

(2) This subdivision shall be operative only if Assembly Bill 2150 of the 2007–08 Regular Session is chaptered and becomes effective and that bill adds Section 787.1 to the Insurance Code.

(g) This section shall become operative on July 1, 2009.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 74. (SB 1498) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 25244

text: Any person whose certificate as a broker-dealer or investment adviser has been suspended or revoked shall immediately surrender such certificate to the commissioner.

history: (History: Amended by Stats. 1981, Ch. 1120, Sec. 9. Effective October 2, 1981. Operative November 1, 1981, by Sec. 15 of Ch. 1120.)

title: 4. SECURITIES


citation: CORP § 25245

text: It is unlawful for any person willfully to make any untrue statement of a material fact in any application, notice, or report filed with the commissioner under this part, or willfully to omit to state in any such application, notice, or report any material fact which is required to be stated therein.

history: (History: Amended by Stats. 1997, Ch. 391, Sec. 28. Effective January 1, 1998.)

title: 4. SECURITIES


citation: CORP § 25246

text: It is unlawful for any agent or broker-dealer to require, as a condition to the purchase or sale of securities for and in the name of a married person, that the prior consent or authorization of the spouse of that person be obtained.

history: (History: Amended by Stats. 1981, Ch. 1120, Sec. 10. Effective October 2, 1981. Operative November 1, 1981, by Sec. 15 of Ch. 1120.)

title: 4. SECURITIES


citation: CORP § 25247

text:
(a) Upon written or oral request, the commissioner shall make available to any person the information specified in Section 7929.005 of the Government Code and made available through the Public Disclosure Program of the Financial Industry Regulatory Authority with respect to any broker-dealer or agent licensed or regulated under this part. The commissioner shall also make available the current license status and the year of issuance of the license of a broker-dealer. Any information disclosed pursuant to this subdivision shall constitute a public record. Notwithstanding any other law, the commissioner may disclose either orally or in writing that information pursuant to this subdivision. There shall be no liability on the part of, and no cause of action of any nature shall arise against, the state, the Department of Financial Protection and Innovation, the Commissioner of Financial Protection and Innovation, or any officer, agent, or employee of the state or the Department of Financial Protection and Innovation for the release of any false or unauthorized information, unless the release of that information was done with knowledge and malice.

(b) Any broker-dealer or agent licensed or regulated under this part shall, upon request, deliver a written notice to any client when a new account is opened stating that information about the license status or disciplinary record of a broker-dealer or an agent may be obtained from the Division of Corporations, or from any other source that provides substantially similar information.

(c) The notice provided under subdivision (b) shall contain the office location or telephone number where the information may be obtained.

(d) A broker-dealer or agent is exempt from providing the notice required under subdivision (b) if a person who does not have a financial relationship with the broker-dealer or agent, requests only general operational information such as the nature of the broker-dealer’s or agent’s business, office location, hours of operation, basic services, and fees, but does not solicit advice regarding investments or other services offered.

(e) Upon written or oral request, the commissioner shall make available to any person the disciplinary records maintained on the Investment Adviser Registration Depository and made available through the Investment Adviser Public Disclosure internet website as to any investment adviser, investment adviser representative, or associated person of an investment adviser licensed or regulated under this part. The commissioner shall also make available the current license status and the year of issuance of the license of an investment adviser. Any information disclosed pursuant to this subdivision shall constitute a public record. Notwithstanding any other law, the commissioner may disclose that information either orally or in writing pursuant to this subdivision. There shall be no liability on the part of, and no cause of action of any nature shall arise against, the state, the Department of Financial Protection and Innovation, the Commissioner of Financial Protection and Innovation, or any officer, agent, or employee of the state or the Department of Financial Protection and Innovation for the release of any false or unauthorized information, unless the release of that information was done with knowledge and malice.

(f) Section 461 of the Business and Professions Code shall not apply to the Division of Corporations when using a national, uniform application adopted or approved for use by the Securities and Exchange Commission, the North American Securities Administrators Association, or the Financial Industry Regulatory Authority that is required for participation in the Central Registration Depository or the Investment Adviser Registration Depository.

(g) This section shall not require the disclosure of criminal history record information maintained by the Federal Bureau of Investigation pursuant to Section 534 of Title 28 of the United States Code, and the rules thereunder, or information not otherwise subject to disclosure under the Information Practices Act of 1977.

history: (History: Amended (as amended by Stats. 2021, Ch. 615, Sec. 58) by Stats. 2022, Ch. 452, Sec. 76. (SB 1498) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 25248

text:
(a) If the commissioner finds, as a result of any examination or investigation or from any report made to the commissioner, that any person subject to this part, other than an investment adviser subject to Section 25230.1, is in an insolvent condition, or is conducting a securities, broker-dealer, or investment advisory business in such an unsafe, injurious, or unauthorized manner as to render further operations hazardous to the public or to customers, the commissioner may, by an order addressed to and served by registered or certified mail or by personal service on that person and on any other person having in his or her possession or control any client funds, trust funds, or other property deposited with that person, direct discontinuance of the disbursement of client or trust funds by the parties or any of them, the receipt of client or trust funds, or other business operations. No person having in his or her possession any of these funds shall be liable for failure to comply with the order unless he or she has received written notice of the order. Subject to subdivision (b), the order shall remain in effect until set aside by the commissioner, in whole or in part, the person is the subject of an order for relief in bankruptcy, or pursuant to Section 25253, the commissioner has assumed possession of the broker-dealer or investment adviser.

