Bill Text: CA AB786 | 2013-2014 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Money transmissions.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2013-10-04 - Chaptered by Secretary of State - Chapter 533, Statutes of 2013. [AB786 Detail]

Download: California-2013-AB786-Introduced.html

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BILL NUMBER: AB 786	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Dickinson

                        FEBRUARY 21, 2013

   An act to amend Sections 2010, 2040, and 2084 of, and to add
Sections 2154 and 2155 to, the Financial Code, relating to money
transmissions.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 786, as introduced, Dickinson. Money transmissions.
   Existing law, the Money Transmission Act, provides for the
regulation of money transmissions by the Department of Financial
Institutions and the Commissioner of Financial Institutions. The
Governor's Reorganization Plan No. 2, as of July 1, 2013, abolishes
the Department of Financial Institutions and transfers its
responsibilities to the Department of Business Oversight and the
Commissioner of Business Oversight.
   Existing law, the Money Transmission Act, requires a person who
engages in the business of money transmission in this state to be
licensed by the department. Existing law provides that only a
corporation or limited liability company may be issued a license
under the Money Transmission Act. Existing law exempts certain
persons or entities from the application of the act, as specified.
   This bill would further exempt from the act a person that delivers
payroll money on behalf of an employer to employees by check or
deposit in a checking or savings account, as specified.
   Existing law requires a licensee to maintain tangible shareholders'
equity, as defined, in an amount to be determined from time to time
by the commissioner, but not less than $500,000.
   This bill would require an applicant to possess, and a licensee to
maintain at all times, a minimum net worth of $100,000 to $500,000,
depending on estimated or actual transaction volume, as determined by
the commissioner. The bill would authorize the commissioner to
increase that net worth requirement to up to $2,000,000, if certain
criteria are met.
   Existing law provides that a licensee shall be deemed to own an
eligible security under specified criteria. Existing law provides
that no licensee shall be deemed not to own an eligible security
solely on account of certain facts, provided that, but for that fact,
the licensee would be deemed to own the eligible security.
   This bill would provide that no licensee shall be deemed not to
own an eligible security solely on account of the fact that the
licensee holds the eligible security in a custodial capacity as an
agent of its customers in a pooled account in the name of the
licensee, as determined by the commissioner.
   Existing law sets forth enforcement provisions under the Money
Transmission Act. Existing law authorizes the commissioner to direct
a licensee who is out of compliance with the Money Transmission Act
to comply with the law or discontinue any unsafe or injurious
practices.
   This bill would provide that the commissioner has continuous
authority to exercise the powers set forth in this act whether or not
an application for a license has been filed with the commissioner,
any license has been issued, or if issued, has been surrendered,
suspended, or revoked. The bill would authorize the commissioner to
bring an action, or request that the Attorney General bring an
action, against any person who has violated or is about to violate
the act, and would set forth the relief that is authorized, as
specified.
   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 2010 of the Financial Code is amended to read:
   2010.  This division does not apply to the following:
   (a) The United States or a department, agency, or instrumentality
thereof, including any federal reserve bank and any federal home loan
bank.
   (b) Money transmission by the United States Postal Service or by a
contractor on behalf of the United States Postal Service.
   (c) A state, county, city, or any other governmental agency or
governmental subdivision of a state.
   (d) A commercial bank or industrial bank, the deposits of which
are insured by the Federal Deposit Insurance Corporation or its
successor, or any foreign (other nation) bank that is licensed under
Article 3 (commencing with Section 1800) of Chapter 20 or that is
authorized under federal law to maintain a federal agency or federal
branch office in this state; a trust company licensed pursuant to
Section 1042 or a national association authorized under federal law
to engage in a trust banking business; an association or federal
association, as defined in Section 5102 the deposits of which are
insured by the Federal Deposit Insurance Corporation or its
successor; and any federally or state chartered credit union the
member accounts of which are insured or guaranteed as provided in
Section 14858.
   (e) Electronic funds transfer of governmental benefits for a
federal, state, county, or local governmental agency by a contractor
on behalf of the United States or a department, agency, or
instrumentality thereof, or a state or governmental subdivision,
agency, or instrumentality thereof.
   (f) A board of trade designated as a contract market under the
federal Commodity Exchange Act (7 U.S.C. Secs. 1-25, incl.) or a
person that, in the ordinary course of business, provides clearance
and settlement services for a board of trade to the extent of its
operation as or for such a board.
   (g) A person that provides clearance or settlement services
pursuant to a registration as a clearing agency or an exemption from
registration granted under the federal securities laws to the extent
of its operation as such a provider.
   (h) An operator of a payment system to the extent that it provides
processing, clearing, or settlement services, between or among
persons excluded by this section, in connection with wire transfers,
credit card transactions, debit card transactions, stored value
transactions, automated clearing house transfers, or similar funds
transfers, to the extent of its operation as such a provider.
   (i) A person registered as a securities broker-dealer under
federal or state securities laws to the extent of its operation as
such a broker-dealer. 
   (j) A person that delivers payroll money on behalf of an employer
to employees by check or deposit into a checking or savings account
at a bank, savings bank, savings and loan association, savings
association, or credit union, if that delivery is the only money
transmission activity of which the person engages.  
   (j) 
    (k)  A person listed under subdivision (d) is exempted
from all the provisions of this division, except Sections 2062 and
2063.
  SEC. 2.  Section 2040 of the Financial Code is amended to read:

