BILL NUMBER: SB 736 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 5, 2015
INTRODUCED BY Senators Vidak and Block
(Coauthor: Senator Morrell)
FEBRUARY 27, 2015
An act to amend Sections 17202 and 17310
17310, 17630, 17635, and 17636 of, and to add Section 17665 to,
the Financial Code, relating to escrow agents, and making an
appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 736, as amended, Vidak. Escrow agents: loss of trust
fund obligations. agents.
The Escrow Law requires the licensing of escrow agents by the
Commissioner of Business Oversight, and further requires licensees to
participate as members of the Escrow Agents' Fidelity Corporation, a
nonprofit corporation established to pay members for loss of trust
fund obligations, as specified. The law requires a licensed escrow
agent to maintain a bond based on the previous year's average annual
trust fund obligations, as specified.
This bill would authorize the commissioner to increase
the minimum bond required of an escrow agent by up to 100% of its
face value if the commissioner reasonably believes, based on an
examination, that conservation or liquidation of that escrow agent
may become necessary for the protection of the public. This bill
would make findings and declarations regarding the role of
Fidelity Corporation to support and enhance preservation of
the public's trust in licensed escrow agents, and specify
that Fidelity Corporation is required to indemnify a member escrow
agent against loss is in accordance
with the Escrow Law. This The bill
would also state the intent of the Legislature for
the commissioner to utilize the services of private 3rd
parties parties, with prior escrow or escrow
conservation, liquidation, or receivership experience, who are
independent of the department to perform conservation, liquidation,
and receiver functions, and would require the full amount of any
penalty revenue, up to $125,000 at any one time, as
specified, to be available for use by the commissioner to compensate
a an appointed conservator, liquidator,
or receiver. The bill would also authorize the commissioner to
utilize all or a portion of the bond or other required obligations,
and all or a portion of a licensee's assets remaining following
conservation, liquidation, or receivership to compensate an appointed
conservator, liquidator, or receiver. By making this penalty
revenue and other revenue available to the commissioner in
this regard, this bill would make an appropriation.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17202 of the Financial Code
is amended to read:
17202. At the time of filing an application for an escrow agent's
license, the applicant shall deposit with the commissioner a bond
satisfactory to the commissioner in the amount of at least
twenty-five thousand dollars ($25,000). Thereafter, a licensee shall
maintain a bond satisfactory to the commissioner in the amount of:
(1) twenty-five thousand dollars ($25,000) if 150 percent of the
previous year's average annual trust fund obligations, as calculated
under Section 17348, equals two hundred fifty thousand dollars
($250,000) or less; (2) thirty-five thousand dollars ($35,000) if 150
percent of the previous year's average annual trust fund
obligations, as calculated under Section 17348, equals at least two
hundred fifty thousand one dollars ($250,001) but not more than five
hundred thousand dollars ($500,000); or (3) fifty thousand dollars
($50,000) if 150 percent of the previous year's average annual trust
fund obligations, as calculated under Section 17348, equals five
hundred thousand one dollars ($500,001) or more. The commissioner may
increase the minimum bond required of an escrow agent by up to 100
percent of its face value if the commissioner reasonably believes,
based on an examination conducted pursuant to Section 17405, that
conservation or liquidation of that escrow agent may become necessary
for the protection of the public. The bond shall run to the state
for the use of the state and for any person who has cause against the
obligor of the bond under the provision of this division. A deposit
given instead of the bond required by this section shall not be
deemed an asset of the applicant or licensee for the purpose of
complying with Section 17210. An applicant or licensee may obtain an
irrevocable letter of credit approved by the commissioner in lieu of
the bond.
SEC. 2. SECTION 1. Section 17310 of
the Financial Code is amended to read:
17310. (a) The Legislature finds and declares that
persons who entrust their money to escrow agents licensed under this
division are entitled to full compensation for any loss of trust fund
moneys they experience due to loss, theft, or misappropriation by a
licensed escrow agent. It is the intent of the Legislature
that Fidelity Corporation undertake its responsibilities under this
division in a manner that supports and enhances preservation
of the public's trust in licensed escrow agents.
