Bill Text: CA AB713 | 2013-2014 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Broker-dealers.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Engrossed - Dead) 2014-08-14 - In committee: Held under submission. [AB713 Detail]
Download: California-2013-AB713-Amended.html
Bill Title: Broker-dealers.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Engrossed - Dead) 2014-08-14 - In committee: Held under submission. [AB713 Detail]
Download: California-2013-AB713-Amended.html
BILL NUMBER: AB 713 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JANUARY 6, 2014
INTRODUCED BY Assembly Member Wagner
FEBRUARY 21, 2013
An act to amend Section 25004 of the Corporations Code, relating
to securities.
LEGISLATIVE COUNSEL'S DIGEST
AB 713, as amended, Wagner. Broker-dealers.
Existing law, the Corporate Securities Law of 1968, defines a
broker-dealer as, among other things, any person engaged in the
business of effecting securities transactions in California for the
account of others or his or her own account, and it specifies those
persons or entities excluded from the definition.
Pursuant to the Governor's Reorganization Plan No. 2 of 2012 (GRP
2), the regulation of corporations by the Commissioner of
Corporations effective July 1, 2013, is transferred to the
Commissioner of Business Oversight.
This bill would add to the persons and entities excluded from the
definition of a broker-dealer an individual who is a finder, as
defined, that satisfied specified requirements, including, among
other things, filing an initial statement of information with the
Department of Business Oversight and paying a filing fee. The bill
also would make technical changes to conform with the GRP 2.
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 25004 of the Corporations Code is amended to
read:
25004. (a) "Broker-dealer" means any person engaged in the
business of effecting transactions in securities in this state for
the account of others or for his own account. "Broker-dealer" also
includes a person engaged in the regular business of issuing or
guaranteeing options with regard to securities not of his own issue.
"Broker-dealer" does not include any of the following:
(1) Any other issuer.
(2) An agent, when an employee of a broker-dealer or issuer.
(3) A bank, trust company, or savings and loan association.
(4) Any person insofar as he buys or sells securities for his own
account, either individually or in some fiduciary capacity, but not
as part of a regular business.
(5) A person who has no place of business in this state if he
effects transactions in this state exclusively with (A) the issuers
of the securities involved in the transactions or (B) other
broker-dealers.
(6) A broker licensed by the Real Estate Commissioner of this
state when engaged in transactions in securities exempted by
subdivision (f) or (p) of Section 25100 or in securities the issuance
of which is subject to authorization by the Real Estate Commissioner
of this state or in transactions exempted by subdivision (e) of
Section 25102.
(7) An exchange certified by the Commissioner of Business
Oversight pursuant to this section when it is issuing or guaranteeing
options. The commissioner may by order certify an exchange under
this section upon any conditions as he or she by rule or order deems
appropriate, and upon notice and opportunity to be heard he may
suspend or revoke that certification, if he or she finds the
certification, suspension, or revocation to be in the public interest
and necessary and appropriate for the protection of investors.
(8) (A) An individual who acts only as a finder and who satisfies
all of the conditions set forth in subparagraphs (B) to (H)
(G) , inclusive. For purposes of this section, a
"finder" is a person an individual who
introduces or refers one or more accredited investors , as that
term is defined in Rule 501(a) of Regulation D under the Securities
Act of 1933 (17 C.F.R. 230.501(a)), to an issuer or an issuer
to one or more accredited investors, solely for the purpose of a
potential investment in the sale of
securities of the issuer, and who does not (i) participate in
negotiating any of the terms of the investment
securities transaction ; (ii) advise any party to the
securities transaction regarding the merits of, or the advantages or
disadvantages of entering into the investment
securities transaction ; or (iii) sell or intend to sell any
securities of the issuer, which securities are owned, directly or
indirectly, by the finder as a part of the investment. A
person securities transaction. An individual who
fails to comply with the requirements of this paragraph shall not be
entitled to rely on the exemption afforded hereunder.
(B) The finder shall have filed an initial statement of
information with the Department of Business Oversight
, in a form as the commissioner may prescribe by regulation,
and has paid an initial filing fee. prior to engaging
in any activities described in subparagraph (A), on a form
prescribed by the commissioner, an initial statement of information
that shall include both of the following: (i) the name and complete
business or residential address of the finder and (ii) the mailing
address of the finder, if different from the business or residential
address. A filing fee of not more than twenty -
five dollars ($25) may be required to be submitted, as determined by
the commissioner by rule, to the Department of Business Oversight
along with the initial statement of information required by this
subparagraph.
(C) The finder shall have timely filed any
an annual reports report of
activity with the Department of Business Oversight , in a
form as the commissioner may prescribe by regulation, and has paid
the requisite filing fee. and paid any requisite
filing fee, as determined by the commissioner by rule.
