BILL NUMBER: AB 722 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 5, 2015
AMENDED IN ASSEMBLY APRIL 22, 2015
INTRODUCED BY Assembly Member Perea
FEBRUARY 25, 2015
An act to amend Sections 25102, 25104, 25110, 25501, 25503, and
25608 of, and to add Section 25113.1 to, the Corporations Code,
relating to securities.
LEGISLATIVE COUNSEL'S DIGEST
AB 722, as amended, Perea. Securities transactions: qualifications
by permit: liability.
Existing law, the Corporate Securities Law of 1968, requires
securities offered or sold in this state in an issuer or nonissuer
transaction to be qualified through an application filed with the
Commissioner of Business Oversight, unless exempt from the
qualification requirements. That law makes it unlawful, for a person
in connection with the offer, sale, or purchase of a security, to
engage in fraudulent or misleading acts or omissions.
This bill would authorize an applicant to file an application for
qualification of the offer or sale of a security by crowdfunding
permit if certain conditions are met, including that the total
offering of securities by the applicant to be sold in a 12-month
period, within or outside this state, is limited to $1,000,000, less
a specified amount; the aggregate amount of securities sold to any
investor, including any amount sold during the 12-month period
preceding the date of the transaction, does not exceed the lesser of
$5,000 or 10% of the net worth of that natural person; and the issuer
will not, directly or indirectly, conduct any unsolicited telephone
solicitation of the securities offered. This bill would impose a
filing fee of $200 plus 1/5 of 2% of the aggregate value of the
securities sought to be sold in this state.
Existing law provides that any person who violates a condition of
qualification of the offer or sale of a security is liable to any
person acquiring the security sold in violation, who may sue to
recover the consideration paid for such security with interest
thereon at the legal rate or for damages, as specified.
This bill would extend that provision to a violation of a
condition of qualification by permit authorized by this bill. This
bill would also require a court to award reasonable attorney's fees
and costs, and authorize the award of treble and punitive damages, to
a prevailing purchaser in an action brought against any person who
violates those conditions of qualification by permit authorized by
this bill.
Existing law imposes liability on any person who engages in
specified unlawful activity to the person who purchases a security
from him or sells a security to him, and authorizes the purchaser or
seller to sue either for rescission or for damages.
This bill would provide that the plaintiff is not required to
plead or prove that the defendant acted with scienter.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 25102 of the Corporations Code is amended to
read:
25102. The following transactions are exempted from the
provisions of Section 25110:
(a) Any offer (but not a sale) not involving any public offering
and the execution and delivery of any agreement for the sale of
securities pursuant to the offer if (1) the agreement contains
substantially the following provision: "The sale of the securities
that are the subject of this agreement has not been qualified with
the Commissioner of Corporations of the State of California and the
issuance of the securities or the payment or receipt of any part of
the consideration therefor prior to the qualification is unlawful,
unless the sale of securities is exempt from the qualification by
Section 25100, 25102, or 25105 of the California Corporations Code.
The rights of all parties to this agreement are expressly conditioned
upon the qualification being obtained, unless the sale is so exempt"
; and (2) no part of the purchase price is paid or received and none
of the securities are issued until the sale of the securities is
qualified under this law unless the sale of securities is exempt from
the qualification by this section, Section 25100, or 25105.
(b) Any offer (but not a sale) of a security for which (1) a
registration statement has been filed under the Securities Act of
1933 but has not yet become effective, or for which an offering
statement under Regulation A has been filed but has not yet been
qualified, if no stop order or refusal order is in effect and (2) no
public proceeding or examination looking towards an order is pending
under Section 8 of the act and no order under Section 25140 or
subdivision (a) of Section 25143 is in effect under this law.
(c) Any offer (but not a sale) and the execution and delivery of
any agreement for the sale of securities pursuant to the offer as may
be permitted by the commissioner upon application. Any negotiating
permit under this subdivision shall be conditioned to the effect that
none of the securities may be issued and none of the consideration
therefor may be received or accepted until the sale of the securities
is qualified under this law.
(d) Any transaction or agreement between the issuer and an
underwriter or among underwriters if the sale of the securities is
qualified, or exempt from qualification, at the time of distribution
thereof in this state, if any.
(e) Any offer or sale of any evidence of indebtedness, whether
secured or unsecured, and any guarantee thereof, in a transaction not
involving any public offering.
(f) Any offer or sale of any security in a transaction (other than
an offer or sale to a pension or profit-sharing trust of the issuer)
that meets each of the following criteria:
(1) Sales of the security are not made to more than 35 persons,
including persons not in this state.
(2) All purchasers either have a preexisting personal or business
relationship with the offeror or any of its partners, officers,
directors or controlling persons, or managers (as appointed or
elected by the members) if the offeror is a limited liability
company, or by reason of their business or financial experience or
the business or financial experience of their professional advisers
who are unaffiliated with and who are not compensated by the issuer
or any affiliate or selling agent of the issuer, directly or
indirectly, could be reasonably assumed to have the capacity to
protect their own interests in connection with the transaction.
(3) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account (or a trust account if the purchaser is
a trustee) and not with a view to or for sale in connection with any
distribution of the security.
(4) The offer and sale of the security is not accomplished by the
publication of any advertisement. The number of purchasers referred
to above is exclusive of any described in subdivision (i), any
officer, director, or affiliate of the issuer, or manager (as
appointed or elected by the members) if the issuer is a limited
liability company, and any other purchaser who the commissioner
designates by rule. For purposes of this section, a husband and wife
(together with any custodian or trustee acting for the account of
their minor children) are counted as one person and a partnership,
corporation, or other organization that was not specifically formed
for the purpose of purchasing the security offered in reliance upon
this exemption, is counted as one person. The commissioner shall by
rule require the issuer to file a notice of transactions under this
subdivision.
The failure to file the notice or the failure to file the notice
within the time specified by the rule of the commissioner shall not
affect the availability of the exemption. Any issuer that fails to
file the notice as provided by rule of the commissioner shall, within
15 business days after discovery of the failure to file the notice
or after demand by the commissioner, whichever occurs first, file the
notice and pay to the commissioner a fee equal to the fee payable
had the transaction been qualified under Section 25110. Neither the
filing of the notice nor the failure by the commissioner to comment
thereon precludes the commissioner from taking any action that the
commissioner deems necessary or appropriate under this division with
respect to the offer and sale of the securities.
(g) Any offer or sale of conditional sale agreements, equipment
trust certificates, or certificates of interest or participation
therein or partial assignments thereof, covering the purchase of
railroad rolling stock or equipment or the purchase of motor
vehicles, aircraft, or parts thereof, in a transaction not involving
any public offering.
(h) Any offer or sale of voting common stock by a corporation
incorporated in any state if, immediately after the proposed sale and
issuance, there will be only one class of stock of the corporation
outstanding that is owned beneficially by no more than 35 persons,
provided all of the following requirements have been met:
(1) The offer and sale of the stock is not accompanied by the
publication of any advertisement, and no selling expenses have been
given, paid, or incurred in connection therewith.
