Bill Text: CA SB664 | 2011-2012 | Regular Session | Chaptered
Bill Title: Financial institutions.
Spectrum: Slight Partisan Bill (Democrat 5-2)
Status: (Passed) 2011-09-06 - Chaptered by Secretary of State. Chapter 243, Statutes of 2011. [SB664 Detail]
Download: California-2011-SB664-Chaptered.html
BILL NUMBER: SB 664 CHAPTERED
BILL TEXT
CHAPTER 243
FILED WITH SECRETARY OF STATE SEPTEMBER 6, 2011
APPROVED BY GOVERNOR SEPTEMBER 6, 2011
PASSED THE SENATE JUNE 2, 2011
PASSED THE ASSEMBLY AUGUST 18, 2011
AMENDED IN SENATE MAY 19, 2011
AMENDED IN SENATE APRIL 25, 2011
INTRODUCED BY Committee on Banking and Financial Institutions
(Senators Vargas (Chair), Blakeslee, Evans, Kehoe, Liu, Padilla, and
Walters)
FEBRUARY 18, 2011
An act to amend Sections 14315 and 14652 of, to amend and renumber
the headings of Division 1.1 (commencing with Section 4000),
Division 1.2 (commencing with Section 4050), Division 1.3 (commencing
with Section 4100), Division 1.5 (commencing with Section 4800),
Division 1.6 (commencing with Section 4970), Division 1.7 (commencing
with Section 4981), Division 1.8 (commencing with Section 4990), and
Division 1.9 (commencing with Section 4995) of, to add Sections 1861
and 1881 to, to add Division 1.1 (commencing with Section 1000) and
Division 1.2 (commencing with Section 2000) to, and to repeal and add
Division 1 (commencing with Section 99) of, the Financial Code,
relating to financial institutions.
LEGISLATIVE COUNSEL'S DIGEST
SB 664, Committee on Banking and Financial Institutions. Financial
institutions.
Existing law establishes the Department of Financial Institutions
in the Business, Transportation and Housing Agency and provides that
the department is in charge of the execution of specified laws
relating to various financial institutions and financial services.
This bill would revise and recast various provisions of the
Financial Code applicable to financial institutions and financial
services regulated by the department and would make other conforming
changes. The bill would also require a bank that establishes a branch
office in this state in accordance with the National Bank Act, as
amended by the Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010, to provide a specified notice to the Commissioner of
Financial Institutions within 10 days of the establishment,
relocation, or redesignation of offices. The bill would make other
conforming changes should AB 109 of the 2011-12 Regular Session
become operative.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Division 1 (commencing with Section 99) of the
Financial Code is repealed.
SEC. 2. Division 1 (commencing with Section 99) is added to the
Financial Code, to read:
DIVISION 1. FINANCIAL INSTITUTIONS
CHAPTER 1. DEFINITIONS
99. This division, Division 1.1 (commencing with Section 1000),
Division 1.2 (commencing with Section 2000), Division 1.6 (commencing
with Section 4800), Division 2 (commencing with Section 5000),
Division 5 (commencing with Section 14000), Division 7 (commencing
with Section 18000), and Division 15 (commencing with Section 31000)
shall be known, and may be cited, as the "Financial Institutions Law."
101. If and to the extent that any provision of this division is
preempted by federal law, the provision does not apply and shall not
be enforced.
103. The word "bank" as used in this division means any
incorporated banking institution that shall have been incorporated to
engage in commercial banking business, industrial banking, or trust
business.
105. Banks are divided into the following classes:
(a) Commercial banks.
(b) Industrial banks.
(c) Trust companies.
107. "Commercial bank" means a corporation organized for the
purpose of engaging in the commercial banking business.
109. "Commercial banking business" includes, but is not limited
to, the business of soliciting, receiving, or accepting of money or
its equivalent on deposit as a regular business whether the deposit
is made subject to check or is evidenced by a certificate of deposit,
a passbook, a note, a receipt, or other writing, provided that
nothing herein shall apply to or include money or its equivalent left
in escrow, or left with an agent pending investment in real estate
or securities for, or on account of, his or her principal. In
addition, "commercial banking business" means to lend money on the
security of real or personal property or without security; to
discount or deal in bills, notes, or other commercial paper; to buy
and sell for the account of customers, and, if eligible for
investment, for its own account, securities, gold and silver bullion,
foreign coins, and bills of exchange; and generally to transact a
commercial banking business.
111. "Industrial bank" means a corporation organized for the
purpose of engaging in the industrial banking business.
113. "Industrial banking business" includes the making of loans
and acceptance of deposits, including deposits evidenced by
investment or thrift certificates, but excluding demand deposits.
115. "Trust business" means the business of acting as executor,
administrator, guardian or conservator of estates, assignee,
receiver, depositary or trustee under the appointment of any court,
or by authority of any law of this or any other state or of the
United States, or as trustee for any purpose permitted by law.
117. "Trust company" means a corporation, industrial bank, or a
commercial bank that is authorized to engage in the trust business.
119. "Bank" or "banks" includes commercial banks, industrial
banks, and trust companies unless the context otherwise requires.
However, "bank" does not include a savings association or a credit
union.
121. (a) "Office" includes head office, branch office, and any
other authorized place of business of a licensee.
(b) "Head office" means the principal place of business of a
licensee.
123. "Real property" and "personal property" have the meanings
defined in and shall be construed in accordance with Title 1
(commencing with Section 654) of Part 1 of Division 2 of the Civil
Code.
125. "Commissioner" means the Commissioner of Financial
Institutions and "department" means the Department of Financial
Institutions.
127. "Person" means an individual, sole proprietorship,
partnership, joint venture, association, trust, estate, business
trust, corporation, joint stock company, limited liability company,
unincorporated association, sovereign government or agency,
instrumentality, or political subdivision thereof, or any similar
entity or organization.
129. Unless the provision or the context otherwise requires, the
definitions set forth in this chapter govern the construction of this
division.
131. References in this division to the voting of shares shall be
construed in accordance with Section 111 of the Corporations Code.
133. If the articles of a bank provide for more or less than one
vote for any share on any matter, the references in Sections 139 and
141 to a majority or other proportion of shares means, as to such
matter, a majority or other proportion of the votes entitled to be
cast. Whenever, under Division 1 (commencing with Section 100), Title
1 of the Corporations Code or this division, shares are disqualified
from voting on any matter, they shall not be considered outstanding
for the determination of a quorum at any meeting to act upon, or the
required vote to approve action upon, such matter under any provision
of Division 1 (commencing with Section 100), Title 1 of the
Corporations Code, of this division, or of the articles or bylaws.
135. Any requirement in this division for a vote of each class of
outstanding shares shall be construed in accordance with Section 117
of the Corporations Code.
137. "Approved by (or approval of) the board" means approved or
ratified by the vote of the board or by the vote of a committee
authorized to exercise the powers of the board, except as to any
matter not within the competence of the committee under Section 311
of the Corporations Code or any matter for which this division also
requires approval of the shareholders or approval of the outstanding
shares.
139. "Approved by (or approval of) the outstanding shares" has
the meaning set forth in Section 152 of the Corporations Code and
shall include approval by the affirmative vote of a majority of the
outstanding shares of each class or series entitled, by any provision
of the articles, of this division, or of Division 1 (commencing with
Section 100), Title 1 of the Corporations Code, to vote as a class
or series on the subject matter being voted upon, and shall also
include approval by the affirmative vote of such greater proportion
(including all) of the outstanding shares of any class or series if
such greater proportion is required by the articles, by this
division, or by Division 1 (commencing with Section 100), Title 1 of
the Corporations Code.
141. "Approved by (or approval of) the shareholders" has the
meaning set forth in Section 153 of the Corporations Code and shall
include approval or ratification by the affirmative vote or written
consent of such proportion (including all) greater than a majority of
the shares of any class or series as may be provided in the
articles, in this division, or in Division 1 (commencing with Section
100), Title 1 of the Corporations Code for all or any specified
shareholder action.
143. "Articles" has the meaning set forth in Section 154 of the
Corporations Code.
145. "Board" has the meaning set forth in Section 155 of the
Corporations Code.
147. "California" means:
(a) When used with respect to a bank, in the case of a state bank,
a bank that is organized under the laws of this state and, in the
case of a national bank, a national bank that maintains its main
office in this state.
(b) When used with respect to an office of a bank, an office which
is located in this state.
(c) When used with respect to any corporation other than a bank, a
corporation that is organized under the laws of this state.
149. "CAMELS composite rating" shall have the meaning set forth
in Section 327.8(j) of Title 12 of the Code of Federal Regulations.
151. "Certificate of correction" means a certificate executed and
filed with the Secretary of State pursuant to Section 109 of the
Corporations Code, subject, however, to the provisions of Section
1105.
153. "Certificate of determination" has the meaning set forth in
Section 156 of the Corporations Code, subject, however, to the
provisions of Section 1104.
155. "Certificate of revocation" means a certificate executed and
filed with the Secretary of State pursuant to the second and third
sentences of subdivision (c) of Section 110 of the Corporations Code,
subject, however, to the provisions of Section 600.12.
157. "Common shares" has the meaning set forth in Section 159 of
the Corporations Code.
159. (a) "Confidential information" means any information
regarding a licensee contained in, or related to, any of the
following:
(1) Applications filed with the commissioner.
(2) Examination, operating, condition, or any other reports
prepared by, on behalf of, or for the use of, the commissioner.
(3) Information received in confidence by the commissioner.
(b) Confidential information is the property of the commissioner.
161. "Constituent corporation," when used with respect to a
corporation:
(a) In the case of a merger, has the meaning set forth in Section
161 of the Corporations Code.
(b) In the case of a consolidation, means a corporation that is
consolidated with one or more other corporations.
163. "Contributed capital" means all of shareholders' equity
other than retained earnings. However, nothing in this section shall
prohibit a bank from transferring amounts from time to time from its
retained earnings to its contributed capital, subject to any
applicable statutes, regulations, and generally accepted accounting
principles.
165. "Credit union" means a corporation of the type described in
Section 14002 organized under the laws of this state or a corporation
of similar type organized under the laws of the United States or of
any state of the United States other than this state.
167. "Directors" has the meaning set forth in Section 164 of the
Corporations Code.
169. "Disappearing," when used with respect to a corporation,
means a constituent corporation that is not the surviving
corporation.
171. "Distribution to its shareholders" has the meaning set forth
in Section 166 of the Corporations Code. However, in Division 1
(commencing with Section 100), Title 1 of the Corporations Code and
in this division, "distribution to its shareholders" does not include
any purchase of shares by a bank or by a majority-owned subsidiary
of a bank which is necessary to reduce or avoid loss to such bank or
to such subsidiary on an extension of credit previously made in good
faith. Also, in this division, "distribution to its shareholders"
includes any distribution made by a bank or by a majority-owned
subsidiary of a bank to the shareholders of any corporation of which
such bank is a majority-owned subsidiary.
173. (a) "Foreign," when used with respect to a bank, an office
of a bank, or any corporation other than a bank, means foreign (other
nation) or foreign (other state).
(b) "Foreign banking corporation" means a foreign bank.
175. "Foreign nation" means any nation other than the United
States, including, without limitation, any subdivision, territory,
trust territory, dependency, colony, or possession of any nation
other than the United States. "Foreign nation" includes Puerto Rico,
Guam, American Samoa, the Virgin Islands, and any territory, trust
territory, dependency, or insular possession of the United States.
177. (a) The definition of "state of the United States" in
Section 207 does not apply to this section. In this section, "state
of the United States" means any state of the United States or the
District of Columbia.
(b) "Foreign (other nation)":
(1) When used with respect to a bank, means any bank (including,
without limitation, any commercial bank, merchant bank, or other
institution that engages in banking activities that are usual in
connection with the business of banking in the nation in which the
institution is organized or operating) other than (A) a bank that is
organized under the laws of a state of the United States or (B) a
national bank that maintains its main office in a state of the United
States.
(2) When used with respect to an office of a bank, means an office
that is located in a place other than a state of the United States.
(3) When used with respect to any corporation other than a bank,
means a corporation that is organized under the laws of a foreign
nation.
179. "Foreign (other state)":
(a) When used with respect to a bank, means a bank that is
organized under the laws of any state of the United States other than
this state, or a national bank that maintains its main office in any
state of the United States other than this state, and includes any
savings bank, as defined in Section 3(g) of the Federal Deposit
Insurance Act (12 U.S.C. Sec. 1813(g)), that is organized under the
laws of a state other than this state.
(b) When used with respect to an office of a bank, means an office
that is located in a state other than this state.
(c) When used with respect to a corporation other than a bank,
means a corporation that is organized under the laws of any state of
the United States other than this state or under the laws of the
United States.
181. "Insured":
(a) When used with respect to a bank or an office of a bank, means
a bank or office the deposits of which are insured by the Federal
Deposit Insurance Corporation under the Federal Deposit Insurance Act
(12 U.S.C. Sec. 1811 et seq.).
(b) When used with respect to a deposit, means a deposit that is
insured by the Federal Deposit Insurance Corporation under the
Federal Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.).
183. "Law of the domicile" means:
(a) When used with respect to a national bank, the law of the
United States.
(b) When used with respect to a state bank, the law of the state
of the United States under which the bank is organized.
(c) When used with respect to a foreign (other nation) bank, the
law of the foreign nation under which the bank is organized.
185. "Licensee" has the following meanings:
(a) Any bank authorized by the commissioner pursuant to Section
1042 to transact banking or trust business.
(b) Any industrial bank authorized by the commissioner pursuant to
Section 1042 to transact industrial banking business.
(c) Any trust company authorized by the commissioner pursuant to
Section 1042 to transact trust business.
