Bill Text: CA SB204 | 2009-2010 | Regular Session | Amended

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

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Bill Title: Financial transactions: escrow agents: exchange

Spectrum: Partisan Bill (Republican 4-0)

Status: (Passed) 2009-10-11 - Chaptered by Secretary of State. Chapter 568, Statutes of 2009. [SB204 Detail]

Download: California-2009-SB204-Amended.html

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BILL NUMBER: SB 204	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 20, 2009
	AMENDED IN SENATE  APRIL 13, 2009

INTRODUCED BY   Senators Benoit, Huff, and Runner
   (Coauthor: Assembly Member Hagman)

                        FEBRUARY 23, 2009

   An act to amend Sections 17405, 17600, 50123, and 50124 of, and to
amend and repeal Section 17207 of, the Financial Code, relating to
financial transactions.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 204, as amended, Benoit. Financial transactions: regulation.
   Existing law provides for the licensing and regulation of escrow
agents by the Commissioner of Corporations. Existing law, until
January 1, 2010, requires each escrow agent to pay an annual license
fee of up to $2,800 for each office or location and authorizes the
commissioner to additionally levy a special assessment  of up to
$500  , which is required to be paid by the escrow agent within
30 days of receipt of notification by the commissioner, for each
office or location in certain circumstances. Commencing January 1,
2010, existing law instead requires each escrow agent to pay to the
commissioner the agent's pro rata share of the commissioner's annual
administrative costs and expenses, as specified.
   This bill would repeal the provisions that would require an escrow
agent, commencing January 1, 2010, to pay to the commissioner the
agent's pro rata share of the commissioner's annual administrative
costs and expenses. The bill would, instead, continue the requirement
for an escrow agent to pay an annual license fee of up to $2,800 for
each office or location. The bill would authorize the special
assessment that may be levied by the commissioner to be in an amount
of up to $1,000  for each office or location  . The bill
would require an escrow agent to pay the special assessment within 60
days of notification by the commissioner.  The bill would
require the commissioner to submit a budget and program justification
and information to the Escrow Law Advisory Committee prior to
providing notice of a special assessment to escrow agents. 
   Existing law authorizes the commissioner to conduct examinations,
as specified, of a new licensee within one year and within 2 years of
the issuance of a license.
   This bill would require the commissioner to conduct the
examinations, as specified, of new licensees or upon change of
ownership.
   Existing law provides that the license of an escrow agent remains
in effect until surrendered, revoked, or suspended. Existing law sets
forth the procedure for the surrender of the license of an escrow
agent, and requires a surrendering licensee to, among other things,
 notify the commissioner in writing of surrender, 
tender his or her license and all other indicia of licensure to the
commissioner, and  , within 105 days of the written
notification,  submit a closing audit to the commissioner,
as specified. Existing law provides that a license is not surrendered
until the commissioner has reviewed and accepted the closing audit,
made a determination that there is no violation of law, and, in
writing, accepted tender of the license.
   This bill would delete the requirement that the commissioner make
a determination that there is no violation of law  ,
 and instead require a determination that acceptance of
 a   the  surrender is in the public
interest.
   Existing law, the California Residential Mortgage Lending Act,
provides for the licensure and regulation of residential mortgage
lenders and servicers by the Commissioner of Corporations. Existing
law provides that the license of a residential mortgage lender or
servicer remains in effect until surrendered, revoked, or suspended.
Existing law sets forth the procedure for the surrender of the
license of a residential mortgage lender or servicer, and requires a
surrendering licensee to, among other things, notify the commissioner
in writing of surrender, tender his or her license and all other
indicia of licensure to the commissioner, and file a plan for the
withdrawal from regulated business that includes a timetable for the
disposition of business and a closing audit, review, or, if agreed
upon, a procedure performed by an independent certified public
accountant as prescribed by rule or order of the commissioner.
Existing law provides that a license is not surrendered until the
commissioner has, in writing, accepted tender after review, made a
finding on the withdrawal plan, and made a determination that there
is no violation of law.
   This bill would delete the provision that allows the licensee's
withdrawal plan to include an agreed-upon procedure performed by an
independent certified public accountant, and instead provide that the
withdrawal plan include any other document prescribed by rule or
order of the commissioner, including a document that demonstrates
that all custodial fund accounts have been properly transferred and
closed. The bill would also delete the requirement that the
commissioner make a determination that there is no violation of law,
and instead require a determination that acceptance of  a
  the  surrender is in the public interest.
   Existing law, the California Residential Mortgage Lending Act,
requires an application for licensure to be accompanied by an exhibit
containing statements that the applicant agrees to take specified
actions, including, but not limited to, agreeing to notify the
commissioner, in writing, by certified mail, return receipt
requested, prior to opening a branch office in this state or changing
the business location or locations of the applicant, as specified.
   This bill would require the application for licensure to include a
statement that the applicant agrees to notify the commissioner prior
to the closing of a business location.
   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 17207 of the Financial Code, as amended by
Section 1 of Chapter 257 of the Statutes of 2005, is amended to read:

   17207.  The commissioner shall charge and collect the following
fees and assessments:
   (a) For filing an application for an escrow agent's license, six
hundred twenty-five dollars ($625) for the first office or location
and four hundred twenty-five dollars ($425) for each additional
office or location.
   (b) For filing an application for a duplicate of an escrow agent's
license lost, stolen, or destroyed, or for replacement, upon a
satisfactory showing of the loss, theft, destruction, or surrender of
certificate for replacement, two dollars ($2).
   (c) For investigation services in connection with each
application, one hundred dollars ($100), and for investigation
services in connection with each additional office application, one
hundred dollars ($100).
   (d) For holding a hearing in connection with the application, as
set forth under Section 17209.2, the actual costs experienced in each
particular instance.
   (e) (1) Each escrow agent shall pay to the commissioner for the
support of this division for the ensuing year an annual license fee
not to exceed two thousand eight hundred dollars ($2,800) for each
office or location.
   (2) On or before May 30 in each year, the commissioner shall
notify each escrow agent by mail of the amount of the annual license
fee levied against it, and that the payment of the invoice is payable
by the escrow agent within 30 days after receipt of notification by
the commissioner.
   (3) If payment is not made within 30 days, the commissioner may
assess and collect a penalty, in addition to the annual license fee,
of 10 percent of the fee for each month or part of a month that the
payment is delayed or withheld.
   (4) If an escrow agent fails to pay the amount due on or before
the June 30 following the day upon which payment is due, the
commissioner may by order summarily suspend or revoke the certificate
issued to the company.
   (5) If, after an order is made pursuant to paragraph (4), a
request for a hearing is filed in writing and a hearing is not held
within 60 days thereafter, the order is deemed rescinded as of its
effective date. During any period when its certificate is revoked or
suspended, a company shall not conduct business pursuant to this
division, except as may be permitted by order of the commissioner.
However, the revocation, suspension, or surrender of a certificate
shall not affect the powers of the commissioner as provided in this
division.
   (f) Fifty dollars ($50) for investigation services in connection
with each application for qualification of any person under Section
17200.8, other than investigation services under subdivision (c) of
this section.
   (g) A fee not to exceed twenty-five dollars ($25) for the filing
of a notice or report required by rules adopted pursuant to
subdivision (a) or Section 17203.1.
   (h) (1) If costs and expenses associated with the enforcement of
this division, including overhead, are or will be incurred by the
commissioner during the year for which the annual license fee is
levied, and that will or could result in the commissioner's incurring
of costs and expenses, including overhead, in excess of the costs
and expenses, including overhead, budgeted for expenditure for the
year in which the annual license fee is levied, then the commissioner
may levy a special assessment on each escrow agent for each office
or location in an amount estimated to pay for the actual costs and
expenses associated with the enforcement of this division, including
overhead, in an amount not to exceed one thousand dollars ($1,000)
for each office or location. The commissioner shall notify each
escrow agent by mail of the amount of the special assessment levied
against it, and that payment of the special assessment is payable by
the escrow agent within 60 days of receipt of notification by the
commissioner. The funds received from the special assessment shall be
deposited into the State Corporations Fund and shall be used only
for the purposes for which the special assessment is made.
   (2) If payment is not made within 60 days, the commissioner may
assess and collect a penalty, in addition to the special assessment,
of 10 percent of the special assessment for each month or part of a
month that the payment is delayed or withheld. If an escrow agent
fails to pay the special assessment on or before 60 days following
the day upon which payment is due, the commissioner may by order
summarily suspend or revoke the certificate issued to the company. If
an order is made under this subdivision, the provisions of paragraph