(2) The consideration to be received by the issuer for the stock
to be issued consists of any of the following:
(A) Only assets (which may include cash) of an existing business
enterprise transferred to the issuer upon its initial organization,
of which all of the persons who are to receive the stock to be issued
pursuant to this exemption were owners during, and the enterprise
was operated for, a period of not less than one year immediately
preceding the proposed issuance, and the ownership of the enterprise
immediately prior to the proposed issuance was in the same
proportions as the shares of stock are to be issued.
(B) Only cash or cancellation of indebtedness for money borrowed,
or both, upon the initial organization of the issuer, provided all of
the stock is issued for the same price per share.
(C) Only cash, provided the sale is approved in writing by each of
the existing shareholders and the purchaser or purchasers are
existing shareholders.
(D) In a case where after the proposed issuance there will be only
one owner of the stock of the issuer, only any legal consideration.
(3) No promotional consideration has been given, paid, or incurred
in connection with the issuance. Promotional consideration means any
consideration paid directly or indirectly to a person who, acting
alone or in conjunction with one or more other persons, takes the
initiative in founding and organizing the business or enterprise of
an issuer for services rendered in connection with the founding or
organizing.
(4) A notice in a form prescribed by rule of the commissioner,
signed by an active member of the State Bar of California, is filed
with or mailed for filing to the commissioner not later than 10
business days after receipt of consideration for the securities by
the issuer. That notice shall contain an opinion of the member of the
State Bar of California that the exemption provided by this
subdivision is available for the offer and sale of the securities.
The failure to file the notice as required by this subdivision and
the rules of the commissioner shall not affect the availability of
this exemption. An issuer who fails to file the notice within the
time specified by this subdivision shall, within 15 business days
after discovery of the failure to file the notice or after demand by
the commissioner, whichever occurs first, file the notice and pay to
the commissioner a fee equal to the fee payable had the transaction
been qualified under Section 25110. The notice, except when filed on
behalf of a California corporation, shall be accompanied by an
irrevocable consent, in the form that the commissioner by rule
prescribes, appointing the commissioner or his or her successor in
office to be the issuer's attorney to receive service of any lawful
process in any noncriminal suit, action, or proceeding against it or
its successor that arises under this law or any rule or order
hereunder after the consent has been filed, with the same force and
validity as if served personally on the issuer. An issuer on whose
behalf a consent has been filed in connection with a previous
qualification or exemption from qualification under this law (or
application for a permit under any prior law if the application or
notice under this law states that the consent is still effective)
need not file another. Service may be made by leaving a copy of the
process in the office of the commissioner, but it is not effective
unless (A) the plaintiff, who may be the commissioner in a suit,
action, or proceeding instituted by him or her, forthwith sends
notice of the service and a copy of the process by registered or
certified mail to the defendant or respondent at its last address on
file with the commissioner, and (B) the plaintiff's affidavit of
compliance with this section is filed in the case on or before the
return day of the process, if any, or within the further time as the
court allows.
(5) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account, or a trust account if the purchaser is
a trustee, and not with a view to or for sale in connection with any
distribution of the stock.
For the purposes of this subdivision, all securities held by a
husband and wife, whether or not jointly, shall be considered to be
owned by one person, and all securities held by a corporation that
has issued stock pursuant to this exemption shall be considered to be
held by the shareholders to whom it has issued the stock.
All stock issued by a corporation pursuant to this subdivision as
it existed prior to the effective date of the amendments to this
section made during the 1996 portion of the 1995-96 Regular Session
that required the issuer to have stamped or printed prominently on
the face of the stock certificate a legend in a form prescribed by
rule of the commissioner restricting transfer of the stock in a
manner provided for by that rule shall not be subject to the transfer
restriction legend requirement and, by operation of law, the
corporation is authorized to remove that transfer restriction legend
from the certificates of those shares of stock issued by the
corporation pursuant to this subdivision as it existed prior to the
effective date of the amendments to this section made during the 1996
portion of the 1995-96 Regular Session.
(i) Any offer or sale (1) to a bank, savings and loan association,
trust company, insurance company, investment company registered
under the Investment Company Act of 1940, pension or profit-sharing
trust (other than a pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or individual retirement
account), or other institutional investor or governmental agency or
instrumentality that the commissioner may designate by rule, whether
the purchaser is acting for itself or as trustee, or (2) to any
corporation with outstanding securities registered under Section 12
of the Securities Exchange Act of 1934 or any wholly owned subsidiary
of the corporation that after the offer and sale will own directly
or indirectly 100 percent of the outstanding capital stock of the
issuer, provided the purchaser represents that it is purchasing for
its own account (or for the trust account) for investment and not
with a view to or for sale in connection with any distribution of the
security.
(j) Any offer or sale of any certificate of interest or
participation in an oil or gas title or lease (including subsurface
gas storage and payments out of production) if either of the
following apply:
(1) All of the purchasers meet one of the following requirements:
(A) Are and have been during the preceding two years engaged
primarily in the business of drilling for, producing, or refining oil
or gas (or whose corporate predecessor, in the case of a
corporation, has been so engaged).
(B) Are persons described in paragraph (1) of subdivision (i).
(C) Have been found by the commissioner upon written application
to be substantially engaged in the business of drilling for,
producing, or refining oil or gas so as not to require the protection
provided by this law (which finding shall be effective until
rescinded).
(2) The security is concurrently hypothecated to a bank in the
ordinary course of business to secure a loan made by the bank,
provided that each purchaser represents that it is purchasing for its
own account for investment and not with a view to or for sale in
connection with any distribution of the security.
(k) Any offer or sale of any security under, or pursuant to, a
plan of reorganization under Chapter 11 of the federal bankruptcy law
that has been confirmed or is subject to confirmation by the decree
or order of a court of competent jurisdiction.
( l ) Any offer or sale of an option, warrant, put,
call, or straddle, and any guarantee of any of these securities, by a
person who is not the issuer of the security subject to the right,
if the transaction, had it involved an offer or sale of the security
subject to the right by the person, would not have violated Section
25110 or 25130.
(m) Any offer or sale of a stock to a pension, profit-sharing,
stock bonus, or employee stock ownership plan, provided that (1) the
plan meets the requirements for qualification under Section 401 of
the Internal Revenue Code, and (2) the employees are not required or
permitted individually to make any contributions to the plan. The
exemption provided by this subdivision shall not be affected by
whether the stock is contributed to the plan, purchased from the
issuer with contributions by the issuer or an affiliate of the
issuer, or purchased from the issuer with funds borrowed from the
issuer, an affiliate of the issuer, or any other lender.
(n) Any offer or sale of any security in a transaction, other than
an offer or sale of a security in a rollup transaction, that meets
all of the following criteria:
(1) The issuer is (A) a California corporation or foreign
corporation that, at the time of the filing of the notice required
under this subdivision, is subject to Section 2115, or (B) any other
form of business entity, including without limitation a partnership
or trust organized under the laws of this state. The exemption
provided by this subdivision is not available to a "blind pool"
issuer, as that term is defined by the commissioner, or to an
investment company subject to the Investment Company Act of 1940.