(d) Any foreign (other nation) bank that is licensed under Article
2 (commencing with Section 1780) of Chapter 20 or under Article 3
(commencing with Section 1800) of Chapter 20.
(e) Any corporation licensed by the commissioner to transmit money
pursuant to Division 1.2 (commencing with Section 1920).
(f) Any person authorized by the commissioner to conduct the
business of a savings association pursuant to Division 2 (commencing
with Section 5000).
(g) Any credit union authorized by the commissioner to conduct
business pursuant to Section 14154.
(h) Any foreign (other state) credit union licensed by the
commissioner to conduct business pursuant to Chapter 11 (commencing
with Section 16000) of Division 5.
(i) Any foreign (other nation) credit union licensed by the
commissioner to conduct business pursuant to Chapter 12 (commencing
with Section 16500) of Division 5.
(j) Any industrial loan company authorized by the commissioner to
conduct insurance premium finance business pursuant to Division 7
(commencing with Section 18000).
(k) Any corporation licensed by the commissioner as a business and
industrial development corporation pursuant to Section 31154.
187. "Majority-owned subsidiary" has the meaning set forth for
"subsidiary" in subdivision (a) of Section 189 of the Corporations
Code.
189. (a) "National bank" or "national banking association" means
a national banking association organized under the National Bank Act.
(b) For purposes of this division, a national bank is deemed to be
a corporation.
191. "Officers' certificate" has the meaning set forth in Section
173 of the Corporations Code.
193. "Resulting," when used with respect to a corporation, means:
(a) In the case of a consolidation, the corporation into which the
constituent corporations are consolidated.
(b) In the case of a conversion, the corporation into which the
converting corporation is converted.
195. "ROCA supervisory rating" shall have the meaning set forth
in Section 327.8(k) of Title 12 of the Code of Federal Regulations.
197. "Savings association" includes a savings association, a
savings and loan association, and a savings bank. However, "savings
association" does not include any savings bank of the type defined in
Section 3(g) of the Federal Deposit Insurance Act (12 U.S.C. Section
1813(g)).
199. "Series," when used with respect to shares, has the meaning
set forth in Section 183 of the Corporations Code.
201. "Shares" has the meaning set forth in Section 184 of the
Corporations Code.
203. "Shareholder" has the meaning set forth in Section 185 of
the Corporations Code.
205. "State":
(a) When used with respect to a corporation, means a corporation
that is organized under the laws of a state of the United States.
(b) When used with respect to an office of a foreign (other
nation) bank, means an office that the bank is authorized to maintain
under the laws of a state of the United States.
207. "State of the United States" means any state of the United
States, the District of Columbia, any territory of the United States,
Puerto Rico, Guam, American Samoa, the Trust Territory of the
Pacific Islands, the Virgin Islands, and the Northern Mariana
Islands.
209. "Surviving," when used with respect to a corporation, means
a corporation in which one or more other corporations are merged.
211. "Uniform Interagency Trust Rating System (UITRS)" shall have
the meaning set forth in the policy statement regarding the uniform
interagency trust rating system published by the Federal Financial
Institutions Examination Council on October 13, 1998 (63 Fed. Reg.
54704).
213. "Uniform Rating System for Informational Technology (URSIT)"
shall have the meaning set forth in the policy statement regarding
the uniform rating system for information technology published by the
Federal Financial Institutions Examination Council on January 20,
1999, and implemented on or before April 1, 1999 (64 Fed. Reg. 3109).
215. "Vote" has the meaning set forth in Section 194 of the
Corporations Code.
217. "Voting power" has the meaning set forth in Section 194.5 of
the Corporations Code.
CHAPTER 2. TRANSITION PROVISIONS
250. In this chapter, unless the provision or context requires
otherwise:
(a) "New General Corporation Law" means Division 1 (commencing
with Section 100), Title 1 of the Corporations Code, as in effect on
and after January 1, 1977.
(b) "Prior Banking Law" means this division, as in effect on
December 31, 1978.
(c) "Prior General Corporation Law" means Division 1 (commencing
with Section 100), Title 1 of the Corporations Code, as in effect on
December 31, 1976.
(d) "Revised Banking Law" means this division, as in effect on and
after January 1, 1979, and as repealed and readded as of January 1,
2012.
(e) "Subject institution" means:
(1) Any corporation incorporated under the laws of this state
which is, with the approval of the commissioner, incorporated for the
purpose of engaging in, or which is authorized by the commissioner
to engage in, the commercial banking business under this division.
(2) Any corporation incorporated under the laws of this state
which is, with the approval of the commissioner, incorporated for the
purpose of engaging in, or which is authorized by the commissioner
to engage in, the trust business under this division.
(3) Any corporation incorporated under the laws of this state
which is, with the approval of the commissioner, incorporated for the
purpose of engaging in, or which is authorized by the commissioner
to engage in, business under Article 1 (commencing with Section 1850)
of Chapter 21 of Division 1.1.
251. For purposes of Chapter 23 (commencing with Section 2300) of
the new General Corporation Law, in the case of any subject
institution existing on January 1, 1979:
(a) The term "new law" shall mean the new General Corporation Law,
subject, however, to the provisions of Section 101 of the revised
Banking Law.
(b) The term "prior law" shall mean the prior General Corporation
Law, subject, however, to the provisions of Section 101 of the prior
Banking Law.
(c) The term "effective date" shall mean January 1, 1979.
252. (a) Sections 600 and 600.2 of the revised Banking Law shall
not apply to any subject institution existing on January 1, 1979,
unless and until an amendment of the articles of such subject
institution is filed with the Secretary of State pursuant to Section
2302 of the new General Corporation Law.
(b) An amendment of the articles of a subject institution existing
on January 1, 1979, which is filed with the Secretary of State
pursuant to Section 2302 of the new General Corporation Law may be
adopted by approval of the board alone in accordance with the second
sentence of Section 2302 of the new General Corporation Law,
notwithstanding the fact that such amendment changes such articles to
conform to the provisions of Sections 600 and 600.2 of the revised
Banking Law.
(c) Neither Article 6 (commencing with Section 690), Chapter 5 of
the revised Banking Law nor Section 904 of the new General
Corporation Law shall apply to an amendment of the articles of a
subject institution existing on January 1, 1979, which is filed with
the Secretary of State pursuant to Section 2302 of the new General
Corporation Law on account of the fact that such amendment conforms
such articles to the provisions of Section 600.2 of the revised
Banking Law.
253. In case the board of a subject institution has, prior to
January 1, 1979, adopted a resolution levying an assessment on the
common shares of such subject institution in accordance with an order
issued by the commissioner pursuant to Section 661 of the prior
Banking Law:
(a) If the assessment has, prior to January 1, 1979, become a lien
on the common shares in accordance with Section 2704 of the prior
General Corporation Law, the assessment shall be collected pursuant
to the prior General Corporation Law:
(b) Otherwise, the resolution shall be deemed to be rescinded on
January 1, 1979.
254. Article 3 (commencing with Section 640), Chapter 5 of the
revised Banking Law applies to any distribution to its shareholders
made after January 1, 1979, by a subject institution existing on
January 1, 1979, except that any such distribution effected pursuant
to a contract for the purchase or redemption of shares entered into
by such subject institution prior to January 1, 1979, may be made if
permissible under the applicable provisions of the revised Banking
Law and the new General Corporation Law or under the applicable
provisions of the prior Banking Law and the prior General Corporation
Law in effect at the time such contract was entered into.
CHAPTER 3. DEPARTMENT OF FINANCIAL INSTITUTIONS
Article 1. General Provisions
300. (a) In this section:
(1) "Business and industrial development corporation" means a
corporation licensed under Division 15 (commencing with Section
31000).
(2) "Payment instrument" has the same meaning as set forth in
Section 33059.
(3) "Traveler's check" has the same meaning as set forth in
Section 1803.
(b) There is in the state government, in the Business,
Transportation and Housing Agency, a Department of Financial
Institutions which has charge of the execution of, among other laws,
the laws of this state relating to any of the following: (1) banks or
trust companies or the banking or trust business; (2) savings
associations or the savings association business; (3) credit unions
or the credit union business; (4) persons who engage in the business
of receiving money for transmission to foreign nations or such
business; (5) issuers of traveler's checks or the traveler's check
business; (6) issuers of payment instruments or the payment
instrument business; (7) business and industrial development
corporations or the business and industrial development corporation
business, or (8) insurance premium finance agencies or the insurance
premium finance business.
301. This chapter is applicable to this division, Division 1.1
(commencing with Section 1000), Division 1.2 (commencing with Section
2000), Division 1.6 (commencing with Section 4800), Division 5
(commencing with Section 14000), Division 7 (commencing with Section
18000), and Division 15 (commencing with Section 31000).
Article 2. Commissioner of Financial Institutions
320. The chief officer of the Department of Financial
Institutions is the Commissioner of Financial Institutions. The
Commissioner of Financial Institutions is the head of the department
and, except as otherwise provided in this code, is subject to the
provisions of the Government Code relating to department heads, but
need not reside in Sacramento.
321. As of the operative date of this section:
(a) In this section, "order" means any approval, consent,
authorization, exemption, denial, prohibition, requirement, or other
administrative action, applicable to a specific case.
(b) The office of the Superintendent of Banks and the State
Banking Department are abolished. All powers, duties,
responsibilities, and functions of the Superintendent of Banks and
the State Banking Department are transferred to the Commissioner of
Financial Institutions and the Department of Financial Institutions,
respectively. The Commissioner of Financial Institutions and the
Department of Financial Institutions succeed to all the rights and
property of the Superintendent of Banks and the State Banking
Department, respectively; the Commissioner of Financial Institutions
and the Department of Financial Institutions are subject to all the
debts and liabilities of the Superintendent of Banks and the State
Banking Department, respectively, as if the Commissioner of Financial
Institutions and the Department of Financial Institutions had
incurred them. Any action or proceeding by or against the
Superintendent of Banks or the State Banking Department may be
prosecuted to judgment, which shall bind the Commissioner of
Financial Institutions or the Department of Financial Institutions,
respectively, or the Commissioner of Financial Institutions or the
Department of Financial Institutions may be proceeded against or
substituted in place of the Superintendent of Banks or the State
Banking Department, respectively. References in the Constitution of
the State of California or in any statute
or regulation to the Superintendent of Banks or to
the State Banking Department mean the Commissioner of Financial
Institutions or the Department of Financial Institutions,
respectively. All agreements entered into with, and orders and
regulations issued by, the Superintendent of Banks or the State
Banking Department shall continue in effect as if the agreements were
entered into with, and the orders and regulations were issued by,
the Commissioner of Financial Institutions or the Department of
Financial Institutions, respectively.
(c) The office of the Savings and Loan Commissioner and the
Department of Savings and Loan are abolished. All powers, duties,
responsibilities, and functions of the Savings and Loan Commissioner
and the Department of Savings and Loan are transferred to the
Commissioner of Financial Institutions and the Department of
Financial Institutions, respectively. The Commissioner of Financial
Institutions and the Department of Financial Institutions succeed to
all the rights and property of the Savings and Loan Commissioner and
the Department of Savings and Loan, respectively; the Commissioner of
Financial Institutions and the Department of Financial Institutions
are subject to all the debts and liabilities of the Savings and Loan
Commissioner and the Department of Savings and Loan, respectively, as
if the Commissioner of Financial Institutions and the Department of
Financial Institutions had incurred them. Any action or proceeding by
or against the Savings and Loan Commissioner or the Department of
Savings and Loan may be prosecuted to judgment, which shall bind the
Commissioner of Financial Institutions or the Department of Financial
Institutions, respectively, or the Commissioner of Financial
Institutions or the Department of Financial Institutions may be
proceeded against or substituted in place of the Savings and Loan
Commissioner or the Department of Savings and Loan, respectively.
References in the Constitution of the State of California or in any
statute or regulation to the Savings and Loan Commissioner or to the
Department of Savings and Loan mean the Commissioner of Financial
Institutions or the Department of Financial Institutions,
respectively. All agreements entered into with, and orders and
regulations issued by, the Savings and Loan Commissioner or the
Department of Savings and Loan shall continue in effect as if the
agreements were entered into with, and the orders and regulations
were issued by, the Commissioner of Financial Institutions or the
Department of Financial Institutions.
(d) All powers, duties, responsibilities, and functions of the
Commissioner of Corporations and the Department of Corporations with
respect to credit unions, the credit union business, industrial loan
companies, or the industrial loan business are transferred to the
Commissioner of Financial Institutions and the Department of
Financial Institutions, respectively. The Commissioner of Financial
Institutions and the Department of Financial Institutions succeed to
all the rights and property of the Commissioner of Corporations and
the Department of Corporations, respectively, with respect to credit
unions, the credit union business, industrial loan companies, or the
industrial loan business; the Commissioner of Financial Institutions
and the Department of Financial Institutions are subject to all the
debts and liabilities of the Commissioner of Corporations and the
Department of Corporations, respectively, with respect to credit
unions, the credit union business, industrial loan companies, or the
industrial loan business, as if the Commissioner of Financial
Institutions and the Department of Financial Institutions had
incurred them. Any action or proceeding by or against the
Commissioner of Corporations or the Department of Corporations with
respect to credit unions, the credit union business, industrial loan
companies, or the industrial loan business may be prosecuted to
judgment, which shall bind the Commissioner of Financial Institutions
or the Department of Financial Institutions, respectively, or the
Commissioner of Financial Institutions or the Department of Financial
Institutions may be proceeded against or substituted in place of the
Commissioner of Corporations or the Department of Corporations,
respectively. References in the Constitution of the State of
California or any statute or regulation to the Commissioner of
Corporations or to the Department of Corporations with respect to
credit unions, the credit union business, industrial loan companies,
or the industrial loan business mean the Commissioner of Financial
Institutions or the Department of Financial Institutions,
respectively. All agreements entered into with, and orders and
regulations issued by, the Commissioner of Corporations or the
Department of Corporations in the exercise of authority under any law
relating to credit unions, the credit union business, industrial
loan companies, or the industrial loan business, shall continue in
effect as if the agreements were entered into with, and the orders
and regulations were issued by, the Commissioner of Financial
Institutions or the Department of Financial Institutions.
