BILL NUMBER: SB 736 INTRODUCED
BILL TEXT
INTRODUCED BY Senators Vidak and Block
(Coauthor: Senator Morrell)
FEBRUARY 27, 2015
An act to amend Sections 17202 and 17310 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 introduced, Vidak. Escrow agents: loss of trust fund
obligations.
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 accordance with the
Escrow Law. This bill would also state the intent of the Legislature
for the commissioner to utilize the services of 3rd parties who are
independent of the department to perform conservation, liquidation,
and receiver functions, and would require the full amount of any
penalty revenue, as specified, to be available for use by the
commissioner to compensate a conservator, liquidator, or receiver. By
making this penalty 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. (a) 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 requi red 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.
(b) Escrow agents licensed prior to January 1, 1986, shall comply
with the requirements of subdivision (a) on or before July 1, 1986.
SEC. 2. Section 17310 of the Financial Code is amended to read:
17310. (a) It shall be the purpose of Fidelity
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
to shall indemnify a member within the State of
California against loss, subject to the limitations set forth in
this chapter.
(b)
(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.
(c)
(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.
(d)
(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. 3. Section 17665 is added to the Financial Code, to read:
17665. (a) 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 pursuant to
Section 17636.
(b) It is the intent of the Legislature that the commissioner
utilize the services of third parties who are independent of the
department to perform conservation, liquidation, and receiver
functions, when possible.