(2) Sales of securities are made only to qualified purchasers or
other persons the issuer reasonably believes, after reasonable
inquiry, to be qualified purchasers. A corporation, partnership, or
other organization specifically formed for the purpose of acquiring
the securities offered by the issuer in reliance upon this exemption
may be a qualified purchaser if each of the equity owners of the
corporation, partnership, or other organization is a qualified
purchaser. Qualified purchasers include the following:
(A) A person designated in Section 260.102.13 of Title 10 of the
California Code of Regulations.
(B) A person designated in subdivision (i) or any rule of the
commissioner adopted thereunder.
(C) A pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or an individual retirement
account, if the investment decisions made on behalf of the trust,
plan, or account are made solely by persons who are qualified
purchasers.
(D) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, each with total assets in excess of five million
dollars ($5,000,000) according to its most recent audited financial
statements.
(E) With respect to the offer and sale of one class of voting
common stock of an issuer or of preferred stock of an issuer
entitling the holder thereof to at least the same voting rights as
the issuer's one class of voting common stock, provided that the
issuer has only one-class voting common stock outstanding upon
consummation of the offer and sale, a natural person who, either
individually or jointly with the person's spouse, (i) has a minimum
net worth of two hundred fifty thousand dollars ($250,000) and had,
during the immediately preceding tax year, gross income in excess of
one hundred thousand dollars ($100,000) and reasonably expects gross
income in excess of one hundred thousand dollars ($100,000) during
the current tax year or (ii) has a minimum net worth of five hundred
thousand dollars ($500,000). "Net worth" shall be determined
exclusive of home, home furnishings, and automobiles. Other assets
included in the computation of net worth may be valued at fair market
value.
Each natural person specified above, by reason of his or her
business or financial experience, or the business or financial
experience of his or her professional adviser, who is unaffiliated
with and who is not compensated, directly or indirectly, by the
issuer or any affiliate or selling agent of the issuer, can be
reasonably assumed to have the capacity to protect his or her
interests in connection with the transaction. The amount of the
investment of each natural person shall not exceed 10 percent of the
net worth, as determined by this subparagraph, of that natural
person.
(F) Any other purchaser designated as qualified by rule of the
commissioner.
(3) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account (or trust account, if the purchaser is a
trustee) and not with a view to or for sale in connection with a
distribution of the security.
(4) Each natural person purchaser, including a corporation,
partnership, or other organization specifically formed by natural
persons for the purpose of acquiring the securities offered by the
issuer, receives, at least five business days before securities are
sold to, or a commitment to purchase is accepted from, the purchaser,
a written offering disclosure statement that shall meet the
disclosure requirements of Regulation D (17 C.F.R. 230.501 et seq.),
and any other information as may be prescribed by rule of the
commissioner, provided that the issuer shall not be obligated
pursuant to this paragraph to provide this disclosure statement to a
natural person qualified under Section 260.102.13 of Title 10 of the
California Code of Regulations. The offer or sale of securities
pursuant to a disclosure statement required by this paragraph that is
in violation of Section 25401, or that fails to meet the disclosure
requirements of Regulation D (17 C.F.R. 230.501 et seq.), shall not
render unavailable to the issuer the claim of an exemption from
Section 25110 afforded by this subdivision. This paragraph does not
impose, directly or indirectly, any additional disclosure obligation
with respect to any other exemption from qualification available
under any other provision of this section.
(5) (A) A general announcement of proposed offering may be
published by written document only, provided that the general
announcement of proposed offering sets forth the following required
information:
(i) The name of the issuer of the securities.
(ii) The full title of the security to be issued.
(iii) The anticipated suitability standards for prospective
purchasers.
(iv) A statement that (I) no money or other consideration is being
solicited or will be accepted, (II) an indication of interest made
by a prospective purchaser involves no obligation or commitment of
any kind, and, if the issuer is required by paragraph (4) to deliver
a disclosure statement to prospective purchasers, (III) no sales will
be made or commitment to purchase accepted until five business days
after delivery of a disclosure statement and subscription information
to the prospective purchaser in accordance with the requirements of
this subdivision.
(v) Any other information required by rule of the commissioner.
(vi) The following legend: "For more complete information about
(Name of Issuer) and (Full Title of Security), send for additional
information from (Name and Address) by sending this coupon or calling
(Telephone Number)."
(B) The general announcement of proposed offering referred to in
subparagraph (A) may also set forth the following information:
(i) A brief description of the business of the issuer.
(ii) The geographic location of the issuer and its business.
(iii) The price of the security to be issued, or, if the price is
not known, the method of its determination or the probable price
range as specified by the issuer, and the aggregate offering price.
(C) The general announcement of proposed offering shall contain
only the information that is set forth in this paragraph.
(D) Dissemination of the general announcement of proposed offering
to persons who are not qualified purchasers, without more, shall not
disqualify the issuer from claiming the exemption under this
subdivision.
(6) No telephone solicitation shall be permitted until the issuer
has determined that the prospective purchaser to be solicited is a
qualified purchaser.
(7) The issuer files a notice of transaction under this
subdivision both (A) concurrent with the publication of a general
announcement of proposed offering or at the time of the initial offer
of the securities, whichever occurs first, accompanied by a filing
fee, and (B) within 10 business days following the close or
abandonment of the offering, but in no case more than 210 days from
the date of filing the first notice. The first notice of transaction
under subparagraph (A) shall contain an undertaking, in a form
acceptable to the commissioner, to deliver any disclosure statement
required by paragraph (4) to be delivered to prospective purchasers,
and any supplement thereto, to the commissioner within 10 days of the
commissioner's request for the information. The exemption from
qualification afforded by this subdivision is unavailable if an
issuer fails to file the first notice required under subparagraph (A)
or to pay the filing fee. The commissioner has the authority to
assess an administrative penalty of up to one thousand dollars
($1,000) against an issuer that fails to deliver the disclosure
statement required to be delivered to the commissioner upon the
commissioner's request within the time period set forth above.
Neither the filing of the disclosure statement nor the failure by the
commissioner to comment thereon precludes the commissioner from
taking any action deemed necessary or appropriate under this division
with respect to the offer and sale of the securities.
(o) An offer or sale of any security issued by a corporation or
limited liability company pursuant to a purchase plan or agreement,
or issued pursuant to an option plan or agreement, where the security
at the time of issuance or grant is exempt from registration under
the Securities Act of 1933, as amended, pursuant to Rule 701 adopted
pursuant to that act (17 C.F.R. 230.701), the provisions of which are
hereby incorporated by reference into this section, provided that
(1) the terms of any purchase plan or agreement shall comply with
Sections 260.140.42, 260.140.45, and 260.140.46 of Title 10 of the
California Code of Regulations, (2) the terms of any option plan or
agreement shall comply with Sections 260.140.41, 260.140.45, and
260.140.46 of Title 10 of the California Code of Regulations, and (3)
the issuer files a notice of transaction in accordance with rules
adopted by the commissioner no later than 30 days after the initial
issuance of any security under that plan, accompanied by a filing fee
as prescribed by subdivision (y) of Section 25608. The failure to
file the notice of transaction within the time specified in this
subdivision shall not affect the availability of this exemption. An
issuer that fails to file the notice shall, within 15 business days
after discovery of the failure to file the notice or after demand by
the commissioner, whichever occurs first, file the notice and pay the
commissioner a fee equal to the maximum aggregate fee payable had
the transaction been qualified under Section 25110.