322. The commissioner is appointed by the Governor, and holds
office at the pleasure of the Governor. The appointment of the
commissioner is subject to confirmation by the Senate.
323. The commissioner shall be a citizen of the United States and
a resident of the state for at least three years prior to his or her
appointment. The commissioner shall be chosen solely for his or her
qualifications and fitness to perform the duties of his or her
office.
324. The annual salary of the commissioner is provided for by
Chapter 6 (commencing with Section 11550) of Part 1 of Division 3 of
Title 2 of the Government Code.
325. Before entering upon the duties of his or her office, the
commissioner shall take and subscribe to the constitutional oath of
office and file the same with the Secretary of State.
326. The commissioner is responsible for the performance of all
duties, the exercise of all powers and jurisdiction, and the
assumption and discharge of all responsibilities vested by law in the
department. The commissioner has and may exercise all the powers
necessary or convenient for the administration and enforcement of,
among other laws, the laws described in Section 300. The commissioner
may issue such rules and regulations consistent with law as he or
she may deem necessary or advisable in executing the powers, duties,
and responsibilities of the department.
327. (a) The commissioner shall apply the Interagency Guidance on
Nontraditional Mortgage Product Risks issued in September 2006 and
the Statement on Subprime Mortgage Lending issued in June 2007 by the
Office of the Comptroller of the Currency, the Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, and the National
Credit Union Administration to state-regulated financial
institutions, including, but not limited to, privately insured,
state-chartered credit unions.
(b) The commissioner may issue emergency and final regulations to
clarify the application of this section as soon as possible.
(c) A bank or credit union to which the commissioner applies the
documents described in subdivision (a) shall adopt and adhere to
policies and procedures that are reasonably intended to achieve the
objectives set forth in those documents.
328. (a) The commissioner may make the agreements that he or she
deems necessary or appropriate in exercising his or her powers.
(b) (1) The agreements authorized under subdivision (a) may
include, but are not limited to, agreements with agencies of this
state, of other states of the United States, of the United States, or
of foreign nations that regulate financial institutions, relating to
examinations of banks, savings associations, credit unions,
industrial loan companies, and other matters.
(2) Any agreement with a government agency that regulates
financial institutions is exempt from the advertising and competitive
bidding requirements of the Public Contract Code.
329. (a) For purposes of this section, the following definitions
apply:
(1) "Applicable law" means:
(A) With respect to any bank, Division 1.6 (commencing with
Section 4800), and any of the following provisions:
(i) Article 6 (commencing with Section 405) of Chapter 3.
(ii) Article 3 (commencing with Section 1130) of Chapter 5 of
Division 1.1.
(iii) Chapter 6 (commencing with Section 1200) of Division 1.1.
(iv) Chapter 10 (commencing with Section 1320) of Division 1.1.
(v) Chapter 14 (commencing with Section 1460) of Division 1.1.
(vi) Article 1 (commencing with Section 1530) of Chapter 15 of
Division 1.1.
(vii) Chapter 16 (commencing with Section 1550) of Division 1.1.
(viii) Chapter 20 (commencing with Section 1750) of Division 1.1.
(ix) Section 456.
(x) Section 457.
(xi) Section 459.
(xii) Section 460.
(xiii) Section 760.
(xiv) Chapter 21 (commencing with Section 1850) of Division 1.1.
(xv) Chapter 18 (commencing with Section 1660) of Division 1.1.
(xvi) Chapter 19 (commencing with Section 1670) of Division 1.1.
(B) With respect to any savings association, any provision of
Division 1.6 (commencing with Section 4800) and Division 2
(commencing with Section 5000).
(C) With respect to any issuer of traveler's checks, any provision
of Chapter 7 (commencing with Section 2120) of Division 1.2.
(D) With respect to any insurance premium finance company, any
provision of Division 7 (commencing with Section 18000).
(E) With respect to any business and development corporation, any
provision of Division 15 (commencing with Section 31000).
(F) With respect to any credit union, any of the following
provisions:
(i) Section 14252.
(ii) Section 14253.
(iii) Section 14255.
(iv) Article 4 (commencing with Section 14350) of Chapter 3 of
Division 5.
(v) Section 14401.
(vi) Section 14404.
(vii) Section 14408, only as that section applies to gifts to
directors, volunteers, and employees, and the related family or
business interests of the directors, volunteers, and employees.
(viii) Section 14409.
(ix) Section 14410.
(x) Article 5 (commencing with Section 14600) of Chapter 4 of
Division 5.
(xi) Article 6 (commencing with Section 14650) of Chapter 4 of
Division 5, excluding subdivision (a) of Section 14651.
(xii) Section 14803.
(xiii) Section 14851.
(xiv) Section 14858.
(xv) Section 14860.
(xvi) Section 14861.
(xvii) Section 14863.
(G) With respect to any person licensed to transmit money abroad,
any provision of Chapter 1 (commencing with Section 2000) of Division
1.2.
(2) "Licensee" means any bank, savings association, credit union,
transmitter of money abroad, issuer of payment instruments, issuer of
traveler's checks, insurance premium finance agency, or business and
industrial development corporation that is authorized by the
commissioner to conduct business in this state.
(b) Notwithstanding any other provision of this code that applies
to a licensee or a subsidiary of a licensee, after notice and an
opportunity to be heard, the commissioner may, by order that shall
include findings of fact which incorporates a determination made in
accordance with subdivision (e), levy civil penalties against any
licensee or any subsidiary of a licensee who has violated any
provision of applicable law, any order issued by the commissioner,
any written agreement between the commissioner and the licensee or
subsidiary of the licensee, or any condition of any approval issued
by the commissioner. Notwithstanding any other provision of law,
neither the commissioner nor any employee of the department shall
disclose or permit the disclosure of any record, record of any
action, or information contained in a record of any action, taken by
the commissioner under the provisions of this section, unless the
action was taken pursuant to paragraph (2) of subdivision (b), to
persons other than federal or state government employees who are
authorized by statute to obtain the records in the performance of
their official duties, unless the disclosure is authorized or
requested by the affected licensee or the affected subsidiary of the
licensee. The commissioner shall have the sole authority to bring any
action with respect to a violation of applicable law subject to a
penalty imposed under this section.
Except as provided in paragraphs (1) and (2), any penalty imposed
by the commissioner may not exceed one thousand dollars ($1,000) a
day, provided that the aggregate penalty of all offenses in any one
action against any licensee or subsidiary of a licensee shall not
exceed fifty thousand dollars ($50,000).
(1) If the commissioner determines that any licensee or subsidiary
of the licensee has recklessly violated any applicable law, any
order issued by the commissioner, any provision of any written
agreement between the commissioner and the licensee or subsidiary, or
any condition of any approval issued by the commissioner, the
commissioner may impose a penalty not to exceed five thousand dollars
($5,000) per day, provided that the aggregate penalty of all
offenses in an action against any licensee or subsidiary of a
licensee shall not exceed seventy-five thousand dollars ($75,000).
(2) If the commissioner determines that any licensee or subsidiary
of the licensee has knowingly violated any applicable law, any order
issued by the commissioner, any provision of any written agreement
between the commissioner and the licensee or subsidiary, or any
condition of any approval issued by the commissioner, the
commissioner may impose a penalty not to exceed ten thousand dollars
($10,000) per day, provided that the aggregate penalty of all
offenses in an action against any licensee or subsidiary of a
licensee shall not exceed 1 percent of the total assets of the
licensee or subsidiary of a licensee subject to the penalty.
(c) Nothing in this section shall be construed to impair or impede
the commissioner from pursuing any other administrative action
allowed by law.
(d) Nothing in this section shall be construed to impair or impede
the commissioner from bringing an action in court to enforce any law
or order he or she has issued, including orders issued under this
section. Nothing in this section shall be construed to impair or
impede the commissioner from seeking any other damages or injunction
allowed by law.
(e) In determining the amount and the appropriateness of
initiating a civil money penalty under subdivision (b), the
commissioner shall consider all of the following:
(1) Evidence that the violation or practice or breach of duty was
intentional or was committed with a disregard of the law or with a
disregard of the consequences to the institution.
(2) The duration and frequency of the violations, practices, or
breaches of duties.
(3) The continuation of the violations, practices, or breaches of
duty after the licensee or subsidiary of the licensee was notified,
or, alternatively, its immediate cessation and correction.
(4) The failure to cooperate with the commissioner in effecting
early resolution of the problem.
(5) Evidence of concealment of the violation, practice, or breach
of duty or, alternatively, voluntary disclosure of the violation,
practice, or breach of duty.
(6) Any threat of loss, actual loss, or other harm to the
institution, including harm to the public confidence in the
institution, and the degree of that harm.
(7) Evidence that a licensee or subsidiary of a licensee received
financial gain or other benefit as a result of the violation,
practice, or breach of duty.
(8) Evidence of any restitution paid by a licensee or subsidiary
of a licensee of losses resulting from the violation, practice, or
breach of duty.
(9) History of prior violations, practices, or breaches of duty,
particularly where they are similar to the actions under
consideration.
(10) Previous criticism of the institution for similar actions.
(11) Presence or absence of a compliance program and its
effectiveness.
(12) Tendency to engage in violations of law, unsafe or unsound
banking practices, or breaches of duties.
(13) The existence of agreements, commitments, orders, or
conditions imposed in writing intended to prevent the violation,
practice, or breach of duty.
(14) Whether the violation, practice, or breach of duty causes
quantifiable, economic benefit or loss to the licensee or the
subsidiary of the licensee. In those cases, removal of the benefit or
recompense of the loss usually will be insufficient, by itself, to
promote compliance with the applicable law, order, or written
agreement. The penalty amount should reflect a remedial purpose and
should provide a deterrent to future misconduct.
(15) Other factors as the commissioner may, in his or her opinion,
consider relevant to assessing the penalty or establishing the
amount of the penalty.
(f) The amounts collected under this section shall be deposited in
the appropriate fund of the department. For purposes of this
subdivision, the term "appropriate fund" means the fund to which the
annual assessments of fined licensees, or the parent licensee of the
fined subsidiary, are credited.
330. The authority vested in the Superintendent of Banks under
subdivision (2) of Section 1 of Article XV of the California
Constitution is delegated to the commissioner.
331. Notwithstanding any other provision of law, the commissioner
may adopt and implement any method of accepting electronic filings
of applications, reports, or other matters, which, in the opinion of
the commissioner, is secure. Any method of electronic filing chosen
by the commissioner shall include a method to verify the identity of
the person making the filing. The verification shall be deemed to
satisfy all other verifications required by this division, and shall
have the same force and effect as the use of manual signatures.
332. (a) (1) In this section, "federal law" includes, but is not
limited to, the United States Constitution, any federal statute, any
federal court decision, and any regulation, circular, bulletin,
interpretation, decision, order, and waiver issued by a federal
agency.
(2) The definitions set forth in Section 1750 apply to this
section.
(b) (1) Notwithstanding any other provision of law, except as
provided in subdivision (c), if the commissioner finds that any
provision of federal law applicable to national banking associations
doing business in this state is substantively different from the
provisions of this code applicable to banks organized under the laws
of this state, the commissioner may by regulation make that provision
of federal law applicable to banks organized under the laws of this
state.
(2) If the commissioner finds that any provision of federal law
applicable to foreign (other nation) banks with respect to federal
agencies or federal branches in this state is substantively different
from the provisions of this code applicable to foreign (other
nation) banks with respect to agencies or branch offices licensed by
the commissioner under Chapter 20 (commencing with Section 1750) of
Division 1.1, the commissioner may by regulation make that provision
of federal law applicable to foreign (other nation) banks with
respect to agencies or branch offices licensed by the commissioner
under Chapter 20 (commencing with Section 1750) of Division 1.1.
(c) (1) Section 11343.4 and Article 5 (commencing with Section
11346) and Article 6 (commencing with Section 11349) of Chapter 3.5
of Part 1 of Division 3 of Title 2 of the Government Code do not
apply to any regulation adopted under subdivision (b).
(2) The commissioner shall file any regulation adopted pursuant to
subdivision (b), together with a citation to this section as
authority for the adoption and a citation to the provisions of
federal law made applicable by the regulation, with the Office of
Administrative Law for filing with the Secretary of State and
publication in the California Code of Regulations.
(3) Any regulation adopted under subdivision (b) shall become
effective on the date when it is filed with the Secretary of State
unless the commissioner prescribes a later date in the regulation or
in a written instrument filed with the regulation.
(4) Any regulation adopted under subdivision (b) shall expire at
12 p.m. on December 31 of the year following the calendar year in
which it becomes effective.
(5) Any regulation adopted pursuant to subdivision (b) shall be
subject to the following restrictions:
(A) The commissioner shall not renew or reinstate the regulation
adopted pursuant to subdivision (b).
(B) The commissioner shall not adopt a new regulation pursuant to
subdivision (b), to address the same conformity issue that was
addressed by the regulation that expired pursuant to subdivision (c).
(d) The commissioner may adopt regulations pursuant to subdivision
(b) that are exempt from the expiration and restrictions of
subdivision (c) if the regulations are adopted in compliance with all
provisions of Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of the Government Code, including those listed in
paragraph (1) of subdivision (c).
333. The powers of supervision and examination of all licensees
are vested in the commissioner.
334. The commissioner may promulgate or waive such rules and
regulations as may be reasonable or necessary to carry out his or her
duties and responsibilities.