   2040.  (a) A licensee under this division shall maintain tangible
shareholders' equity in an amount determined to be adequate by the
commissioner from time to time, but in no event shall tangible
shareholders' equity be less than five hundred thousand dollars
($500,000). "Tangible shareholders' equity" means shareholders' or
members' equity minus intangible assets as determined in accordance
with United States generally accepted accounting principles.

    2040.    (a) An applicant shall possess, and a
licensee shall maintain at all times, a minimum net worth computed in
accordance with generally accepted accounting principles of one
hundred thousand dollars ($100,000) to five hundred thousand dollars
($500,000), depending on estimated or actual transaction volume, as
determined by the commissioner.  
   (b) The commissioner may increase the amount of net worth required
of an applicant or licensee, up to a maximum of two million dollars
($2,000,000), if the commissioner determines, with respect to the
applicant or licensee, that a higher net worth is necessary to
achieve the purposes of this division based on the following: 

   (1) The nature and volume of the projected or established
business.  
   (2) The number of locations at or through which money transmission
is or will be conducted.  
   (3) The amount, nature, quality, and liquidity of its assets.
 
   (4) The amount and nature of its liabilities.  
   (5) The history of its operations and prospects for earning and
retaining income.  
   (6) The quality of its operations.  
   (7) The quality of its management.  
   (8) The nature and quality of its principals.  
   (9) The nature and quality of the persons in control.  
   (10) The history of its compliance with applicable state and
federal law.  
   (11) Any other factor the commissioner considers relevant. 

   (b) 
    (c)  The commissioner at any time may require a licensee
to write down any asset held by it to a valuation that will
represent its then fair market value. Any receivable or debt due to a
licensee that is past due and unpaid for the period of one year
shall be charged off, unless it is well secured or is in process of
collection. 
   (c) 
    (d)  The aggregate value of a licensee's accounts
receivable, excluding money transmission receivables, loans or
extensions of credit to any one person, or that person's affiliates,
cannot exceed 50 percent of the licensee's tangible shareholders'
equity without the advanced written approval of the commissioner.
Whenever such amount equals or exceeds 20 percent of the licensee's
tangible shareholders' equity, the licensee shall maintain records
evidencing such amount and any security or other source of payment
for the amount owed, and such other records as the commissioner may
require by order or regulation.
  SEC. 3.  Section 2084 of the Financial Code is amended to read:
   2084.  (a) A licensee shall be deemed to own an eligible security
only if the following apply:
   (1) The licensee owns the eligible security solely and exclusively
in its own right, both of record and beneficially.
   (2) The eligible security is not subject to any pledge, lien, or
security interest.
   (3) The licensee can freely negotiate, assign, or otherwise
transfer the eligible security.
   (b) Notwithstanding subdivision (a), no licensee shall be deemed
not to own an eligible security solely on account of any of the
following facts, provided that, but for that fact, the licensee would
be deemed to own the eligible security under the provisions of
subdivision (a):
   (1) The fact that the eligible security is owned of record by a
documented nominee of the licensee or by a securities depository.
   (2) The fact that the licensee has pledged the eligible security
with the United States or any state of the United States to secure
payment by the licensee of transmission money. 
   (3) The fact that the licensee holds the eligible security in a
custodial capacity as an agent of its customers in a pooled account
titled in the name of the licensee for the benefit of its customers.
 
   (c) The commissioner shall make a determination of the application
of paragraph (3) of subdivision (b) on a case-by-case basis. 
  SEC. 4.  Section 2154 is added to the Financial Code, to read:
   2154.  Whenever the commissioner deems it necessary for the
general welfare of the public, he or she has continuous authority to
exercise the powers set forth in this division whether or not an
application for a license has been filed with the commissioner, any
license has been issued, or if issued, has been surrendered,
suspended, or revoked.
  SEC. 5.  Section 2155 is added to the Financial Code, to read:
   2155.  (a) Whenever the commissioner believes from evidence
satisfactory to the commissioner that any person has violated or is
about to violate a provision of this division, or a provision of any
order, license, decision, demand, requirement, or any regulation
adopted pursuant to this division, the commissioner may, in the
commissioner's discretion, bring an action, or the commissioner may
request the Attorney General to bring an action in the name of the
people of the State of California, against that person to enjoin that
person from continuing that violation or doing any act in
furtherance of the violation. Upon a proper showing, a permanent or
preliminary injunction, restraining order, or writ of mandate shall
be granted and other ancillary relief may be granted, as appropriate.

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