Offers and sales exempt pursuant to this subdivision shall be
deemed to be part of a single, discrete offering and are not subject
to integration with any other offering or sale, whether qualified
under Chapter 2 (commencing with Section 25110), or otherwise exempt,
or not subject to qualification.
(p) An offer or sale of nonredeemable securities to accredited
investors (Section 28031) by a person licensed under the Capital
Access Company Law (Division 3 (commencing with Section 28000) of
Title 4), provided that all purchasers either (1) have a preexisting
personal or business relationship with the offeror or any of its
partners, officers, directors, controlling persons, or managers (as
appointed or elected by the members), or (2) by reason of their
business or financial experience or the business or financial
experience of their professional advisers who are unaffiliated with
and who are not compensated by the issuer or any affiliate or selling
agent of the issuer, directly or indirectly, could be reasonably
assumed to have the capacity to protect their own interests in
connection with the transaction. All nonredeemable securities shall
be evidenced by certificates that shall have stamped or printed
prominently on their face a legend in a form to be prescribed by rule
or order of the commissioner restricting transfer of the securities
in the manner as the rule or order provides. The exemption under this
subdivision shall not be available for any
offering that is exempt or asserted to be exempt
pursuant to Section 3(a)(11) of the Securities Act of 1933 (15 U.S.C.
Sec. 77c(a)(11)) or Rule 147 (17 C.F.R. 230.147) thereunder or
otherwise is conducted by means of any form of general solicitation
or general advertising.
(q) Any offer or sale of any viatical or life settlement contract
or fractionalized or pooled interest therein in a transaction that
meets all of the following criteria:
(1) Sales of securities described in this subdivision are made
only to qualified purchasers or other persons the issuer reasonably
believes, after reasonable inquiry, to be qualified purchasers. A
corporation, partnership, or other organization specifically formed
for the purpose of acquiring the securities offered by the issuer in
reliance upon this exemption may be a qualified purchaser only if
each of the equity owners of the corporation, partnership, or other
organization is a qualified purchaser. Qualified purchasers include
the following:
(A) A person designated in Section 260.102.13 of Title 10 of the
California Code of Regulations.
(B) A person designated in subdivision (i) or any rule of the
commissioner adopted thereunder.
(C) A pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or an individual retirement
account, if the investment decisions made on behalf of the trust,
plan, or account are made solely by persons who are qualified
purchasers.
(D) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, each with total assets in excess of five million
dollars ($5,000,000) according to its most recent audited financial
statements.
(E) A natural person who, either individually or jointly with the
person's spouse, (i) has a minimum net worth of one hundred fifty
thousand dollars ($150,000) and had, during the immediately preceding
tax year, gross income in excess of one hundred thousand dollars
($100,000) and reasonably expects gross income in excess of one
hundred thousand dollars ($100,000) during the current tax year or
(ii) has a minimum net worth of two hundred fifty thousand dollars
($250,000). "Net worth" shall be determined exclusive of home, home
furnishings, and automobiles. Other assets included in the
computation of net worth may be valued at fair market value.
Each natural person specified above, by reason of his or her
business or financial experience, or the business or financial
experience of his or her professional adviser, who is unaffiliated
with and who is not compensated, directly or indirectly, by the
issuer or any affiliate or selling agent of the issuer, can be
reasonably assumed to have the capacity to protect his or her
interests in connection with the transaction.
The amount of the investment of each natural person shall not
exceed 10 percent of the net worth, as determined by this
subdivision, of that natural person.
(F) Any other purchaser designated as qualified by rule of the
commissioner.
(2) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account (or trust account, if the purchaser is a
trustee) and not with a view to or for sale in connection with a
distribution of the security.
(3) Each natural person purchaser, including a corporation,
partnership, or other organization specifically formed by natural
persons for the purpose of acquiring the securities offered by the
issuer, receives, at least five business days before securities
described in this subdivision are sold to, or a commitment to
purchase is accepted from, the purchaser, the following information
in writing:
(A) The name, principal business and mailing address, and
telephone number of the issuer.
(B) The suitability standards for prospective purchasers as set
forth in paragraph (1) of this subdivision.
(C) A description of the issuer's type of business organization
and the state in which the issuer is organized or incorporated.
(D) A brief description of the business of the issuer.
(E) If the issuer retains ownership or becomes the beneficiary of
the insurance policy, an audit report of an independent certified
public accountant together with a balance sheet and related
statements of income, retained earnings, and cashflows that reflect
the issuer's financial position, the results of the issuer's
operations, and the issuer's cashflows as of a date within 15 months
before the date of the initial issuance of the securities described
in this subdivision. The financial statements listed in this
subparagraph shall be prepared in conformity with generally accepted
accounting principles. If the date of the audit report is more than
120 days before the date of the initial issuance of the securities
described in this subdivision, the issuer shall provide unaudited
interim financial statements.
(F) The names of all directors, officers, partners, members, or
trustees of the issuer.
(G) A description of any order, judgment, or decree that is final
as to the issuing entity of any state, federal, or foreign country
governmental agency or administrator, or of any state, federal, or
foreign country court of competent jurisdiction (i) revoking,
suspending, denying, or censuring for cause any license, permit, or
other authority of the issuer or of any director, officer, partner,
member, trustee, or person owning or controlling, directly or
indirectly, 10 percent or more of the outstanding interest or equity
securities of the issuer, to engage in the securities, commodities,
franchise, insurance, real estate, or lending business or in the
offer or sale of securities, commodities, franchises, insurance, real
estate, or loans, (ii) permanently restraining, enjoining, barring,
suspending, or censuring any such person from engaging in or
continuing any conduct, practice, or employment in connection with
the offer or sale of securities, commodities, franchises, insurance,
real estate, or loans, (iii) convicting any such person of, or
pleading nolo contendere by any such person to, any felony or
misdemeanor involving a security, commodity, franchise, insurance,
real estate, or loan, or any aspect of the securities, commodities,
franchise, insurance, real estate, or lending business, or involving
dishonesty, fraud, deceit, embezzlement, fraudulent conversion, or
misappropriation of property, or (iv) holding any such person liable
in a civil action involving breach of a fiduciary duty, fraud,
deceit, embezzlement, fraudulent conversion, or misappropriation of
property. This subparagraph does not apply to any order, judgment, or
decree that has been vacated, overturned, or is more than 10 years
old.
(H) Notice of the purchaser's right to rescind or cancel the
investment and receive a refund pursuant to Section 25508.5.
(I) The name, address, and telephone number of the issuing
insurance company, and the name, address, and telephone number of the
state or foreign country regulator of the insurance company.
(J) The total face value of the insurance policy and the
percentage of the insurance policy the purchaser will own.
(K) The insurance policy number, issue date, and type.