335. (a) The commissioner, whenever in his or her opinion such
action is necessary or appropriate to carry out his or her duties,
may call a meeting of the board of directors of a licensee.
(b) A meeting of the board of a licensee called by the
commissioner shall be held upon four days' notice by first-class mail
or 24 hours' notice delivered personally or by telephone. The notice
shall be given by the commissioner or, if the commissioner so
orders, by an officer of the licensee.
(c) A meeting of the board of a licensee called by the
commissioner shall be held at a place within this state as may be
designated by the commissioner and specified in the notice of the
meeting.
(d) The expenses of a meeting of the board of a licensee called by
the commissioner shall be paid by the licensee.
336. The commissioner may, at any time, require a licensee to
write down any asset held by the licensee to a valuation that will
represent the asset's then fair market value.
Article 3. Deputies and Employees
350. The commissioner shall appoint a chief deputy who holds
office at the pleasure of the commissioner. The annual salary of the
chief deputy shall be fixed by the commissioner with the approval of
the Director of Finance. The chief deputy shall have the same
qualifications as the commissioner. The commissioner shall also
appoint two deputies, one to serve in the City and County of San
Francisco and one to serve in the City of Los Angeles.
351. The Chief Officer of the Division of Credit Unions is the
Deputy Commissioner of Financial Institutions for the Division of
Credit Unions. The Deputy Commissioner of Financial Institutions for
the Division of Credit Unions shall administer the laws of this state
relating to credit unions or the credit union business under the
direction of the commissioner. The Deputy Commissioner of Financial
Institutions for the Division of Credit Unions shall be appointed by
the Governor and shall hold office at the pleasure of the Governor.
The Deputy Commissioner of Financial Institutions shall receive an
annual salary as fixed by the Governor.
352. The commissioner may employ deputies in addition to the
chief deputy, and examiners, appraisers, technical assistants,
investigators, administrative assistants, clerks, and other employees
that he or she may need to discharge in a proper manner the duties
imposed upon him or her by law. He or she shall prescribe their
duties and fix their compensation in accordance with classifications
made by the State Personnel Board. The commissioner may also, at
those times and on those terms as may be approved by the Governor,
employ those attorneys as he or she may need.
353. Before entering upon the duties of his office each deputy
and examiner shall take and subscribe to the constitutional oath of
office and file the same with the Secretary of State.
354. The commissioner may require, at any time, of any deputy,
examiner, or other employee of the department, an official bond in
such amount as the commissioner may deem necessary. The premium for
bonds required by the commissioner shall be an expense of the
department.
355. Neither the commissioner nor any deputy or employee of the
department shall do or be any of the following with respect to any
bank, savings association, credit union, or industrial loan company
supervised by the department:
(a) Be indebted, directly or indirectly, as borrower, endorser,
surety, or guarantor to any such bank, savings association, credit
union, or industrial loan company.
(b) Be an officer, director, or employee of any such bank, savings
association, credit union, or industrial loan company.
(c) Own or deal in directly or indirectly, the shares or
obligations of any such bank, savings association, credit union, or
industrial loan company.
(d) Be interested in or, directly or indirectly, receive from any
such bank, savings association, credit union, or industrial loan
company or any officer, director, or employee thereof, any salary,
fee, compensation, or other valuable thing by way of gift, credit,
compensation for services, or otherwise. However, this subdivision
does not prohibit any person from being interested in or directly or
indirectly receiving (1) anything which is expressly excluded from a
definition of "gift" or "honorarium" in the Political Reform Act of
1974 (Title 9 (commencing with Section 81000) of the Government Code)
or in regulations issued under the Political Reform Act of 1974 by
the Fair Political Practices Commission or (2) anything which, if
received by the commissioner, would constitute a gift or honorarium
within the meaning of the Political Reform Act of 1974 or regulations
issued under the Political Reform Act of 1974 by the Fair Political
Practices Commission but which the commissioner would not be
prohibited from receiving under the Political Reform Act of 1974 or
regulations issued under the Political Reform Act of 1974 by the Fair
Political Practices Commission.
(e) Be interested in or engage in the negotiation of any loan
to, obligation of, or accommodation for another person to or with any
such bank, savings association, credit union, or industrial loan
company.
Notwithstanding the foregoing the commissioner and any deputy or
employee may have and maintain one or more deposit or similar
accounts in any bank, savings association, credit union, or
industrial loan company in this state and may maintain with any bank,
savings association, credit union, or industrial loan company in
this state a loan which was not obtained in violation of this section
if the person reports the loan in writing to the department within
30 days after the person commences his or her term of appointment or
employment with the department and if the loan is not renewed,
renegotiated, extended, or otherwise modified on or after July 1,
1997.
A violation of this section by any person shall constitute
sufficient grounds for his or her removal or discharge.
356. If the commissioner is unable to perform his or her duties
for more than 30 consecutive days or if the office of the
commissioner becomes vacant, the chief deputy shall have all the
powers and duties of the commissioner until the return or recovery of
the commissioner, or, in case of a vacancy, until a new commissioner
is appointed by the Governor and qualifies to hold office.
357. If a deputy commissioner or any examiner has knowledge of
the insolvency or unsafe condition of any licensee and willfully
fails to report that fact to the commissioner in writing, he or she
is guilty of a felony.
Article 4. Administration of the Department
370. The commissioner may have an office in the City of
Sacramento, the City of Los Angeles, the City of San Diego, the City
and County of San Francisco, or any other location in the state that
he or she considers appropriate. The commissioner shall provide at
the expense of the department such office space, furniture, and
equipment as may be necessary or convenient for the transaction of
the business of the department.
371. There is in the Department of Financial Institutions, the
Division of Credit Unions. The Division of Credit Unions has charge
of the execution of the laws of this state relating to credit unions
and to the credit union business.
372. The department may expend moneys in accordance with law for
the necessary travel expenses of officers and employees of the
department while traveling in the line of their duties either within
or without the state.
373. The commissioner shall adopt and keep an official seal.
Papers executed by the commissioner in his or her official capacity
pursuant to law and bearing the seal, or copies thereof certified by
him or her, shall be received in evidence in like manner as the
original and may be recorded in the same manner and with the same
effect as a deed regularly acknowledged.
374. (a) Whenever it is necessary for the commissioner to approve
any instrument and to affix his or her official seal thereto, the
commissioner shall charge a fee of twenty-five dollars ($25)
therefor.
(b) Whenever it is proper for the department to furnish a copy of
any paper that has been filed therein and to certify to the paper,
the commissioner may charge twenty-five cents ($0.25) for each page
copied.
(c) Whenever the commissioner is required or requested to certify
copies of documents, the commissioner may charge a fee of twenty-five
dollars ($25) for certifying the copied documents and for affixing
his or her official seal.
375. Official reports made by the commissioner and verified
reports of an examination made by the commissioner, exclusively or in
conjunction with or with assistance from any agency of the United
States, of a state of the United States, or of a foreign nation are
prima facie evidence of the facts stated in the reports for all
purposes.
376. At least once each month, the commissioner shall issue and
disseminate as the commissioner deems appropriate a bulletin
containing the following information:
(a) Information regarding any of the following actions taken since
issuance of the previous bulletin:
(1) The filing, approval, or denial under Chapter 1 (commencing
with Section 1000) of Division 1.1 of an application for authority to
organize a California state bank, or the issuance under Chapter 3
(commencing with Section 1040) of Division 1.1 of a certificate of
authority to a California state bank.
(2) The filing, approval, or denial under Article 1 (commencing
with Section 5400) of Chapter 2 of Division 2 of an application for
the issuance of an organizing permit for the organization of a
California savings association, or for the issuance under Article 2
(commencing with Section 5500) of Chapter 2 of Division 2 of a
certificate of authority to a California savings association.
(3) The filing, approval, or denial under Article 2 (commencing
with Section 14150) of Chapter 2 of Division 5 of an application for
a certificate to act as a credit union, or the issuance of a
certificate to engage in the business of a credit union.
(4) The filing, approval, or denial under Division 1.2 (commencing
with Section 2000), Division 7 (commencing with Section 18000), or
Division 15 (commencing with Section 31000) of an application for a
license to engage in business, or the issuance under any of those
laws of a license to engage in business.
(5) The filing, approval, or denial under Chapter 20 (commencing
with Section 1750) of Division 1.1 of an application by a foreign
(other nation) bank to establish its first office of any particular
class (as determined under Section 1753) in this state, or the
issuance under that chapter of a license in connection with the
establishment of such an office.
(6) The filing, approval, or denial under Division 1.6 (commencing
with Section 4800) of an application for approval of a sale, merger,
or conversion.
(7) The filing, approval, or denial under Article 6 (commencing
with Section 5700) of Chapter 2 of Division 2 of an application for
approval of a conversion of a federal savings association into a
state savings association, or the filing of a federal charter of a
state savings association that has converted to a federal savings
association.
(8) The filing, approval, or denial under Article 7 (commencing
with Section 5750) of Chapter 2 of Division 2 of an application for
approval of a reorganization, merger, consolidation, or transfer of
assets of a state savings association.
(9) The filing, approval, or denial under Chapter 9 (commencing
with Section 15200) of Division 5 of an application for approval of a
merger, dissolution, or conversion of a credit union.
(10) The taking of possession of the property and business of a
California state bank, savings association, credit union, or person
licensed by the commissioner under any of the laws cited in paragraph
(2).
(b) Other information as the commissioner deems appropriate.
377. Notwithstanding any other provision of this code, whenever
any provision of this division requires the pledge of securities to
be deposited with the Treasurer, to insure the performance of any act
or duty, the securities after first being approved by the
commissioner and upon the written order of the commissioner, shall be
deposited with the Treasurer. The Treasurer, with the consent of the
owner of the securities deposited or to be deposited with the
Treasurer, may place the securities in the custody of a qualified
trust company or bank in the same manner and under the same
conditions provided in Article 3 (commencing with Section 16550) of
Chapter 4 of Part 2 of Division 4 of Title 2 of the Government Code.
378. Whenever the commissioner is notified of or discovers a
violation of the state law punishable by criminal penalties, he or
she shall promptly advise the Attorney General.
379. (a) For the purposes of this section the following
definitions shall apply:
(1) "Control" has the meaning set forth in subdivision (b) of
Section 1250. "Control" also means the ownership of a subject person
by means of sole proprietorship, partnership, or by any other similar
means.
(2) "Controlling person" means a person who, directly or
indirectly, controls a subject person.
(3) "Subject person" means any of the following:
(A) A commercial bank, industrial bank, trust company, savings
association, or credit union incorporated under the laws of this
state.
(B) A person licensed by the commissioner under Chapter 1
(commencing with Section 2000) of Division 1.2 to receive money for
transmission to foreign countries.
(C) A person authorized by the commissioner pursuant to Section
2004 to act as an agent of a person licensed by the commissioner to
receive money for transmission to foreign countries.
(D) A person licensed by the commissioner pursuant to Division 7
(commencing with Section 18000) to transact business as a premium
finance agency.
(E) A person licensed by the commissioner pursuant to Division 15
(commencing with Section 31000) to transact business as a business
and industrial development corporation.
(F) A person licensed by the commissioner pursuant to Division 16
(commencing with Section 33000) to engage in the business of selling
payment instruments in this state issued by the licensee.
(G) A corporation incorporated under the laws of this state for
the purpose of engaging in, or that is authorized by the commissioner
to engage in, business pursuant to Article 1 (commencing with
Section 1850) of Chapter 21 of Division 1.1.
(H) A foreign corporation that is licensed by the commissioner
pursuant to Article 1 (commencing with Section 1850) of Chapter 21 of
Division 1.1 to maintain an office in this state and to transact at
that office business pursuant to Article 1 (commencing with Section
1850) of Chapter 21 of Division 1.1.
(b) Notwithstanding any other provision of law, and subject to
subdivision (c), the commissioner may deliver, or cause to be
delivered, to local, state, or federal law enforcement agencies
fingerprints taken of any of the following:
(1) An applicant for employment with the department.
(2) A person licensed, or proposed to be licensed, as a subject
person.
(3) A director, officer, or employee of an existing or proposed
subject person.
(4) An existing or proposed controlling person of a subject
person.
(5) A director, officer, or employee of an existing or proposed
controlling person of a subject person.
(6) A director, officer, or employee of an existing or proposed
affiliate of a subject person.
(c) The authorization in subdivision (b) may only be used by the
department for the purpose of obtaining information regarding an
individual as to the existence and nature of the criminal record, if
any, of that individual relating to convictions, and to any arrest
for which the individual is released on bail or on his or her own
recognizance pending trial, for the commission or attempted
commission of a crime involving robbery, burglary, theft,
embezzlement, fraud, forgery, bookmaking, receiving stolen property,
counterfeiting, or involving checks or credit cards or using
computers.
(d) No request shall be submitted pursuant to this section without
the written consent of the person affected.
(e) Any criminal history information obtained pursuant to this
section shall be confidential and no recipient shall disclose its
contents other than for the purpose for which it was acquired.
380. (a) The commissioner shall inform the Commissioner of
Corporations and other appropriate state and federal officials
charged with the regulation of financial institutions or securities
transactions of any enforcement actions, including, but not limited
to, civil or criminal actions, cease and desist orders, license or
authorization suspensions or revocations, or an open investigation.
(b) The commissioner shall inform the Commissioner of Corporations
and other appropriate state and federal officials charged with the
regulation of financial institutions or securities transactions if it
appears that any bank, bank holding company, savings association,
savings and loan holding company, credit union, industrial loan
company, industrial loan holding company, or other licensee of the
department is conducting its business in a fraudulent, unsafe,
unsound, or injurious manner, or has suffered or will suffer
substantial financial loss or damage, and it appears to the
commissioner that the information is relevant to the regulatory
activities of the other agency.
381. Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to
hearings conducted by the department.
Article 5. Financial Institutions Fund
400. As of the operative date of this section, there is
established a Financial Institutions Fund in the State Treasury.
Except as otherwise provided in Division 5 (commencing with Section
14000), all money collected or received by the commissioner under
this code shall be deposited with the Treasurer to the credit of the
Financial Institutions Fund.
Article 6. State Banking Account
405. (a) The commissioner shall annually collect pro rata from
the banks and trust companies under the supervision of the department
a fund in amount sufficient in the commissioner's judgment to meet
the expenses of the department in administering laws relating to
banks or trust companies or to the banking or trust business that are
not otherwise provided for and to provide a reasonable reserve for
contingencies.
(b) The amount of the annual assessment for the fund on any bank
or trust company shall not be less than five thousand dollars
($5,000). Above that minimum amount, except as otherwise provided
subdivision (c), the annual assessment shall not exceed the sum of
the products of a base assessment rate, or percentage thereof, and
segregated portions of its total resources, according to the
following table:
Segregated Total Resources Percentage of Base
(In Millions or Fractions
Thereof) Assessment Rate
First $2 100.0
Next $18 50.0
Next $80 12.0
Next $100 6.25
Next $800 6.0
Next $1,000 4.0
Next $4,000 3.5
Next $14,000 3.0
Next $20,000 2.5
Excess over $40,000 1.5
(c) (1) For purposes of determining the annual assessment on banks
and trust companies that have one or more foreign (other state)
branch offices, the resources of foreign (other state) branch offices
shall be excluded from total resources, except that the commissioner
may order the resources of foreign (other state) branch offices to
be included in total resources if and to the extent that it is
necessary in the commissioner's judgment to meet the expenses of the
department on account of foreign (other state) branch offices and a
reasonable reserve for contingencies.
(2) If the commissioner finds that a bank or trust company
allocated any resource to a foreign (other state) branch office for
the purpose, in whole or in part, of reducing its annual assessment,
the commissioner may, for purposes of calculating the annual
assessment on the bank or trust company, reallocate the resource to
the bank's or trust company's head office.
(d) The base assessment rate shall be set by the commissioner from
time to time at the commissioner's discretion, not to exceed two
dollars and twenty cents ($2.20) per one thousand dollars ($1,000) of
total resources.
406. The commissioner shall annually collect from national
banking associations and foreign (other state) banks operating trust
departments in this state an annual assessment to meet expenses of
the department, not exceeding one one-hundredth of 1 percent of the
amount required by law to be deposited with the Treasurer as surety
for the faithful performance and execution of all court and private
trusts accepted by them.
407. Whenever the commissioner makes an assessment pursuant to
Section 405 or 406, the commissioner shall fix the date when the
assessment is due and payable and shall mail or otherwise deliver to
each bank and trust company assessed an invoice showing the amount of
its assessment and the date when the assessment is due and payable.
408. The commissioner, in addition to the annual assessment,
shall collect from each bank authorized to engage in the trust
business, to defray the cost of examination, a fee not to exceed
seventy-five dollars ($75) per hour for each examiner necessarily
engaged in the examination of the trust company, trust business, or
trust department. The commissioner shall assess the fee upon
completion of the examination of the trust company or trust business
and shall mail or otherwise deliver an invoice for the fee to the
institution. The institution shall pay the fee within 30 days after
the invoice is mailed or otherwise delivered to it.
409. If any bank or trust company fails to make timely payment of
any assessment made pursuant to Section 405, 406, or 408, the
commissioner may, in the commissioner's sole discretion, (a) cancel
the certificate of authority of the bank or trust company to conduct
a banking or trust business or (b) levy a civil penalty pursuant to
Section 329.
410. As of the operative date of this section:
(a) The State Banking Fund is converted into a separate account in
the Financial Institutions Fund and designated as the State Banking
Account.
(b) All moneys and other assets and all liabilities of the State
Banking Fund shall be transferred to the State Banking Account.
411. Except as otherwise provided in Section 413 or 414, all
salaries and other expenses of the department, other than those
incurred in administering laws relating to savings associations or
the savings association business, credit unions or the credit union
business, industrial banks, the industrial banking business,
insurance premium finance agencies, the insurance premium finance
business, or Article 2 (commencing with Section 53630) of Chapter 4
of Part 1 of Division 2 of Title 5 of the Government Code, shall be
paid out of the State Banking Account in the Financial Institutions
Fund. Salaries and other expenses incurred in the liquidation or
conservation of any bank (other than an industrial bank) or of any
person licensed under Division 1.2 (commencing with Section 2000) or
Division 15 (commencing with Section 31000), including the
compensation of employees of the department to the extent that they
are engaged in that liquidation or conservation, if possible, and if
advanced from the State Banking Account in the Financial Institutions
Fund, shall constitute a first charge against the assets of the bank
or licensee, as the case may be. Salaries and other expenses
incurred in the liquidation or conservation of any industrial bank,
including the compensation of employees of the department to the
extent that they are engaged in that liquidation or conservation, if
possible, and if advanced from the Industrial Bank Account in the
Financial Institutions Fund, shall constitute a first charge against
the assets of the industrial bank.
412. The commissioner shall deliver all moneys received or
collected by the commissioner under Section 405, 406, or 408 or
otherwise, other than moneys received or collected by the
commissioner under laws relating to savings associations, the savings
association business, credit unions, the credit union business,
industrial banks, the industrial banking business, insurance premium
finance agencies, the insurance premium finance business, or Article
2 (commencing with Section 53630) of Chapter 4 of Part 1 of Division
2 of Title 5 of the Government Code, to the Treasurer, who shall
deposit the moneys to the credit of the State Banking Account of the
Financial Institutions Fund.
413. (a) In this section, "assessment statute" means any statute
that authorizes the commissioner to make or collect an assessment
(other than a fine) on financial institutions, including the
following:
(1) Sections 405 to 407, inclusive.
(2) Section 2042.
(3) Section 33302.
(4) Article 2 (commencing with Section 8030) of Chapter 7 of
Division 2.
(5) Article 4 (commencing with Section 14350) of Chapter 3 of
Division 5.
(6) Section 1532.
(b) The commissioner may charge to and collect from the Financial
Institutions Fund, the Credit Union Fund, each of the accounts
included in the Financial Institutions Fund, and each of the programs
included in the State Banking Account an amount equal to the fund's,
account's, or program's pro rata share of those expenses of the
department which, in the opinion of the commissioner, it is not
feasible to attribute to any single one of the funds, accounts, or
programs. The fund's, account's, or program's pro rata share shall be
determined and paid in the manner and at the time ordered by the
commissioner.
(c) The provisions of any assessment statute that authorize the
commissioner to make or collect an assessment for the purposes
specified in the assessment statute include authority for the
commissioner to make and collect an assessment for the additional
purpose of providing money in an amount that will, in the
commissioner's judgment, be sufficient to make payments that may be
required under subdivision (b).
414. Notwithstanding any other provision of this code or of
Section 53667 of the Government Code, the commissioner may, at any
time during a fiscal year, pay any expense of the department from any
of the following accounts and funds: the State Banking Account, the
Savings and Loan Account, the Industrial Bank Account, the Financial
Institutions Fund, the Credit Union Fund, and the Local Agency
Deposit Security Fund. However, if the commissioner pays an expense
of the department from an account or fund from which the expense is
not, except for this section, permitted to be paid, the commissioner
shall, as of a date within that fiscal year, reimburse the account or
fund from which the expense was paid by making a transfer from the
account or fund from which the expense would have been permitted to
be paid.
CHAPTER 4. OPERATIONS
450. (a) In this section, "governmental agency" includes, without
limitation, any agency of this state, of any other state of the
United States, of the United States, or of any foreign nation.
(b) The commissioner may furnish information to a governmental
agency that regulates financial institutions.
(c) The commissioner may furnish to a governmental agency that
administers a loan guarantee or similar program, information relating
to a person who participates in the program.
(d) The commissioner may furnish to a governmental agency that
regulates business activities, other than the type described in
subdivision (b), information relating to any of the following:
(1) A suspected violation of a law administered by the agency.
(2) A person involved in an application to the agency for a
license, approval, or other authorization.
(e) The commissioner may furnish to a governmental agency that is
a law enforcement agency information relating to a suspected crime.
(f) The commissioner may furnish information to any person who
provides share insurance or guaranty of the shares of a credit union
in accordance with Section 14858, 16004, or 16503.
(g) The commissioner may furnish confidential information
regarding a licensee to the directors, officers, employees,
attorneys, accountants, and consultants of that licensee in
accordance with Section 452.
(h) This section does not prescribe the only circumstances under
which the commissioner may furnish information.
451. With the prior approval of the commissioner, a foreign
(other state) or foreign (other nation) financial institutions
regulatory agency may examine a licensee and any of its offices,
provided that the agency has a regulatory interest in the licensee.
Any regulatory agency approved by the commissioner under this section
shall be considered a supervisory agency under subdivision (f) of
Section 7480 of the Government Code.
452. (a) Directors, officers, employees, attorneys, accountants,
or consultants of a licensee may not disclose in any manner to any
person confidential information regarding the licensee received from
the commissioner. The prohibition in this section shall not apply to
disclosures of confidential information by directors, officers,
employees, attorneys, accountants, or consultants of the licensee:
(1) Made pursuant to a subpoena or other discovery proceeding.
(2) Made to any state or federal prosecuting or investigatory
agency or authority.
(3) Made to any state, federal, or foreign (other nation)
financial institutions regulatory agency that has a direct regulatory
interest in the licensee.
(4) Made to any state or federal taxing agency.
(5) Made as otherwise required by law.
(6) Made as otherwise authorized by the commissioner in writing.
(b) Any director, officer, employee, attorney, accountant, or
consultant that discloses confidential information in a manner other
than allowed by this section shall be liable for a civil penalty not
to exceed fifty thousand dollars ($50,000). The commissioner may
impose a penalty under this section in accordance with the procedures
set forth in Section 329.
(c) The prohibition set forth in subdivision (a) shall not apply
to any discussion, analysis, or other use of confidential information
provided by the commissioner that occurs between directors,
officers, employees, attorneys, accountants, or consultants of the
licensee.
453. Every licensee shall make and file with the commissioner
whenever required by him or her a report in any form as the
commissioner may prescribe and verified in any manner the
commissioner prescribes, showing its financial condition and any
other information as the commissioner may require at the close of
business on any day designated by him or her. Any verification shall
state that each of the officers making the verification has a
personal knowledge of the matters in the report and that each of them
believes that each statement in the report is true.
454. The commissioner shall call for the report specified in
Section 453 from all licensees at least four times each year upon
dates selected by the commissioner.
455. The commissioner may at any time require any licensee to
make and file with him or her a special report furnishing any
information as the commissioner may specify when necessary to inform
him or her fully of the
actual financial condition and all other affairs of the licensee. The
reports shall be in the form and filed on a date prescribed by the
commissioner and shall, if required by the commissioner, be verified
in any manner that he or she prescribes.
456. Every licensee shall keep its corporate records, financial
records, and books of account in words and figures of the English
language and in form satisfactory to the commissioner.
457. Every licensee shall notify the commissioner of any change
in the following officers of the licensee, to the extent that those
officers exist within the licensee: chairperson, chief executive
officer, president, general manager, managing officer, chief
financial officer, or chief credit officer.
458. (a) Each report required under this article, or under any
other provision of law administered by the commissioner, shall be
filed with the commissioner at the time that the commissioner may
require. If any licensee fails to make any required report at the
time specified by the commissioner or fails to include therein any
matter required by this article, any provision of law administered by
the commissioner, or by the commissioner, it shall be liable to the
people of this state in the sum of not more than one hundred dollars
($100) for each day that the report is delayed or withheld by the
failure or neglect of the licensee.
(b) The provisions of Section 329 shall not apply to this section.
459. (a) Every licensee shall file with the commissioner one copy
of all material filed by the licensee with any applicable federal
financial institutions regulatory agency, law enforcement agency, or
other federal agency that is required to be filed by law or order of
the agency.
(b) Each copy required to be filed pursuant to subdivision (a)
shall be filed with the commissioner on or before the date upon which
the original is filed with the federal regulatory agency and shall
be available for inspection by the public except to the extent the
information contained therein is accorded confidential treatment
under federal law or regulations. That material shall be open for
inspection by the Attorney General.
460. Any person intentionally making a false statement in any
report required to be rendered under this article or other provision
of law administered by the commissioner is guilty of perjury.
461. Any debt due a licensee on which interest is past due and
unpaid for the period of one year shall be charged off, unless the
debt is well secured or is in process of collection.
462. Any person that provides services to any licensee, at the
request of the commissioner, shall submit to an examination by the
commissioner. Should the commissioner deem it necessary or desirable
that an examination be made of a person, the examination shall be
made at the expense of the person examined. If the person refuses to
permit an examination to be made, the commissioner may order every
licensee receiving services from that person to discontinue receiving
those services or otherwise conducting business with that person,
and the licensees shall comply with that order.
463. (a) All references in this code and the Corporations Code to
financial statements, balance sheets, income statements, and
statements of changes in financial position of a licensee, and all
references to assets, liabilities, earnings, retained earnings,
shareholders' equity, net worth, and similar accounting items of a
licensee, mean those financial statements or those items prepared or
determined in conformity with generally accepted accounting
principles then applicable in the United States, fairly presenting in
conformity with generally accepted accounting principles accepted in
the United States the matters which they purport to present, subject
to any specific accounting treatment required by any applicable
provision of the Corporations Code, this code, or any regulation,
order issued by the commissioner, or agreement entered into by the
commissioner and a licensee.
