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 14, 2014
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 ,
effective July 1, 2013, from the Commissioner of Corporations
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 who
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 or her 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 or her 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 or she buys or sells
securities for his or her 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
or she 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 or
she 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 in this state
and who satisfies all of the conditions set forth in
subparagraphs (B) to (G), inclusive. For purposes of this section, a
"finder" is 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 sale of securities of the
issuer, and who does not (i) participate in negotiating any of the
terms of the securities transaction; (ii) advise any party to the
securities transaction regarding the merits of, or the advantages or
disadvantages of entering into the 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 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 file
with the Department of Business Oversight 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 an annual report of
activity with the Department of Business Oversight and paid any
requisite filing fee, as determined by the commissioner by rule.
(D)
(C) For each securities transaction or
series of securities transactions, the finder shall
have filed file with the Department of
Business Oversight, on a form as prescribed by the
commissioner, a notice that shall include the following affirmative
representations by the finder, that the finder (i) is acting only to
introduce the issuer and the potential purchaser
accredited investor of an issuer's securities and will not
effect any securities transaction in, advise or consult
on, or induce or attempt to induce the purchase or sale of, any
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) will not receive, directly or
indirectly, possession or custody of any funds related to the
purchase and sale of the subject securities transactions; (iv) has
not acted in violation of any provision of this section; and (v) has
fully disclosed and obtained the informed written consent of the
issuer and each potential purchaser
accredited investor 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 services provided
for the subject securities transaction. A separate notice shall be
filed for each new securities transaction or series of
securities transactions, no later than 20 business days
following the first sale of securities in the 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 or referral ,
the finder shall have obtained obtain
the informed, written consent of each potential purchaser
accredited investor introduced or referred
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 potential purchaser
accredited investor , disclosing the following: (i) the type
and amount of compensation that will be paid to the finder in
connection with the subject securities transactions and the
conditions for payment of that compensation; (ii) that the finder
shall neither recommend nor advise the potential purchaser
accredited investor with respect to the subject
securities transaction; (iii) whether the finder is also an owner of
the securities 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 potential
purchaser accredited investor shall
represent in the written consent that the potential
purchaser accredited investor is an accredited
investor, as that term is defined in Rule 501(a) of Regulation D
under the Securities Exchange Act of 1933 (17 C.F.R. 230.501(a)), and
that the potential purchaser accredited
investor 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 (D), a copy of the notice, the written consent required
in subparagraph (E), and all other records relating to any 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 take possession or custody of funds related to
the purchase and sale of any subject securities transaction; (ii)
knowingly participate in any unregistered offering not otherwise
exempt from registration or qualification; (iii) fail to make the
disclosures required by subparagraph (E); (iv) conduct due diligence
on behalf of the issuer or the potential purchaser
accredited investor related to any subject securities
transaction; (v) make any disclosures to potential
purchasers accredited investors 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 potential
purchaser accredited investor .
(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.