(5) of subdivision (e) shall apply.
   (3) If the amount collected pursuant to this subdivision exceeds
the actual costs and expenses, including overhead, incurred in the
administration and enforcement of this division and any deficit
incurred, the excess shall be credited to each escrow agent on a pro
rata basis. 
   (4) Prior to notifying an escrow agent of a special assessment
under this subdivision, the commissioner shall submit, as part of a
regular meeting of the Escrow Law Advisory Committee created under
this division, any budget and program justification and information
for the current or prior budget years that would support the special
assessment. 
  SEC. 2.  Section 17207 of the Financial Code, as amended by Section
2 of Chapter 257 of the Statutes of 2005, is repealed.
  SEC. 3.  Section 17405 of the Financial Code is amended to read:
   17405.  (a) The business, accounts and records of every person
performing as an escrow agent, whether required to be licensed under
this division or not, are subject to inspection and examination by
the commissioner at any time without prior notice. The provisions of
this section shall not apply to persons specified in Section 17006.
   (b) Any person subject to this division shall, upon request,
exhibit and allow inspection and copying of any books and records by
the commissioner or his or her authorized representative.
   (c) (1) The commissioner shall conduct an examination of each
licensed escrow agent as described in subdivision (a) as often as the
commissioner deems necessary and appropriate, but not less than once
every 48 months.
   (2) The examination shall be conducted for the 12-month period
immediately preceding the date that the examination is commenced
unless the commissioner finds, based on information uncovered in the
examination or in the most recent independent audit report, that the
examination should be extended beyond the 12-month period.
   (3) In determining how often an examination shall be conducted,
the commissioner may consider each licensed escrow agent's compliance
with the requirements set forth in this division and other factors
the commissioner may by rule or order designate.
   (4) This subdivision shall apply only to examinations commenced
after the effective date established by the rule or order of the
commissioner for the factors described in paragraph (3).
   (d) Notwithstanding subdivision (c), the commissioner shall
conduct an indoctrination or preliminary examination, or both, under
this section of any new licensee or of a change of ownership within
one year of the issuance of the license under this division, and an
examination described in subdivision (a) within two years of the
issuance of the license or of the change of ownership under this
division.
  SEC. 4.  Section 17600 of the Financial Code is amended to read:
   17600.  (a) An escrow agent's license remains in effect until
surrendered, revoked, or suspended.
   (b) A licensee that ceases to engage in the business regulated by
this division and desires to no longer be licensed shall notify the
commissioner in writing and, at that time, tender the license and all
other indicia of licensure to the commissioner. Within 105 days of
the written notice to the commissioner, the licensee shall submit to
the commissioner, at its own expense, a closing audit report as of
the date the license is tendered to the commissioner for surrender,
or for another period as the commissioner may specify, to be
performed by an independent certified public accountant. The closing
audit shall include, but not be limited to, information required by
the commissioner, a bank reconciliation of the trust account, and a
verified statement from a certified public accountant confirming
lawful disbursement of funds. A license is not surrendered until the
commissioner has reviewed and accepted the closing audit report, a
determination has been made by the commissioner that acceptance of
the surrender is in the public interest, and tender of the license is
accepted in writing by the commissioner.
  SEC. 5.  Section 50123 of the Financial Code is amended to read:
   50123.  (a) A license shall remain in effect until suspended,
surrendered, or revoked.
   (b) A licensee that ceases to engage in the business regulated by
this division and desires to no longer be licensed shall inform the
commissioner in writing and, at that time, surrender the license and
all other indicia of licensure to the commissioner. The licensee