(b) The commissioner may, by regulation or order, require that any
financial statement or accounting item of a licensee be prepared or
determined in a manner other than in conformity with generally
accepted accounting principles accepted in the United States if the
commissioner finds that such other manner is necessary or appropriate
to carry out the purposes or provisions of this code.
464. (a) An officer of a financial institution, within the
meaning of Section 1101(1) of the federal Right to Financial Privacy
Act of 1978 (12 U.S.C. Sec. 3401(1)), shall furnish the State
Department of Health Care Services or its designee with information
in the possession of the bank or company regarding the assets of any
person who is applying for, or is receiving assistance or benefits
from, the State Department of Health Care Services and has provided
authorization pursuant to Section 14013.5 of the Welfare and
Institutions Code.
(b) The obtaining of financial records by the State Department of
Health Care Services, or its designee, pursuant to this section shall
be subject to the cost reimbursement requirements of Section 1115(a)
of the federal Right to Financial Privacy Act of 1978 (12 U.S.C.
Sec. 3415(a)) and shall be at no cost to the applicant, recipient, or
any other person, as defined in paragraph (3) of subdivision (c) of
Section 14013.5 of the Welfare and Institutions Code.
(c) An authorization obtained by the State Department of Health
Care Services, or its designee, under Section 14013.5 of the Welfare
and Institutions Code shall be considered as meeting the requirements
of Section 1103(a) of the federal Right to Financial Privacy Act of
1978 (12 U.S.C. Sec. 3403(a)) and, notwithstanding Section 1104(a) of
the federal Right to Financial Privacy Act of 1978 (12 U.S.C. Sec.
3404(a)), need not be furnished to the financial institution.
(d) The certification requirements of Section 1103(b) of the
federal Right to Financial Privacy Act of 1978 (12 U.S.C. Sec. 3403
(b)) shall not apply to requests by the State Department of Health
Care Services, or its designee, pursuant to an authorization provided
under Section 14013.5 of the Welfare and Institutions Code.
(e) A request by the State Department of Health Care Services, or
its designee, pursuant to an authorization provided under Section
14013.5 of the Welfare and Institutions Code shall be deemed to meet
the requirements of Section 1104(a)(3) of the federal Right to
Financial Privacy Act of 1978 (12 U.S.C. Sec. 3404(a)(3)) and of
Section 1102 of the act (12 U.S.C. Sec. 3402), relating to a
reasonable description of financial records.
CHAPTER 5. EXAMINATIONS AND REPORTS-BANKING
Article 1. Examination
500. (a) (1) For purposes of this section, "foreign bank" means
the business in this state of every foreign (other nation) bank
licensed under Article 3 (commencing with Section 1800) of Chapter 20
of Division 1.1.
(2) For purposes of this subdivision, an examination made by the
commissioner in conjunction with or with assistance from a bank
regulatory agency of the United States, of a state of the United
States, or of a foreign nation is deemed to be an examination caused
by the commissioner.
(3) No provision of this subdivision shall be deemed to require
that the commissioner cause an examination to be made onsite at the
offices of a bank.
(4) The commissioner shall cause every California state bank and
every foreign bank to be examined to the extent and whenever and as
often as the commissioner shall deem it advisable, but in no case
less frequently than once every 12 months, except that the following
banks shall be examined pursuant to federal law no less frequently
than state banks and foreign banks that meet the respective federal
criteria:
(A) California state banks that meet the criteria set forth in
Section 1820(d)(4) of Title 12 of the United States Code.
(B) Foreign banks that meet the criteria set forth in Section
211.26(c)(2) of Title 12 of the Code of Federal Regulations.
(5) The examinations required by paragraph (4) may be conducted in
alternate examination periods, as appropriate, if the commissioner
determines that an examination of the state bank by the appropriate
federal regulator, insuring or guaranteeing corporation during the
intervening examination period carries out the purpose of this
section. The commissioner may not accept two consecutive
examinations, or two consecutive examination reports, made by federal
regulators, insuring or guaranteeing corporations, or agencies with
respect to the condition of the state bank.
(6) The commissioner shall cause every California state trust
company to be examined to the extent and whenever and as often as the
commissioner shall deem it advisable, but in no case less frequently
than once every 24 months.
(7) The commissioner may examine subsidiaries of every California
state bank, state trust company, and foreign (other nation) bank
licensed under Article 3 (commencing with Section 1800) of Chapter 20
of Division 1.1 to the extent and whenever and as often as the
commissioner shall deem it advisable.
(b) The commissioner may at any time examine any of the following:
(1) Any office of a bank organized under the laws of this state.
(2) Any office of a foreign (other state) bank that maintains an
office in this state.
(3) Any office of a foreign (other nation) bank that maintains an
office in this state.
(c) The officers and employees of every California state bank,
California state trust company, and foreign bank being examined shall
exhibit to the examiners, on request, any or all of its securities,
books, records, and accounts and shall otherwise facilitate the
examination so far as it may be in their power.
501. (a) Whenever, in the judgment of the commissioner, it is
necessary or advisable to make an extra examination of or to devote
any extraordinary attention to any bank, any foreign bank, or any
office of a foreign bank, he or she has the authority to do so and to
charge and collect from the bank or foreign bank, in the case of an
extra examination, an amount not exceeding seventy-five dollars ($75)
per hour for each examiner engaged in the examination and, in the
case of extraordinary attention, an amount not exceeding the
department's expenses in providing the extraordinary attention,
including, but not limited to, compensation of employees.
(b) Whenever in the judgment of the commissioner it is necessary
or expedient for any examiner engaged in any examination to travel
outside this state, the commissioner may charge for the travel
expenses of the examiner.
502. (a) The commissioner may by order or regulation grant
exemptions from this section in cases where the commissioner finds
that the requirements of this section are not necessary.
(b) Each California state bank shall, within 90 days after the end
of each fiscal year, or within such extended time as the
commissioner may prescribe, file with the commissioner an audit
report for the fiscal year.
(c) The audit report called for in subdivision (b) shall comply
with all of the following provisions:
(1) The audit report shall contain those audited financial
statements of the bank for or as of the end of the fiscal year
prepared in accordance with generally accepted accounting principles
and any other information that the commissioner may require.
(2) The audit report shall be based upon an audit of the bank
conducted in accordance with generally accepted auditing standards
and any other requirements that the commissioner may prescribe.
(3) The audit report shall be prepared by an independent certified
public accountant or independent public accountant who is not
unsatisfactory to the commissioner.
(4) The audit report shall include or be accompanied by a
certificate or opinion of the independent certified public accountant
or independent public accountant that is satisfactory in form and
content to the commissioner. If the certificate or opinion is
qualified, the commissioner may order the bank to take such action as
the commissioner may find necessary to enable the independent
certified public accountant or independent public accountant to
remove the qualification.
503. The commissioner, whenever in his or her opinion the
condition of the bank, trust company, or foreign banking corporation
is such as to require such audit, may require any bank, trust
company, or foreign banking corporation to employ a certified public
accountant to make a special audit of the affairs of such bank or
trust company at its expense.
504. The commissioner, for good cause, at any time and from time
to time may employ appraisers to appraise the value of any
investment, asset, or property held or upon which a lien is held as
security for a loan. The bank, trust company, or foreign banking
corporation shall pay to the commissioner on demand the cost of such
appraisal.
505. The commissioner, a deputy commissioner, and every examiner
assigned to an examination may administer an oath to any person whose
testimony is required for the purposes of any examination authorized
by this division and may by issuance of subpoena compel the
appearance of any person and the production of any evidence for the
purposes of the examination.
506. Whenever he or she deems it expedient, the commissioner may
call a meeting of the stockholders of any bank or trust company.
Notice of the time and place of the meeting shall be given to each
stockholder by a notice mailed to the stockholder by registered mail
at the stockholder's last known address at least 15 days before the
date of the meeting. Any expenses of such meeting shall be borne by
the bank or trust company.
507. During any emergency period declared by the President of the
United States, each bank shall conform to any order of the
commissioner directed to it, relating to and conforming with
regulations, limitations, or restrictions which are applicable
thereto prescribed by the Secretary of the Treasury, the Comptroller
of the Currency, or the Board of Governors of the Federal Reserve
System regulating or governing the operations of banks which are
members of the Federal Reserve System.
508. During any emergency period declared by the Governor no bank
shall transact any banking business except to such extent and
subject to such regulations, limitations, or restrictions as may be
prescribed by the commissioner, which, as to member banks, shall be
as consistent as the exigencies of the situation permit with the
provisions of the Federal Reserve Act and regulations issued
thereunder or, as to insured banks, shall be as consistent as the
exigencies of the situation permit with the rules and regulations
governing banks whose deposits are insured by the Federal Deposit
Insurance Corporation.
509. (a) The commissioner may, in his or her discretion, bring an
action in the name of the people of this state in a superior court
to enjoin a violation of, to enforce compliance with, or to collect a
penalty or other liability imposed under, this division or any
regulation or order issued under this division. The amount of any
penalty or liability collected shall be deposited into the State
Banking Account in the Financial Institutions Fund. Upon a proper
showing, a permanent or preliminary injunction, restraining order, or
writ of mandate shall be granted, and a monitor, receiver,
conservator, or other designated fiduciary or officer of the court
may be appointed for the defendant or the defendant's assets, or
other appropriate relief may be granted.
(b) A receiver, monitor, conservator, or other designated
fiduciary officer of the court appointed by the superior court
pursuant to this section may, with the approval of the court,
exercise all of the powers of the defendant's officers, directors,
partners, trustees, or of persons who exercise similar powers and
perform similar duties, including the filing of a petition for
bankruptcy. No action at law or in equity may be maintained by any
party against the commissioner, or a receiver, monitor, conservator,
or any other designated fiduciary officer of the court by reason of
their exercising these powers or performing these duties pursuant to
the order of, or with the approval of, the superior court.
(c) If the commissioner determines it is in the public interest,
the commissioner may include in an 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
person injured by the act or practice that is the subject matter of
the action. The court has jurisdiction to award additional relief.
(d) The provision of subdivision (a) that authorizes the
appointment of a monitor, receiver, conservator, or other designated
fiduciary or officer of the court, and subdivisions (b) and (c) do
not apply to any of the following:
(1) A state bank that is authorized by the commissioner to
transact commercial banking or trust business.
(2) A national bank.
(3) A foreign (other state) bank that maintains a branch office in
this state in accordance with federal law, the law of this state,
and the law of the bank's domicile.
(4) A foreign (other nation) bank that is licensed by the
commissioner to maintain a branch office or agency, as defined in
Section 1750, in this state.
(5) A foreign (other nation) bank that maintains a federal branch
or agency, as defined in Section 1750, in this state.
(e) The provisions of this section that authorize the commissioner
to bring actions and seek relief are not intended to, and do not,
affect any right that any other person may have to bring the same or
similar actions, or to seek the same or similar relief.
Article 2. Reports
520. (a) A California state bank shall prominently display in the
lobby of its main office and each branch office, except an automated
teller machine branch office, a notice that any person may obtain a
financial report from the bank. The notice shall include the address
and telephone number of the person or office to be contacted for a
financial report. The bank shall, promptly after receiving a request
for a financial report, mail or otherwise furnish the financial
report to the requester. The first financial report shall be provided
without charge.
(b) The financial report called for in this section shall contain
either (1) the information that the commissioner may require by
regulation or (2) in the absence of a regulation, the last balance
sheet and income statement, each without any schedules, that the bank
filed with the commissioner pursuant to Section 453.
CHAPTER 6. ENFORCEMENT
Article 1. General Provisions
550. In this article:
(a) "Appropriate licensee business" means the business that a
licensee may conduct in accordance with the charter or license that
the commissioner has issued to that licensee.
(b) "Customer" means a depositor of a bank, a member of a credit
union, or a customer of any other licensee.
(c) "Holding company" shall have the meaning set forth in Section
1280.
(d) "Officer of a subject institution" means any director,
officer, official, or employee of the subject institution.
(e) "Person" means a subject institution or a subject person.
(f) "Subject institution" means any of the following:
(1) Licensee.
(2) Subsidiary of a licensee.
(3) Foreign (other state) or foreign (other nation) bank or credit
union that maintains an office in this state, with respect to any
such office other than a national bank or federal credit union.
(4) Any other person lawfully conducting the business of a bank or
credit union in this state other than a national bank or federal
credit union.
(g) "Subject person," when used with respect to a subject
institution, means any of the following:
(1) Director, officer, employee, or agent of the subject
institution.
(2) Member, consultant, joint venture partner, or other person
that participates in the affairs of a subject institution.
(3) Independent contractor, including any attorney, appraiser, or
accountant, who knowingly or recklessly participates in any of the
following acts if the act caused or is likely to cause more than a
minimal financial loss to, or a significant adverse effect on, the
subject institution:
(A) A violation of any applicable law, regulation, or order.
(B) A breach of fiduciary duty.
(C) An unsafe or unsound act.
(h) "Violation" includes any act performed, alone or with other
persons, for or toward causing, bringing about, participating in,
counseling, aiding, or abetting a violation of any applicable
statute, regulation, provision of a written order issued by the
commissioner, or provision of a written agreement made between the
commissioner and a subject institution or subject person.
551. Any subject person who is entitled to a hearing pursuant to
this article may waive that right at any time. A waiver under this
section shall relieve the commissioner from having to issue a formal
notice of hearing that would otherwise be required by this article.
552. (a) Within 30 days after an order is issued pursuant to
Section 567, 581, 582, 586, or 591, or subdivision (c) of Section
587, the person to whom the order is issued may file with the
commissioner an application for a hearing on the order.
(b) If the commissioner fails to commence the hearing within 15
business days after the application is filed with the commissioner or
within any longer period to which the person subject to the order
consents, the order shall be deemed rescinded.