(L) If a group insurance policy, the name, address, and telephone
number of the group, and, if applicable, the material terms and
conditions of converting the policy to an individual policy,
including the amount of increased premiums.
(M) If a term insurance policy, the term and the name, address,
and telephone number of the person who will be responsible for
renewing the policy if necessary.
(N) That the insurance policy is beyond the state statute for
contestability and the reason therefor.
(O) The insurance policy premiums and terms of premium payments.
(P) The amount of the purchaser's moneys that will be set aside to
pay premiums.
(Q) The name, address, and telephone number of the person who will
be the insurance policy owner and the person who will be responsible
for paying premiums.
(R) The date on which the purchaser will be required to pay
premiums and the amount of the premium, if known.
(S) A statement to the effect that any projected rate of return to
the purchaser from the purchase of a viatical or life settlement
contract or a fractionalized or pooled interest therein is based on
an estimated life expectancy for the person insured under the life
insurance policy; that the return on the purchase may vary
substantially from the expected rate of return based upon the actual
life expectancy of the insured that may be less than, equal to, or
may greatly exceed the estimated life expectancy; and that the rate
of return would be higher if the actual life expectancy were less
than, and lower if the actual life expectancy were greater than the
estimated life expectancy of the insured at the time the viatical or
life settlement contract was closed.
(T) A statement that the purchaser should consult with his or her
tax adviser regarding the tax consequences of the purchase of the
viatical or life settlement contract or fractionalized or pooled
interest therein and, if the purchaser is using retirement funds or
accounts for that purchase, whether or not any adverse tax
consequences might result from the use of those funds for the
purchase of that investment.
(U) Any other information as may be prescribed by rule of the
commissioner.
SEC. 2. Section 25104 of the Corporations Code is amended to read:
25104. The following transactions are exempted from the
provisions of Section 25130:
(a) Any offer or sale of a security by the bona fide owner thereof
for his or her own account if the sale (1) is not accompanied by the
publication of any advertisement and (2) is not effected by or
through a broker-dealer in a public offering.
(b) Any offer or sale effected by or through a licensed
broker-dealer pursuant to an unsolicited order or offer to buy. For
the purpose of this subdivision, an inquiry regarding a written bid
for a security or a written solicitation of an offer to sell a
security made by another broker-dealer within the previous 60 days
shall not be considered the solicitation of an order or offer to buy.
(c) Any offer or sale to a bank, savings and loan association,
trust company, insurance company, investment company registered under
the Investment Company Act of 1940, pension or profit-sharing trust
(other than a pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or individual retirement
account), or such other institutional investor or governmental agency
or instrumentality as the commissioner may designate by rule,
whether the purchaser is acting for itself or as trustee; provided
the purchaser represents that it is purchasing for its own account
(or for the trust account) for investment and not with a view to or
for sale in connection with any distribution of the security.
(d) Any transaction or agreement between a person on whose behalf
an offering is made and an underwriter or among underwriters, if the
sale of the securities is exempt from qualification at the time of or
qualified prior to distribution in this state, if any.
(e) Any offer or sale of any security by or for the account of a
bona fide secured party selling the security in the ordinary course
of business to liquidate a bona fide debt.
(f) Any transaction by an executor, administrator, sheriff,
marshal, receiver, trustee in bankruptcy, guardian, or conservator.
(g) Any offer (but not a sale) of a security for which (1) a
registration statement has been filed under the Securities Act of
1933 but has not yet become effective, or for which an offering
statement under Regulation A has been filed but has not yet been
qualified, if no stop order or refusal order is in effect and no
public proceeding or examination looking toward such an order is
pending under Section 8 of that act and (2) no order under Section
25140 or subdivision (a) of Section 25143 is in effect under this
division.
(h) Any offer or sale of a security if a qualification under
Chapter 2 (commencing with Section 25110) of this part for any
securities of the same class has become effective within 18 months,
or longer period as the commissioner may order provided that each
consecutive order shall be for no more than six months, prior to the
offer or sale or if a qualification under Chapter 3 (commencing with
Section 25120) or Chapter 4 (commencing with Section 25130) of this
part for any securities of the same class has become effective within
12 months prior to that offer or sale, provided no order under
Section 25140 or subdivision (a) of Section 25143 is in effect under
this division with respect to the qualification, and, provided
further, that this exemption does not apply to securities offered
pursuant to a registration under the Securities Act of 1933 or
pursuant to an exemption under Regulation A under that act if the
aggregate offering price of the securities offered under such
exemption exceeds fifty thousand dollars ($50,000). The commissioner
may, by rule or order, withhold this exemption with respect to
securities qualified only pursuant to a limited offering
qualification.
SEC. 3. Section 25110 of the Corporations Code is amended to read:
25110. It is unlawful for any person to offer or sell in this
state any security in an issuer transaction (other than in a
transaction subject to Section 25120), whether or not by or through
underwriters, unless such sale has been qualified under Section
25111, 25112, 25113, or 25113.1 (and no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification) or unless such security or transaction is exempted or
not subject to qualification under Chapter 1 (commencing with Section
25100) of this part. The offer or sale of such a security in a
manner that varies or differs from, exceeds the scope of, or fails to
conform with either a material term or material condition of
qualification of the offering as set forth in the permit or
qualification order, or a material representation as to the manner of
offering which is set forth in the application for qualification,
shall be an unqualified offer or sale.
SEC. 4. Section 25113.1 is added to the Corporations Code, to
read:
25113.1. (a) Any offer or sale of any security that meets all of
the conditions in subdivision (b) may be qualified by permit under
this section.
(b) (1) An application for a crowdfunding permit under this
section shall contain any information and be accompanied by any
documents as shall be required by rule of the commissioner, in
addition to the information specified in Section 25160 and the
consent to service of process required by Section 25165. For this
purpose, the commissioner may classify issuers and types of
securities.
(2) An applicant may file an application for a crowdfunding permit
under this section if it meets all of the following conditions:
(A) The applicant is: (i) a California corporation or a foreign
corporation, which at the time of filing an application under this
subdivision is subject to Section 2115, and neither corporation is a
"blind pool" company, as that term is defined by the commissioner;
(ii) not issuing fractional undivided interests in oil or gas rights,
or a similar interest in other mineral rights; (iii) not an
investment company subject to the Investment Company Act of 1940; and
(iv) not subject to the reporting requirements of Section 13 or 15
(d) of the Securities Exchange Act of 1934.
(B) The total offering of securities by the applicant to be sold
in a 12-month period, within or outside this state, is limited to one
million dollars ($1,000,000), less the aggregate offering price for
all securities sold (within the 12 months before the start, and
during the offering, of the securities) under Rule 504 (17 C.F.R.
230.504) under the Securities Act of 1933 or in violation of
subdivision (a) of Section 5 of that act.
(C) Offers and sales made in reliance on this section will not be
integrated with: (i) prior offers or sales of securities or (ii)
subsequent offers or sales of securities that are (I) registered
under the Securities Act of 1933; (II) made pursuant to Rule 701 (17
C.F.R. 230.701) under that act; (III) made pursuant to an employee
benefit plan; (IV) made pursuant to Regulation S (17 C.F.R.