(b) Within 15 days from the date of an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code). Upon receipt of a request, the matter shall be set for hearing to commence within 30 days after that receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of the notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing. Neither the request for a hearing nor the hearing itself shall stay the order issued by the commissioner under subdivision (a).

history: (History: Amended by Stats. 2009, Ch. 500, Sec. 30. (AB 1059) Effective January 1, 2010.)

title: 4. SECURITIES


citation: CORP § 25249

text: If, after examination or investigation, the commissioner has reasonable grounds to believe that any broker-dealer or investment adviser is violating or has violated any law or rule binding upon it, the commissioner shall, by written order addressed to the broker-dealer or investment adviser, direct the discontinuance of the violation. The order shall be effective immediately, but shall not become final except in accordance with the provisions of Section 25251.

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

title: 4. SECURITIES


citation: CORP § 25250

text: If, after examination or investigation, the commissioner has reasonable grounds to believe that any broker-dealer or investment adviser, other than an investment adviser subject to Section 25230.1, is conducting or has conducted business in an unsafe or injurious manner, the commissioner shall, by written order addressed to the broker-dealer or investment adviser, direct the discontinuance of the unsafe or injurious practices. The order shall be effective immediately, but shall not become final except in accordance with the provisions of Section 25251.

history: (History: Amended by Stats. 2022, Ch. 188, Sec. 2. (AB 2433) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 25251

text:
(a) No order issued pursuant to Section 25249 or 25250 may become final except after notice to the affected broker-dealer or investment adviser of the commissioner’s intention to make the order final and of the reasons for the finding. The commissioner shall also notify the broker-dealer or investment adviser that upon receiving a request the matter shall be set for hearing to commence within 15 business days after receipt of the request. The broker-dealer or investment adviser may consent to have the hearing commence at a later date. If no hearing is requested within 30 days after the mailing or service of the required notice, and none is ordered by the commissioner, the order may become final without a hearing and the broker-dealer or investment adviser shall immediately discontinue the practices named in the order. If a hearing is requested or ordered, it shall be held in accordance with the provisions of the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and the commissioner shall have all of the powers granted under that act. If, upon the conclusion of the hearing, it appears to the commissioner that the broker-dealer or investment adviser is conducting or has conducted business in an unsafe and injurious manner or is violating or has violated any law of this state, or any rule binding upon it, the commissioner shall make the order of discontinuance final and the broker-dealer or investment adviser shall immediately discontinue the practices named in the order.

(b) The broker-dealer or investment adviser may within 10 days after an order is made final commence an action to restrain enforcement of the order. If the enforcement of the order is not enjoined within 10 days by the court in which the action is brought, the broker-dealer or investment adviser shall comply with the order.

history: (History: Amended by Stats. 2022, Ch. 188, Sec. 3. (AB 2433) Effective January 1, 2023.)

title: 4. SECURITIES


citation: CORP § 25252

text:
The commissioner may, after appropriate notice and opportunity for hearing, by orders, levy administrative penalties as follows:

(a) Any person subject to this division, other than a broker-dealer or investment adviser, who willfully violates any provision of this division, or who willfully violates any rule or order adopted or issued pursuant to this division, is liable for administrative penalties of not more than one thousand dollars ($1,000) for the first violation, and not more than two thousand five hundred dollars ($2,500) for each subsequent violation.

(b) Any broker-dealer or investment adviser that willfully violates any provision of this division to which it is subject, or that willfully violates any rule or order adopted or issued pursuant to this division and to which it is subject, is liable for administrative penalties of not more than five thousand dollars ($5,000) for the first violation, not more than ten thousand dollars ($10,000) for the second violation, and not more than fifteen thousand dollars ($15,000) for each subsequent violation.

(c) The administrative penalties shall be collected by the commissioner and paid into the State Corporations Fund.

(d) The administrative penalties available to the commissioner pursuant to this section are not exclusive, and may be sought and employed in any combination with civil, criminal, and other administrative remedies deemed advisable by the commissioner to enforce the provisions of this division.

(e) After the exhaustion of the review procedures provided in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, the commissioner may apply to the appropriate superior court for a judgment in the amount of the administrative penalty and costs awarded in a final decision and order compelling the respondent, or the named or cited person, to comply with the final decision of the commissioner brought under this division. The application shall include a certified copy of the final decision of the commissioner and shall constitute a sufficient showing to warrant the issuance of the judgment and order from superior court.

history: (History: Amended by Stats. 2013, Ch. 335, Sec. 4. (SB 538) Effective January 1, 2014.)

title: 4. SECURITIES