(c) Within 30 days after the hearing, or within any longer period
to which the person consents, the commissioner shall affirm, modify,
or rescind the order. If the commissioner fails to affirm, modify, or
rescind the order within that time limit, the order shall be deemed
rescinded.
(d) The right to petition for judicial review of the order shall
not be affected by the failure of the person subject to the order to
apply to the commissioner for a hearing on the order pursuant to
subdivision (a).
553. In addition to any other action or requirement the
commissioner deems necessary or advisable, an order issued pursuant
to Section 580, 581, 582, 585, 586, or 587 may require the person
subject to the order to do any of the following:
(a) Make restitution or provide reimbursement, indemnification, or
guarantee against loss, if the subject institution, subject person,
or holding company was unjustly enriched by the action or violation
or if the action or violation involved a reckless disregard for any
provision of this division, of any regulation or order issued under
this division, of any other applicable law, or of any agreement with
the commissioner.
(b) Restrict the growth of the subject institution.
(c) Dispose of any loan or other asset.
(d) Correct violations of law.
(e) Employ qualified officers or employees, who may be subject to
approval of the commissioner.
(f) Limit the activities or functions of the subject institution,
subject person, or holding company.
554. If the commissioner takes possession of a subject
institution without a prior notice or hearing, or takes action
against a subject person without prior notice or hearing, the
commissioner shall, upon taking possession or taking that action,
concurrently provide to the subject institution or subject person a
written order. The order shall set forth the condition or conditions
of the subject institution or action or actions of the subject person
that constitute the basis or bases for the commissioner's action. In
any case where the commissioner takes possession of a subject
institution, the commissioner shall establish, by clear evidence, the
basis for his or her action.
Article 2. Actions Involving the Conduct of Business by
Unauthorized Persons
560. No person who has not received a certificate from the
commissioner authorizing it to engage in the banking business shall
solicit or receive deposits, issue certificates of deposit with or
without provision for interest, make payments on checks, or transact
business in the way or manner of a bank or trust company.
561. No person who has not received a certificate from the
commissioner authorizing it to engage in the banking business shall
advertise that it is accepting deposits, and issuing notes or
certificates therefore, or make use of any office sign, at the place
where its business is transacted, having thereon any artificial or
corporate name, or other words indicating that the place or office is
the place or office of a bank or trust company, that deposits are
received there or payments made on checks, or any other form of
banking business is transacted, nor shall any person make use of or
circulate any letterheads, billheads, blank notes, blank receipts,
certificates, or circulars, or any written or printed paper,
whatever, having thereon any artificial or corporate name or other
words indicating that the business is the business of a bank or trust
company, or transact business in a way or manner as to lead the
public to believe that its business is that of a bank or trust
company, except to the extent expressly authorized by this division.
562. No person who has not received a certificate from the
commissioner authorizing it to engage in the banking business shall
transact business under any name or title that contains the word
"bank" or "banker" or "banking" or "industrial bank" or "industrial
loan company" or "investment and loan" or "savings bank" or "thrift
and loan" or "trust" or "trustee" or "trust company" or act or
advertise in any manner that indicates that the business is the
business of a bank or trust company. Any building and loan
association or savings association having in its corporate name words
not clearly indicating the nature of its business shall state, on
all signs, letterheads, and advertising matter, "This is a building
and loan association" or "This is a savings association" or words to
that effect.
563. No provision of Section 560, 561, or 562 prohibits any of
the following from transacting any business or performing any
activity if it is authorized by applicable law to transact the
business or perform the activity and is not prohibited by any
applicable law, other than Sections 560, 561, or 562, from
transacting the business or performing the activity:
(a) Any California state commercial bank, industrial bank, or
trust company.
(b) Any national bank.
(c) Any insured foreign (other state) state bank.
(d) Any foreign (other state) state bank that is licensed by the
commissioner under Article 4 (commencing with Section 3860) of
Chapter 22 to maintain a facility, as defined in Section 3800, in
this state.
(e) Any foreign (other nation) bank that is licensed by the
commissioner under Chapter 20 (commencing with Section 1750) of
Division 1.1 to maintain an office in this state.
(f) Any foreign (other nation) bank that maintains a federal
agency, as defined in subdivision (g) of Section 1750, or federal
branch, as defined in subdivision (h) of Section 1750, in this state.
(g) Any California state corporation that is incorporated for the
purpose of engaging in, and that is authorized by the commissioner to
engage in, business under Article 1 (commencing with Section 1850)
of Chapter 21 of Division 1.1.
(h) Any corporation incorporated under Section 25A of the Federal
Reserve Act (12 U.S.C. Sec. 612 et seq.).
(i) Any foreign corporation that is licensed by the commissioner
under Article 1 (commencing with Section 1850) of Chapter 21 of
Division 1.1 to maintain an office in this state and to transact at
that office business under Article 1 (commencing with Section 1850)
of Chapter 21 of Division 1.1.
(j) Any industrial bank that is organized under the laws of
another state of the United States and is insured by the Federal
Deposit Insurance Corporation.
564. Any person or any bank violating any provision of the
foregoing sections of this article shall be liable to the people of
the state in the amount of one hundred dollars ($100) per day or part
thereof during which that violation continues.
565. No person shall represent by advertisement, circular, or
otherwise, or in any manner mislead anyone to believe, that any
securities are legal investments for savings banks in this state or
conform to the requirements of law relating to such investments,
unless those securities are in fact at that time legal investments
for such banks or do in fact so conform. Any person violating the
provisions of this section shall be guilty of a misdemeanor and shall
be punishable by a fine of not more than one thousand dollars
($1,000) or by imprisonment in a county jail not exceeding one year,
or by both such fine and imprisonment.
566. (a) The commissioner may bring an action in the name of the
people of this state in superior court to enjoin any violation of, to
enforce compliance with, or to collect any penalty or other
liability imposed under, any law subject to the jurisdiction of the
commissioner. The commissioner may bring an action in the name of the
people of this state in superior court to enjoin any violation of,
to enforce compliance with, or to collect any penalty or other
liability imposed under, any regulation promulgated under the power
of the commissioner. The commissioner may bring an action in the name
of the people of this state in superior court to enjoin any
violation of, to enforce compliance with, or to collect any penalty
or other liability imposed under, any (1) agreement entered into with
the commissioner or (2) order issued by the commissioner. Upon a
proper showing, a permanent or preliminary injunction, restraining
order, or writ of mandate shall be granted, and a monitor, receiver,
conservator, or other designated fiduciary or officer of the court
may be appointed for the defendant or the defendant's assets, or
other relief may be granted as appropriate.
(b) A receiver, monitor, conservator, or other designated
fiduciary officer of the court appointed by the court pursuant to
this section may, with the approval of the court, exercise all of the
powers of the defendant's officers, directors, partners, trustees,
or persons who exercise similar powers and perform similar duties. No
action at law or in equity may be maintained by any party against
the commissioner or a receiver, monitor, conservator, or other
designated fiduciary or officer of the court by reason of his or her
exercise of those powers or performing these duties pursuant to the
order of, or with the approval of, the court.
(c) If the commissioner finds that it is in the public interest,
the commissioner may include in any action authorized by subdivision
(a) a claim for ancillary relief, including a claim for restitution,
disgorgement, or damages on behalf of the person injured by the act
or practice constituting the subject matter of the action, and the
court shall have jurisdiction to award ancillary relief.
(d) Neither the provision of subdivision (a) that authorizes the
appointment of a monitor, receiver, conservator, or other designated
fiduciary or officer of the court nor any provision of subdivision
(b) or (c) applies to any of the following:
(1) A licensee that is authorized by the commissioner to transact
appropriate licensee business.
(2) A foreign (other state) or foreign (other nation) bank or
credit union that maintains an office in this state in accordance
with federal law, the law of this state, and the law of the bank or
credit union's domicile.
(e) The provisions of this section that authorize the commissioner
to bring actions and seek relief are not intended to, and do not,
affect any right that any other person may have to bring the same or
similar actions or to seek the same or similar relief.
567. If the commissioner finds that a person has conducted, or
that there is reasonable cause to believe that a person is about to
conduct, business that requires a license issued by the commissioner
and that person has not been issued the required license, the
commissioner may, without any prior notice or hearing, order the
person to cease and desist from conducting any unauthorized business
unless and until the person is issued a license to engage in
appropriate licensee business.
Article 3. Orders Against Licensees and Subject Persons
580. If, after notice and an opportunity to be heard, the
commissioner finds any of the factors set forth in subdivision (a) or
(b) with respect to any subject institution, subject person, or any
holding company, the commissioner may order the subject institution,
subject person, or holding company to cease and desist from the act
or violation:
(a) That the subject institution, subject person, or holding
company has engaged or participated, is engaging or participating, or
that there is reasonable cause to believe that the subject
institution, subject person, or holding company is about to engage or
participate, in any unsafe or unsound act with respect to the
business of the subject institution.
(b) That the subject institution, subject person, or holding
company has violated, is violating, or that there is reasonable cause
to believe that the subject institution, subject person, or holding
company is about to violate any:
(1) Provision of any division subject to the jurisdiction of the
commissioner.
(2) Provision of any regulation promulgated by, or subject to the
jurisdiction of, the commissioner.
(3) Provision of any other applicable law.
(4) Provision of any written agreement between the subject
institution, subject person, or holding company, and the
commissioner.
581. If the commissioner finds that any of the factors set forth
in Section 580 is true with respect to any subject institution,
subject person, or holding company, and that the action, omission, or
violation is likely to have any of the consequences set forth in
subdivisions (a) to (d), inclusive, the commissioner may, without any
prior notice or opportunity to be heard, order the subject
institution or subject person to cease and desist from the following:
(a) Any act, omission, or violation that may cause the insolvency
of the subject institution.
(b) Any act, omission, or violation that may cause significant
dissipation of the assets or earnings of the subject institution.
(c) Any act, omission, or violation that may weaken the condition
of the subject institution.
(d) Any act, omission, or violation that may otherwise prejudice
the interests of the customers of the subject institution.
582. If the commissioner finds that a subject institution's books
or records are so incomplete or inaccurate that the commissioner is
unable through the normal supervisory process to determine the
financial condition of the subject institution or the details or
purpose of any transaction or transactions that may materially affect
the financial condition of the subject institution, the commissioner
may, without any prior notice or hearing, order the subject
institution to do either of the following:
(a) Cease any activity or practice that gave rise, in whole or in
part, to the incomplete or inaccurate state of the books or records.
(b) Take affirmative action to restore the books or records to a
complete and accurate state.
Article 4. Suspension or Removal of Subject Persons
585. If, after notice and an opportunity to be heard, the
commissioner finds that any of the factors set forth in subdivision
(a), any of the factors set forth in subdivision (b), and any of the
factors set forth in subdivision (c) are true with respect to a
subject person of a subject institution or holding company, the
commissioner may issue an order suspending or removing the subject
person from the subject person's office, if any, with the subject
institution or holding company, and prohibiting the subject person
from participating in any manner in the conduct of the affairs of the
subject institution or holding company without the approval of the
commissioner:
(a) (1) That the subject person has, directly or indirectly,
violated, or has caused a subject institution to violate, any
provision of any:
(A) Division subject to the jurisdiction of the commissioner.
(B) Regulation promulgated by, or subject to the jurisdiction of,
the commissioner.
(C) Other applicable law.
(D) Order issued by the commissioner or under the commissioner's
authority.
(E) Written agreement between the subject institution, subject
person, or holding company and the commissioner.
(2) That the subject person has, directly or indirectly, engaged
or participated in any unsafe or unsound act in connection with the
business of the subject institution, holding company, or any other
business institution.
(3) That the subject person has, directly or indirectly, engaged
or participated in any act that constitutes a breach of the subject
person's fiduciary duty.
(b) That, by reason of the act, violation, or breach of fiduciary
duty described in subdivision (a):
(1) The subject institution, holding company, or business
institution has suffered or will probably suffer financial loss or
other harm.
(2) The rights or interests of the customers or members of the
subject institution have been or could be prejudiced.
(3) The subject person has received financial gain or other
benefit.
(c) That the act, violation, or breach of fiduciary duty described
in subdivision (a) either involves dishonesty on the part of the
subject person or demonstrates the subject person's willful or
continuing disregard for the safety or soundness of the subject
institution, holding company, or business institution.
586. If the commissioner finds that any of the factors set forth
in subdivision (a) of Section 585, any of the factors set forth in
subdivision (b) of Section 585, and any of the factors set forth in
subdivision (c) of Section 585 are true with respect to a subject
person of a subject institution, and that it is necessary or
advisable for the protection of the subject institution or holding
company, or the rights or interests of the customers or members of
the subject institution, the commissioner may, without any prior
notice or opportunity to be heard, issue an order suspending the
subject person from the subject person's office, if any, with the
subject institution or holding company, and prohibiting the subject
person from participating in any manner in the conduct of the affairs
of the subject institution or holding company without the prior
approval of the commissioner.
587. (a) If the commissioner finds that any of the factors set
forth in paragraph (1) and the factor set forth in paragraph (2) are
true with respect to a subject person or former subject person of a
subject institution or holding company, the commissioner may, without
any prior notice or opportunity to be heard, issue an order
suspending the subject person or former subject person from his or
her office, if any, with the subject institution or holding company
and prohibiting him or her from further participating in any manner
in the conduct of the affairs of the subject institution or holding
company without the approval of the commissioner:
(1) That the subject person or former subject person has been
charged in an indictment issued by a grand jury or in an information,
complaint, or similar pleading issued by a United States attorney,
district attorney, or other governmental official or agency
authorized to prosecute crimes, with commission of or participation
in any of the following:
(A) A crime that involves dishonesty or breach of trust and that
is punishable by imprisonment for a term exceeding one year.
(B) A criminal violation of any provision of this division.