230.901-905) under that act; (V) made in reliance on a federal rule
in substantially the same form as the rule proposed by the Securities
Exchange Commission to govern the offer and sale of securities under
Section 4 (a)(6) of the Securities Act of 1933, referred to as
Regulation Crowdfunding, proposed 17 C.F.R. Parts 200, 227, 232, 239,
240, and 249 Release Nos. 33-9470; 34-70741; File Nos. 7-09-13];
or (VI) made more than six months after the completion of the
offering in reliance on this section.
(D) The aggregate amount of securities sold to any investor in
reliance on this section, including any amount sold during the
12-month period preceding the date of the transaction, does not
exceed the lesser of five thousand dollars ($5,000) or 10 percent of
the net worth of that natural person, or such amount as the
commissioner may provide by rule or order. "Net worth" shall be
determined exclusive of home, home furnishings, and automobiles.
Other assets included in the computation of net worth may be valued
at fair market value.
(E) The applicant has taken reasonable steps to ensure that each
investor who is a natural person who is not an accredited investor as
defined in Rule 501 (17 C.F.R. 230.501) under the Securities Act of
1933 either alone or with his or her purchaser representative or
representatives has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits
and risks of the prospective investment.
(F) The applicant files with the commissioner, provides to
investors, and makes available to potential investors
investors: (i) a disclosure document meeting the
requirements of Section 260.113.1 of Title 10 of the California Code
of Regulations; and (ii) a Small Company Offering Registration
disclosure document on Form U-7, as adopted by the North American
Securities Administrators Association, no less than 10 business
days prior to the commencement of the offering of securities.
(G) The offering is made pursuant to this section, a disclosure
document meeting the requirements of Section 260.113.1 of Title 10 of
the California Code of Regulations, a permit application disclosure
documents based on the Form U-7, as adopted by the North American
Security Administrators Association, and any additional requirements
as the commissioner shall prescribe, that may include, but not be
limited to, investor suitability and due diligence investigation
requirements.
(H) The investor shall have a three-day right to rescind any
investment made in any security offered under this section. The
three-day period shall end at 11:59 p.m. Pacific standard time on the
third business day after the date on which the issuer's confirmation
of its acceptance of the investor's investment is communicated in
writing and received by the investor.
(G)
(I) The applicant sets aside in a separate third-party
escrow account all funds raised as part of the offering, to be held
in escrow until the time that the minimum offering amount is reached.
If the minimum offering amount is not reached within one year of the
effective date of the offering, the applicant shall return all funds
to investors.
(J) The applicant shall not, directly or indirectly, conduct any
direct solicitation of the securities offered by this section. For
purposes of this subparagraph, "direct solicitation" means and
includes the following: any in-person or face-to-face conversation
between the applicant or any of its founders, promoters, officers,
directors, controlling persons, agents, or other persons acting
directly or indirectly on behalf of the applicant and any investor or
prospective investor or any person acting directly or indirectly on
behalf of, or in regular communication with, the investor.
(H)
(K) The applicant shall not, directly or indirectly,
conduct any unsolicited telephone solicitation of the securities
offered by this section.
(L) The applicant or any person or entity selling an investment to
an investor pursuant to this section, including without limitation,
any issuer, securities broker-dealer, agent, or officer, director,
founder, promoter, controlling person, or other persons acting
directly or indirectly on behalf of the applicant shall have a
fiduciary obligation to any investor or prospective investor.
(I)
(M) The applicant, a predecessor of the applicant, an
affiliated applicant, a director, executive officer, or other officer
participating in the offering, a general partner or managing member
of the applicant, a beneficial owner of 20 percent or more of the
applicant's outstanding voting equity securities, calculated on the
basis of voting power, a promoter connected with the issuer in any
capacity at the time of the sale, an investment manager of an
applicant that is a pooled investment fund, a person that has been or
will be paid, directly or indirectly, remuneration for solicitation
of purchasers in connection with the sale of securities, a general
partner or managing member of the investment manager or solicitor, or
any director, executive officer, or other officer participating in
the offering of the investment manager or solicitor or general
partner or managing member of the investment manager or solicitor
shall not be disqualified as a "bad actor" under Rule 506(d) (17
C.F.R. 230.506(d)) under the Securities Act of 1933.
(N) The applicant undertakes that there will be no stock splits,
stock dividends, spinoffs, or mergers for a period of two years from
the close of the offering.
(J)
(O) Any other requirement set forth by rule adopted by
the commissioner.
(c) If no stop order or order under subdivision (a) of Section
25143 is in effect under this law, qualification of the sale of the
securities under this section automatically becomes effective (and
the securities may be offered and sold in accordance with the terms
of the application as amended) at 12 o'clock noon California time of
the 60th calendar day after the filing of the application or at such
earlier time as the commissioner determines.
(c) The Department of Business Oversight shall either issue or
deny the permit within 60 days of the receipt of the application. If
the Department of Business Oversight fails to either issue or deny
the permit within 60 days, the applicant may demand a hearing with
the Department of Business Oversight to explain why the permit has
not been granted.
SEC. 5. Section 25501 of the Corporations Code is amended to read:
25501. Any person who violates Section 25401 shall be liable to
the person who purchases a security from him or her or sells a
security to him or her, who may sue either for rescission or for
damages (if the plaintiff or the defendant, as the case may be, no
longer owns the security), unless the defendant proves that the
plaintiff knew the facts concerning the untruth or omission or that
the defendant exercised reasonable care and did not know (or if he
had exercised reasonable care would not have known) of the untruth or
omission. The plaintiff shall not be required to plead or prove that
the defendant acted with scienter. Upon rescission, a purchaser may
recover the consideration paid for the security, plus interest at the
legal rate, less the amount of any income received on the security,
upon tender of the security. Upon rescission, a seller may recover
the security, upon tender of the consideration paid for the security
plus interest at the legal rate, less the amount of any income
received by the defendant on the security. Damages recoverable under
this section by a purchaser shall be an amount equal to the
difference between (a) the price at which the security was bought
plus interest at the legal rate from the date of purchase and (b) the
value of the security at the time it was disposed of by the
plaintiff plus the amount of any income received on the security by
the plaintiff. Damages recoverable under this section by a seller
shall be an amount equal to the difference between (1) the value of
the security at the time of the filing of the complaint plus the
amount of any income received by the defendant on the security and
(2) the price at which the security was sold plus interest at the
legal rate from the date of sale. Any tender specified in this
section may be made at any time before entry of judgment.
SEC. 6. Section 25503 of the Corporations Code is amended to read:
25503. Any person who violates Section 25110, 25130 or 25133, or
a condition of qualification under Chapter 2 (commencing with Section
25110) of this part, imposed pursuant to Section 25141, or an order
suspending trading issued pursuant to Section 25219, shall be liable
to any person acquiring from him the security sold in violation of
such section, who may sue to recover the consideration he paid for
such security with interest thereon at the legal rate, less the
amount of any income received therefrom, upon the tender of such
security, or for damages, if he no longer owns the security, or if
the consideration given for the security is not capable of being
returned. Damages, if the plaintiff no longer owns the security,
shall be equal to the difference between (a) his purchase price plus
interest at the legal rate from the date of purchase and (b) the
value of the security at the time it was disposed of by the plaintiff
plus the amount of any income received therefrom by the plaintiff.