(b) Fidelity Corporation shall indemnify a member within the State
of California against loss, subject to the limitations set forth in
this chapter.
(c) Fidelity Corporation shall not be liable for any consequential
damages sustained by a member, or by any other person, nor for any
punitive damages whatsoever.
(d) The indemnification shall be provided by any of the following:
(1) A fund established by Fidelity Corporation pursuant to Section
17320.
(2) A fidelity bond or insurance policy to be approved by the
commissioner.
(3) A combination of paragraphs (1) and (2) subject, however, to
the maximum coverage specified in subdivision (b) of Section 17314.
(e) Fidelity Corporation shall provide a copy to all of its
members and the commissioner of the fidelity bond or insurance policy
as it is acquired or renewed, and Fidelity Corporation shall
promptly provide a copy to any member or successor in interest, upon
request.
SEC. 2. Section 17630 of the Financial
Code is amended to read:
17630. (a) If any facts occur
which that would entitle the commissioner under
Section 17621 to take possession of the property, business
business, and assets of a licensee
licensee, the commissioner may appoint a
conservator of a licensee and require of him such
or her a bond as the commissioner deems proper. The
commissioner may also, upon the request of the board of directors of
a licensee, appoint a conservator of such the
licensee and require of him such or h
er a bond as the commissioner deems proper. The
conservator, under the direction of the commissioner, shall take
possession of the property, business
business, and assets of the licensee and take such
the action as he or she may deem
necessary to conserve the assets of such the
licensee pending further disposition of its business. The
conservator shall retain such the
possession until the property, business
business, and assets of the licensee are returned to the
licensee or until further order of the commissioner.
(b) Whenever possible, the commissioner shall utilize the services
of one or more qualified private individuals with prior escrow or
escrow conservation experience to act as conservator.
SEC. 3. Section 17635 of the Financial
Code is amended to read:
17635. (a) If at any time after taking
possession of the property and business of a licensee it shall appear
to the commissioner that it would be futile to proceed as
conservator with the conduct of the business of such
the person he or she may apply to the
superior court of the county in which is located the principal
office of such the person in this
State state for an order to liquidate
and wind up the business of said that
person. Upon a full hearing of such an
application, the court may make an order directing the winding up and
liquidation of the business of such the
person by the commissioner, as liquidator.
(b) If the commissioner appoints a representative to act on his or
her behalf as a liquidator, the commissioner shall, whenever
possible, utilize the services of one or more qualified private
individuals with prior escrow or escrow liquidation experience to act
in this capacity.
SEC. 4. Section 17636 of the Financial
Code is amended to read:
17636. (a) Whenever the commissioner has
taken possession of the property and business of a licensee he
or she may petition the superior court for the appointment of a
receiver to liquidate the affairs of the licensee.
(b) Whenever possible, the commissioner shall utilize the services
of one or more qualified private individuals with prior escrow or
escrow receivership experience to act as receiver.
SEC. 3. SEC. 5. Section 17665 is
added to the Financial Code, to read:
17665. (a) The Except as provided in
subdivision (b), the full amount of any penalty revenue
collected from persons who are found to have violated any provision
of this division shall be available for use by the commissioner to
compensate a conservator appointed pursuant to Section 17630, a
liquidator appointed pursuant to Section 17635, or a receiver
appointed pursuant to Section 17636.
(b) The maximum amount of penalty revenue available for use by the
commissioner at any one time to compensate conservators,
liquidators, or receivers shall not exceed one hundred twenty-five
thousand dollars ($125,000). Any amounts above one hundred
twenty-five thousand dollars ($125,000) shall revert to the General
Fund.
(c) The commissioner may utilize all or a portion of the bond or
other obligations required pursuant to Section 17202, and all or a
portion of a licensee's assets remaining following conservation,
liquidation, or receivership to compensate conservators, liquidators,
or receivers.
(b)
(d) It is the intent of the Legislature that the
commissioner utilize the services of private third parties
with prior escrow or escrow conservation, liquidation, or
receivership experience, who are independent of the department
to perform conservation, liquidation, and receiver functions,
when whenever possible.