shall file a plan for the withdrawal from regulated business, and the
plan shall include a timetable for the disposition of the business.
The plan shall also include a closing audit, review, or any other
document prescribed by rule or order of the commissioner, including,
but not limited to, any document or documents that demonstrate that
all custodial fund accounts have been properly transferred and
closed. Upon receipt of the written notice and plan, the commissioner
shall review the plan and, if satisfactory to the commissioner,
shall accept the surrender of the license. A license is not
surrendered until its tender is accepted in writing by the
commissioner after a review, and a finding has been made on the
licensee's plan required to be filed by this section, and a
determination has been made that acceptance of the surrender is in
the public interest.
   (c) A licensee may not surrender its license under this division
and, under the authority of a real estate license, subsequently
engage in residential mortgage lending or servicing activities that
are subject to this division, unless the licensee has been licensed
under this division for a period of five years or more.
  SEC. 6.  Section 50124 of the Financial Code is amended to read:
   50124.  (a) A license application must be accompanied by an
exhibit containing statements that the applicant agrees to do the
following:
   (1) To maintain staff adequate to meet the requirements of this
division, as prescribed by rule or order of the commissioner.
   (2) To keep and maintain for 36 months from the date of final
entry the business records and other information required by law or
rules of the commissioner regarding any mortgage loan made or
serviced in the course of the conduct of its business.
   (3) To file with the commissioner any report required under law or
by rule or order of the commissioner.
   (4) To disburse funds in accordance with its agreements and to
make a good faith and reasonable effort to effect closing in a timely
manner.
   (5) To account or deliver to a person any personal property such
as money, funds, deposit, check, draft, mortgage, other document, or
thing of value, that has come into its possession and is not its
property, or that it is not in law or equity entitled to retain under
the circumstances, at the time that has been agreed upon or is
required by law, or, in the absence of a fixed time, upon demand of
the person entitled to the accounting or delivery.
   (6) To file with the commissioner an amendment to its application
prior to any material change in the information contained in the
application for licensure, including, without limitation, the plan of
operation. The commissioner shall, within 20 business days of
receiving a completed amendment to the application, or within a
longer time if agreed to by the licensee, issue an order approving or
disapproving the effectiveness of the proposed amendment.
   (7) To comply with the provisions of this division, and with any
order or rule of the commissioner.
   (8) To submit to periodic examination by the commissioner as
required by this division.
   (9) To advise the commissioner by amendment to its application of
any material judgment filed against, or bankruptcy petition filed by,
the licensee within five days of the filing.
   (10) To notify the commissioner, in writing, by certified mail,
return receipt requested, prior to opening a branch office in this
state, or changing or closing the business location or locations of
the applicant or the branch offices of the applicant from which
activities subject to this division are conducted.
   (b) The exhibit also shall contain a space for the applicant to
attest that the applicant:
   (1) Has complied with all applicable state and federal tax return
filing requirements for the past three years or has filed with the
commissioner an accountant's or attorney's statement as to why no
return was filed.
   (2) Has not committed a crime against the laws of any state or the
United States, involving moral turpitude, misrepresentation,
fraudulent or dishonest dealing, or fraud, and has disclosed to the
commissioner any final judgment entered against it in a civil action
upon grounds or allegations of fraud, misrepresentation, or deceit.
   (3) Has not engaged in conduct that would be cause for denial of a
license.
   (4) Is not insolvent.
   (5) Has acted with due care and competence in performing any act
for which it is required to hold a license under this division.
   (6) Any other matter as required by rule of the commissioner.