Damages, if the consideration given for the security is not
capable of being returned, shall be equal to the value of that
consideration plus interest at the legal rate from the date of
purchase, provided the security is tendered; and if the plaintiff no
longer owns the security, damages in such case shall be equal to the
difference between (a) the value of the consideration given for the
security plus interest at the legal rate from the date of purchase
and (b) the value of the security at the
time it was disposed of by the plaintiff plus the
amount of any income received therefrom by the plaintiff. Any person
who violates Section 25120 or a condition of qualification under
Chapter 3 (commencing with Section 25120) of this part imposed
pursuant to Section 25141, shall be liable to any person acquiring
from him the security sold in violation of such section who may sue
to recover the difference between (a) the value of the consideration
received by the seller and (b) the value of the security at the time
it was received by the buyer, with interest thereon at the legal rate
from the date of purchase. Any person on whose behalf an offering is
made and any underwriter of the offering, whether on a best efforts
or a firm commitment basis, shall be jointly and severally liable
under this section, but in no event shall any underwriter (unless
such underwriter shall have knowingly received from the issuer for
acting as an underwriter some benefit, directly or indirectly, in
which all other underwriters similarly situated did not share in
proportion to their respective interest in the underwriting) be
liable in any suit or suits authorized under this section for damages
in excess of the total price at which the securities underwritten by
him and distributed to the public were offered to the public. Any
tender specified in this section may be made at any time before entry
of judgment. No person shall be liable under this section for
violation of Section 25110, 25120, or 25130 if the sale of the
security is qualified prior to the payment or receipt of any part of
the consideration for the security sold, even though an offer to sell
or a contract of sale may have been made or entered into without
qualification. The court shall award reasonable attorney's fees and
costs, and, in its discretion, may award treble and punitive damages,
to a prevailing purchaser in an action brought against any person
who violates Section 25110 in any offering qualified under Section
25113.1.
SEC. 7. Section 25608 of the Corporations Code is amended to read:
25608. (a) The commissioner shall charge and collect the fees
fixed in this section and Section 25608.1. All fees charged and
collected under this section and Section 25608.1 shall be transmitted
to the Treasurer at least weekly, accompanied by a detailed
statement thereof and shall be credited to the State Corporations
Fund.
(b) The fee for filing an application for a negotiating permit
under subdivision (c) of Section 25102 is fifty dollars ($50).
(c) The fee for filing a notice pursuant to paragraph (5) of
subdivision (h) of Section 25102 and the fee for filing a notice
pursuant to paragraph (4) of subdivision (f) of Section 25102, in
addition to the fee prescribed in those paragraphs, if applicable,
shall be determined based on the value of the securities proposed to
be sold in the transaction for which the notice is filed and in
accordance with subdivision (g), and shall be as follows:
Value of
Securities
Proposed to be Sold Filing Fee
$25,000 or less $ 25
$25,001 to $100,000 $ 35
$100,001 to $500,000 $ 50
$500,001 to $1,000,000 $150
Over $1,000,000 $300
(d) The fee for filing an application for designation of an issuer
pursuant to subdivision (k) of Section 25100 is fifty dollars ($50).
(e) The fee for filing an application for qualification of the
sale of securities by notification under Section 25112 or by permit
under paragraph (1) of subdivision (b) of Section 25113 (except
applications for qualification by permit of the sale of any guarantee
of any security, the fees for which applications are fixed in
subdivision (k)) is two hundred dollars ($200) plus one-fifth of 1
percent of the aggregate value of the securities sought to be sold in
this state up to a maximum aggregate fee of two thousand five
hundred dollars ($2,500).
The fee for filing a small company application for qualification
of the sale of securities by permit under paragraph (2) of
subdivision (b) of Section 25113 is two thousand five hundred dollars
($2,500). In the case where the costs of processing a small company
application exceed the filing fee, an additional fee shall be
charged, not to exceed one thousand dollars ($1,000), over and above
the filing fee based on the costs of the salary or other compensation
paid to persons processing the application plus overhead costs
reasonably incurred in the performance of the work. In determining
the costs, the commissioner may use the estimated average hourly cost
for all persons processing applications for the fiscal year.
The fee for filing a crowdfunding application for qualification of
the sale of securities by permit under Section 25113.1 is two
hundred dollars ($200) plus one-fifth of 2 percent of the aggregate
value of the securities sought to be sold in this state.
(f) The fee for filing an application for qualification of the
sale of securities by coordination under Section 25111 or a notice of
intention to sell under subdivision (t) of Section 25100 is two
hundred dollars ($200) plus one-fifth of 1 percent of the aggregate
value of the securities sought to be sold in this state up to a
maximum aggregate fee of two thousand five hundred dollars ($2,500).
(g) For the purpose of determining the fees fixed in subdivisions
(e) and (f):
(1) The value of the securities shall be the price at which the
company proposes to sell the securities, or the value, as alleged in
the application, or the actual value, as determined by the
commissioner, of the consideration (if other than money) to be
received in exchange therefor, or of the securities when sold,
whichever is greater.
(2) Interim or voting trust certificates shall have a value equal
to the aggregate value of the securities to be represented by the
interim or voting trust certificates.
(3) The value of a warrant or right to purchase or subscribe to
another security of the same or another issuer shall be an amount
equal to the consideration to be paid for that warrant or right plus
an amount equal to the consideration to be paid upon purchase of the
additional securities, provided that if the latter amount is not
determinable at the time of qualification, that amount shall then be
the value of the additional securities as determined by the
commissioner.
(4) In the case of a share dividend where the shareholders are
given an option to accept either cash or additional shares of common
stock, the value of the securities to be sold shall be the maximum
amount of cash that would be payable in the event that all
shareholders elected to accept cash.
(h) The fee for filing an application for qualification of the
sale of securities by permit under Section 25121 is:
(1) Two hundred dollars ($200) in connection with any change
(including any stock split or reverse stock split or stock dividend,
except a stock dividend where the shareholders are given an option to
accept either cash or additional shares of common stock) in the
rights, preferences, privileges, or restrictions of or on outstanding
securities.
(2) Two hundred dollars ($200) plus one-fifth of 1 percent of the
value, as alleged in the application, or the actual value, as
determined by the commissioner, of the consideration to be received
in exchange therefor, up to a maximum aggregate fee of two thousand
five hundred dollars ($2,500), in any exchange of securities by the
issuer with its existing security holders exclusively, or in any
exchange in connection with any merger or consolidation or purchase
of corporate assets in consideration of the issuance of securities,
or any entity conversion transaction.
(i) The fee for filing an application for qualification of the
sale of securities by notification under Section 25131 shall be one
hundred dollars ($100).
(j) The fee for an application for the removal of any condition
under Section 25141 is fifty dollars ($50).