(D) For each transaction or series of transactions, the finder
shall have filed a notice with the Department of
Business Oversight, to be made available to the public in
on a form as prescribed by the
commissioner may prescribe by regulation, containing
, a notice that shall include the following
affirmative representations by the finder , that the
finder (i) is acting only to introduce the parties
issuer and the potential purchaser of an issuer's securities
and will not effect any transaction in, advise or consult on,
or induce or attempt to induce the purchase or sale of, any
security securities in this state; (ii) has not
done any of the acts, satisfied any of the circumstances, or is
subject to any order specified in Section 25212; (iii) has
not engaged in any advertising or general solicitation with respect
to the offering, sale, or purchase of any securities; (iv)
(iii) will not receive, directly or indirectly, possession
or custody of any funds in connection with acting as a
finder; (v) related to the purchase and sale of the
subject securities transactions; (iv) has not acted in
violation of any provision of this section; and (vi)
(v) has fully disclosed and obtained the
informed written consent of the issuer and the potential
investor each potential purchaser introduced by the
finder to the issuer regarding the material terms of the
compensation arrangement between the issuer and the finder relating
to the finder's introduction of the investor
services provided for the subject securities transaction . A
separate notice shall be filed for each new offering of
securities transaction or series of transactions
, no later than 30 calendar 20 business
days following the first sale of securities in the
offering, unless the end of that period falls on a Saturday, Sunday
or holiday, in which case the due date shall be the next business
day. For each notice filing, the finder shall pay a filing fee, as
set from time to time by the Department of Business Oversight.
offering. The commissioner may by rule require the
finder to pay a filing fee in connection with the notice required in
this subparagraph of not more than twenty -five dollars
($25).
(E) Concurrently with each introduction, the finder shall have
obtained the informed, written consent of each person or
entity potential purchaser introduced by the
finder to an issuer for the purchase and sale of securities of
the issuer , in an agreement signed by the finder, the issuer,
and the investor potential purchaser ,
disclosing the following: (i) the type and amount of compensation
that will be paid to the finder in connection with the
investment subject securities transactions and
the conditions for payment of that compensation; (ii) that the finder
shall neither recommend nor advise the investor
potential purchaser with respect to the subject securities
transaction; (iii) whether the finder is also an owner of the
securities offered by of the issuer,
and (iv) any other actual and potential conflict of interest in
connection with the finder's activities related to the subject
securities transaction . Each investor
potential purchaser shall represent in the written consent that
the investor potential purchaser is an
accredited investor, as that term is defined in Rule
501(a) of Regulation D under the Securities
Exchange Act of 1933 , as amended (17 C.F.R.
230.501(a)) , and that the investor
potential purchaser knowingly consents to the payment of the
compensation described therein.
(F) The finder shall maintain and preserve, for a period of five
years from the date of filing of the notice prescribed in
subparagraph (B) (D) , a copy of the
notice, the written consent required in subparagraph (C)
(E) , and all other records relating to any
investments securities transaction in
connection with which the finder receives compensation, as the
commissioner may by rule require. The finder, upon written request of
the commissioner, shall furnish to the commissioner any records
required to be maintained and preserved under this subparagraph.
(G) The finder shall not engage in any of the following: (i)
directly or indirectly taking take
possession or custody of investor funds
related to the purchase and sale of any subject securities
transaction ; (ii) knowingly participating
participate in any unregistered offering not otherwise
exempt from registration or qualification; (iii) failing to
disclose the existence of a financial or pecuniary benefit to the
finder in connection with or relating to the finders' introduction
fail to make the disclosures required by subparagraph
(E) ; (iv) conducting conduct due
diligence on behalf of the issuer or investor;
(v) soliciting, marketing, advertising, or holding himself, herself,
or itself out to the public in general as being in the business of
making introductions between accredited investors or issuers or
seeking business from accredited investors or issuers; (vi) or making
any disclosures to investors the potential purchaser
related to any subject securities transaction; (v) make any
disclosures to potential purchasers other than disclosures
expressly permitted or required under this subparagraph.
Permitted disclosures are limited to the name, address, and telephone
number of the issuer; the name, type, and price (if known) of any
securities to be issued; the issuer's industry, location, and years
in business; the type, number, and aggregate amount of securities
being offered; and contact information regarding the
investor potential purchaser .
(b) For purposes of this section, an agent is an employee of a
broker-dealer under paragraph (2) of subdivision (a) when the agent
is employed by or associated with the broker-dealer under all of the
following conditions:
(1) The agent is subject to the supervision and control of the
broker-dealer.
(2) The agent performs under the name, authority, and marketing
policies of the broker-dealer.
(3) The agent discloses to investors the identity of the
broker-dealer.
(4) The agent is reported pursuant to subdivision (c) of Section
25210 and the rules adopted thereunder.