(k) The fee for filing any application for a permit to execute or
issue any guarantee of any security is fifty dollars ($50).
( l ) The fee for acting as escrowholder for securities
under Section 25149 is fifty dollars ($50). In addition, a fee of
two dollars and fifty cents ($2.50) shall be paid for the deposit
with the commissioner of each new certificate or other document
resulting from a transfer in escrow.
(m) The fee for filing an application for an order (1) consenting
to the transfer in escrow of securities or (2) consenting to the
transfer of securities subject to any condition imposed by the
commissioner requiring the commissioner's consent to the transfer is
twenty dollars ($20) for each transfer.
(n) The filing fee for an amendment to an application filed after
the effective date of the qualification of the sale of securities is
fifty dollars ($50) plus any additional fee that would have been
required to be paid with the original application for qualification
of the sale of securities under this section if the matters set forth
in the amendment had been included in the original application.
(o) (1) The fee for filing an application for a broker-dealer
certificate under Section 25211 is three hundred dollars ($300).
(2) Each broker-dealer shall pay to the commissioner its pro rata
share of all costs and expenses, reasonably incurred in the
administration of the broker-dealer program under this division, as
estimated by the commissioner for the ensuing year and any deficit
actually incurred or anticipated in the administration of the program
in the year in which the assessment is made. The pro rata share
shall be the proportion that the broker-dealer and the number of its
agents in this state bears to the aggregate number of broker-dealers
and agents in this state as shown by records maintained by or on
behalf of the commissioner. The pro rata share may include the costs
of any examinations, audit, or investigation provided for in
subdivision (r).
(3) Every broker-dealer who has secured from the commissioner a
certificate shall, in order to keep the certificate in effect for an
additional period, pay a minimum assessment of seventy-five dollars
($75) on or before the 31st of December in each year.
(4) The commissioner may assess and levy against each
broker-dealer any additional amount above the minimum assessment
amount of seventy-five dollars ($75) that is reasonable and necessary
to support the broker-dealer program under this division. If an
additional amount is assessed, the commissioner shall notify each
broker-dealer by mail of any additional amount assessed and levied
against it on or before the 30th day of May in each year, and that
amount shall be paid within 20 days thereafter. If payment is not
made within 20 days, the commissioner shall assess and collect a
penalty in addition to the assessment of 1 percent of the assessment
for each month or part of a month that the payment is delayed or
withheld.
(5) If a broker-dealer fails to pay any assessment on or before
the 30th day of the month following the day upon which payment is
due, the commissioner may by order summarily suspend or revoke the
certificate issued to the broker-dealer. If, after that order is
made, a request for hearing is filed in writing and a hearing is not
held within 60 days thereafter, the order is deemed rescinded as of
its effective date. During any period when its certificate is revoked
or suspended, a broker-dealer shall not conduct business pursuant to
this division except as may be permitted by order of the
commissioner; provided, however, that the revocation, suspension, or
surrender of a certificate shall not affect the powers of the
commissioner as provided under this division.
(6) In determining the amount assessed, the commissioner shall
consider all appropriations from the State Corporations Fund for the
support of the broker-dealer program under this division and all
reimbursements applicable to the administration of the broker-dealer
program under this division.
(p) (1) The commissioner shall charge a fee of twenty-five
dollars ($25) for the filing of a notice or report required by rules
adopted pursuant to subdivision (b) of Section 25210 or subdivision
(b) of Section 25230.
(2) The commissioner may charge a fee up to thirty-five dollars
($35) to keep in effect for the following year any notice or report
required by rules adopted pursuant to subdivision (b) of Section
25210 or subdivision (b) of Section 25230.
(3) No person shall, on behalf of a broker-dealer licensed
pursuant to Section 25211, effect any transaction in, or induce or
attempt to induce the purchase or sale of, any security in this state
unless the broker-dealer pays the annual fee required by paragraph
(2) of this subdivision on or before the day upon which payment is
due.
(4) No person may, in this state, on behalf of an investment
adviser licensed pursuant to Section 25231, 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 pays the annual fee required by paragraph (2) on
or before the day upon which payment is due.
(5) The commissioner may by order summarily enjoin an individual
from performing any activity under paragraph (3) or (4) if the annual
fee in paragraph (2) is not paid on or before the day upon which
payment is due. An order under this paragraph may not be made before
10 days after notice by the commissioner that the fee is due and
unpaid.
(q) (1) Except as provided for in paragraph (2), the fee for
filing an application for an investment adviser under Section 25231
is one hundred twenty-five dollars ($125), and payment of this amount
shall keep the certificate, if granted, in effect during the
calendar year during which it is granted. Every investment adviser
who has secured from the commissioner a certificate shall, in order
to keep the certificate in effect for an additional period, pay a
renewal fee of one hundred twenty-five dollars ($125) on or before
the 31st day of December.
(2) Paragraph (1) shall not apply to a broker-dealer licensed
under Section 25210.
(r) (1) Except as provided for in paragraph (2), the fee for any
routine or nonroutine regulatory examination, audit, or investigation
is the amount of the salary or other compensation paid to the
persons making the examination, audit, or investigation plus the
amount of expenses including overhead reasonably incurred in the
performance of the work. In determining the costs associated with an
examination, audit, or investigation, the commissioner may use the
estimated average hourly cost for all persons performing
examinations, audits, or investigations for the fiscal year.
(2) An investment adviser licensed under Section 25230 pursuant to
the Investment Adviser Registration Depository shall not be subject
to paragraph (1) only in regard to the fee for a routine regulatory
examination of its investment advisory services for which it is
licensed under Section 25230.
(s) The fee for any hearing held by the commissioner pursuant to
Section 25142 shall be the sum determined by the commissioner to
cover the actual expense of noticing and holding the hearing.
(t) The commissioner may fix by rule a reasonable charge for any
publications issued under his or her authority. The charges shall not
apply to reports of the commissioner in the ordinary course of
distribution.
(u) The fee for filing an offer under subdivision (b) of Section
25507 shall be the amount of filing fee payable under subdivision
(e), (f), (h), or (i) of this section if an application had been
filed to qualify the transaction in which the securities upon which
the offer is to be made were sold in violation of the qualification
provisions of this law.
(v) The fee for filing an application for exemption pursuant to
subdivision ( l ) of Section 25100 is two hundred fifty
dollars ($250).
(w) The commissioner may by rule require payment of a fee for
filing a notice or report required by a rule adopted pursuant to
Section 25105. The fee required in connection with a transaction as
defined by that rule shall not exceed the fees specified in
subdivision (c) based on the value of the securities sold, but the
commissioner may permit a single notice for more than one
transaction.
(x) The fee for filing the first notice of transaction under
subdivision (n) of Section 25102 is six hundred dollars ($600).
(y) The fee for filing a notice of transaction under subdivision
(o) of Section 25102 shall be the fee for filing an application for
qualification of the sale of securities by permit under paragraph (1)
of subdivision (b) of Section 25113 as set forth in subdivision (e)
of this section.
(z) The fee for filing a notice of transaction under subdivision
(h) of Section 25103 shall be six hundred dollars ($600).