(C) A criminal violation of Section 1956, 1957, or 1960 of Title
18 of, or Section 5322 or 5324 of Title 31 of, the United States
Code.
(D) A criminal violation of a law of any jurisdiction other than
the United States that is substantially similar to any of the
statutes specified in subparagraph (C).
(2) That continued or resumed service or participation by the
subject person or former subject person may pose a threat to the
rights or interests of the customers or members of the subject
institution or may threaten to impair public confidence in the
subject institution.
(b) An order issued pursuant to subdivision (a) shall remain in
effect until the indictment or the information, complaint, or similar
pleading is finally disposed of or, if the order is earlier
terminated by the commissioner, until the order is so terminated.
(c) If the commissioner finds that the factors set forth in
paragraphs (1) and (2) are true with respect to a subject person or
former subject person of a subject institution or holding company,
the commissioner may, without any prior notice or opportunity to be
heard, issue an order suspending or removing the subject person or
former subject person from his or her office, if any, with the
subject institution or holding company and prohibiting him or her
from further participating in any manner in the affairs of the
subject institution or holding company without the approval of the
commissioner:
(1) That the subject person or former subject person has been
finally convicted of any crime of the type described in paragraph (1)
of subdivision (a). For purposes of this paragraph, an agreement to
enter a pretrial diversion or similar program is deemed to be a
conviction.
(2) That continued or resumed service or participation by the
subject person or former subject person may pose a threat to the
interests of the customers of the subject institution or may threaten
to impair public confidence in the subject institution.
(d) The fact that any subject person of a subject institution
charged with a crime of the type described in paragraph (1) of
subdivision (a) is not finally convicted of the crime does not
preclude the commissioner from issuing an order regarding the subject
person pursuant to any other provision of this article.
588. (a) Any subject institution, subject person of a subject
institution, or former subject person of a subject institution to
whom an order is issued under Sections 585 to 587, inclusive, may
apply to the commissioner to modify or rescind the order. In deciding
whether to grant or deny the application, the commissioner shall
consider whether it is in the public interest to modify or rescind
the order and whether it is reasonable to believe that the subject
person or former subject person will, if and when he or she becomes a
subject person of a subject institution or holding company, comply
with all applicable provisions of law, or any regulation or order
issued by the commissioner.
(b) The right of any subject person or former subject person of a
subject institution or holding company to whom an order is issued
under Sections 585 to 587, inclusive, to petition for judicial review
of the order shall not be affected by the failure of the subject
institution or holding company to apply to the commissioner pursuant
to subdivision (a) to modify or rescind the order.
589. (a) In this section, "subject depository institution" means
any:
(1) Licensee or any bank or credit union that maintains an office
in this state.
(2) Affiliate of any of the institutions specified in paragraph
(1).
(3) Subsidiary of any of the institutions specified in paragraph
(1).
(4) Holding company of any of the institutions specified in
paragraph (1).
(b) It is unlawful for any subject person or former subject person
of a subject institution to whom an order is issued under Sections
585 to 587, inclusive, willfully to do, directly or indirectly, any
of the following without the approval of the commissioner, so long as
the order is in effect:
(1) Act as a subject person of any subject depository institution.
(2) Vote any shares or other securities having voting rights for
the election of any person as a director of a subject depository
institution.
(3) Solicit, procure, transfer or attempt to transfer, or vote any
proxy, consent, or authorization with respect to any shares or other
securities of a subject depository institution having voting rights.
(4) Otherwise to participate in any manner in the affairs of any
subject depository institution.
Article 5. Suspension or Possession of a License
590. The commissioner may revoke or suspend any license issued
by, or under the authority of, the commissioner, if, after notice and
opportunity to be heard, the commissioner finds any of the
following:
(a) The licensee has violated, is violating, or that there is
reasonable cause to believe that the licensee is about to violate,
any provision of any of the following:
(1) Any division subject to the jurisdiction of the commissioner.
(2) Any regulation promulgated by, or subject to the jurisdiction
of, the commissioner.
(3) A provision of any other applicable law.
(4) A provision of any order issued by the commissioner.
(5) A provision of any written agreement between the licensee and
the commissioner.
(6) A condition imposed on any written approval granted by the
commissioner.
(b) Any fact or condition exists which, if it had existed at the
time of the original application for the license, would be grounds
for denying the application for the license.
(c) The licensee is conducting its business in an unsafe manner.
(d) The licensee is in such condition that it is unsafe or unsound
for the licensee to transact appropriate licensee business.
(e) The licensee has inadequate capital or net worth or is
insolvent.
(f) The licensee failed to pay any of its obligations as they came
due or is reasonably expected to be unable to pay its obligations as
they come due.
(g) The licensee is the subject of an order for relief in
bankruptcy, or has sought other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or any person has
applied for any such relief under any such law against the licensee
and the licensee has by any affirmative act approved of, or consented
to, the action or the relief has been granted.
(h) The licensee has ceased to transact appropriate licensee
business.
(i) The licensee refuses to submit its books, papers, and affairs
to the inspection of any examiner.
(j) Any officer of the licensee refuses to be examined upon oath
touching the concerns of the licensee.
(k) The licensee has, with the approval of its board, requested
the commissioner to take possession of its property and business.
591. If the commissioner finds that any of the factors set forth
in Section 590 is true with respect to any licensee and that it is
necessary for the protection of the public interest, the commissioner
may issue an order immediately suspending or revoking the licensee's
license.
592. If the commissioner finds that any of the factors set forth
in subdivisions (a) to (k), inclusive, is true with respect to a
licensee, the commissioner may by order, without any prior notice or
opportunity to be heard, take possession of the property and business
of the licensee:
(a) The licensee has violated any provision of (1) any division
subject to the jurisdiction of the commissioner, (2) any regulation
promulgated by, or subject to the jurisdiction of, the commissioner,
(3) any provision of any other applicable law, (4) any provision of
any order issued by the commissioner, (5) any provision of any
written agreement made between the commissioner and the licensee, or
(6) a condition imposed on any written approval granted by the
commissioner.
(b) The licensee is conducting its business in an unsafe or
unsound manner.
(c) The licensee is in such condition that it is unsafe or unsound
for the licensee to transact appropriate licensee business.
(d) The licensee has inadequate capital or net worth or is
insolvent.
(e) If the licensee is a bank, the tangible shareholders' equity
of the bank is less than the following:
(1) If the bank is a commercial bank or industrial bank, the
greater of three percent of the bank's total assets or one million
dollars ($1,000,000).
(2) If the bank is a trust company other than a commercial bank
authorized to engage in trust business, one million dollars
($1,000,000).
(f) The licensee failed to pay any of its obligations as they came
due or is reasonably expected to be unable to pay its obligations as
they come due.
(g) The licensee has applied for an adjudication of bankruptcy,
reorganization, arrangement, or other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or that any person has
applied for any such relief under any such law against the licensee
and the licensee has by any affirmative act approved of or consented
to the action or the relief has been granted.
(h) The licensee has ceased to transact the business the licensee
is authorized to conduct pursuant to its license.
(i) The licensee refuses to submit its books, papers, and affairs
to the inspection of any examiner.
(j) Any officer of the licensee refuses to be examined upon oath
touching the concerns of the licensee.
(k) The licensee has, with the approval of its board, requested
the commissioner to take possession of its property and business.
593. (a) If the commissioner takes possession of the property and
business of a licensee pursuant to Section 592, the licensee may,
within 10 days, apply to the superior court in the county where its
head office is located to enjoin further proceedings. The court may,
after citing the commissioner to show cause why further proceedings
should not be enjoined and after a hearing, dismiss the application
or enjoin the commissioner from further proceedings and order the
commissioner to surrender the property and business of the licensee
to the licensee or make any further order as may be just. The
judgment of the court may be appealed by the commissioner or by the
licensee as allowed by law.
(b) At any time after the commissioner takes possession of the
property and business of a licensee pursuant to Section 592, the
licensee may, with the approval of the commissioner, resume business
upon conditions as the commissioner may prescribe.
594. (a) Upon taking possession of the property and business of
any licensee, the commissioner shall give notice of that fact to all
persons holding or having in their possession any assets of the
licensee. No person knowing of the taking, or who has been notified
thereof, shall have a lien or charge upon any assets of the licensee
for any payment, advance, or clearance thereafter made or for any
liability thereafter incurred.
(b) The giving of notice in accordance with this section shall not
be deemed to be a prerequisite to the taking of possession of the
property and business of the licensee.
595. The commissioner is deemed to take possession of the entire
property and business of a licensee when the commissioner takes
possession of the business and property of the head office of the
licensee.
CHAPTER 7. LIQUIDATION AND CONSERVATION
Article 1. General Provisions
600. In this article, "Federal Insurance Agency" means the
Federal Deposit Insurance Corporation or the National Credit Union
Administration, as appropriate, or their respective
successors-in-interest.
601. Upon taking possession of the property and business of any
licensee, the commissioner has authority, and it is his or her duty,
to collect all moneys due to the licensee and to do other acts as are
necessary or expedient to collect, conserve, or protect the licensee'
s assets, property, and business, and he or she shall proceed to
conserve or liquidate the affairs of the licensee as provided in this
article.
602. No attachment shall be issued against the property of any
licensee subject to conservation or liquidation pursuant to this
article.
603. Upon taking possession of the property and business of any
licensee pursuant to Section 592, the commissioner may proceed to
liquidate or conserve the licensee in the manner provided by this
article.
604. Upon taking possession of the property and business of a
licensee pursuant to Section 592, the commissioner may tender to any
person or persons an appointment as conservator, liquidator,
receiver, or liquidating committee of the licensee.
605. The commissioner shall supervise the acts of the
conservator, liquidator, receiver, or liquidating committee appointed
under this article and may remove the conservator, liquidator,
receiver, or any or all members of the liquidating committee in his
or her discretion.
606. If required by the commissioner, the conservator,
liquidator, receiver, or members of the liquidating committee
appointed under this article shall provide proof of bond coverage
that extends to the conservator, liquidator, receiver, or members of
the liquidating committee. The bond shall include fraud, dishonesty,
and faithful performance coverage. The premium for that bond shall be
paid out of the assets of the licensee.
607. (a) If the commissioner retains
possession of the assets of the licensee for the purpose of
liquidation or conservation, the commissioner shall, to the extent
possible, use the services of civil service employees of the
commissioner's office, and the attorneys employed by the commissioner
or the Department of Justice shall render all necessary legal
services, as the commissioner may request.
(b) The commissioner, from time to time, under his or her official
seal, may appoint one or more special deputy commissioners as his or
her agent or agents with the powers specified in the certificate of
appointment to assist him or her in the duties of conservation or of
liquidation and distribution. The certificate of appointment shall be
filed in the office of the commissioner and a certified copy in the
office of the clerk of the county in which the head office of the
licensee is located. The commissioner may employ counsel and procure
expert assistance and advice as may be necessary in the liquidation
and distribution of the assets of the licensee and for that purpose
may retain any of the officers or employees of the licensee as the
commissioner may deem necessary.
608. The compensation of civil service employees, special
deputies, counsel, and other employees and assistants appointed to
assist in the conservation or liquidation of any licensee and the
distribution of its assets and all expenses of supervision and
liquidation shall be fixed by the commissioner and shall be paid out
of the funds of the licensee in the hands of the commissioner. The
expenses of liquidation shall be reported to the court upon each
application for payment of a dividend.
609. If a licensee is not insured by a Federal Insurance Agency,
upon the commissioner taking possession of the business and property
of the licensee, the superior court of the State of California for
the county in which the head office of the licensee is located shall
have exclusive original jurisdiction of all proceedings relating
thereto and of any action or other proceedings brought under the
provisions of this article. All papers relating to the proceeding,
including copies of the certificate of appointment of any special
deputy and the inventories required to be filed, shall be filed and
be made a part of the record of the proceeding without the payment of
any additional fees. No damages may be awarded in the proceeding
but, if sought, may only be recovered in a separate action.
Article 2. Conservation or Liquidation of an Insured Licensee
620. If the licensee whose property and business has been taken
pursuant to Section 592 is insured by a Federal Insurance Agency, the
commissioner may tender to the appropriate Federal Insurance Agency
an appointment as conservator, liquidator, or receiver of the
licensee. The commissioner shall determine whether the licensee whose
property and business has been taken shall be liquidated or
conserved. If the Federal Insurance Agency accepts the appointment,
the Federal Insurance Agency shall have, in addition to any powers
conferred by applicable federal law, the powers conferred on the
commissioner pursuant to this article.
621. The Federal Insurance Agency may be, and act as, a
conservator, liquidator, or receiver without bond.
622. If the Federal Insurance Agency accepts the appointment in
accordance with Section 621, the rights of customers and other
creditors of the insured licensee shall be determined in accordance
with the applicable provisions of the laws of this state.
623. The Federal Insurance Agency conservator, liquidator, or
receiver shall possess with respect to the insured licensee all the
powers, rights, and privileges given the commissioner under this
article with respect to the conservation or liquidation of a
licensee, as appropriate, and the property and assets of which he or
she has taken possession, except insofar as the same may be in
conflict with the provisions of applicable federal law.
624. (a) The commissioner may sell to any other licensee any part
or the whole of the business of a licensee that is subject to
liquidation or conservatorship. The purchase and sale shall be
approved by the purchasing licensee, as follows:
(1) If the purchasing licensee is organized under the laws of this
state, by two-thirds of all of its directors.
(2) If the licensee is any licensee other than a licensee
organized under the laws of this state, in accordance with the laws
of the jurisdiction under which the licensee is organized.
(b) (1) Subject to any applicable federal statutes and
regulations, any bank or credit union organized under the laws of
this state may, with the approval of two-thirds of all of its
directors, purchase from the receiver of a national banking
association or a federal credit union the whole or any part of the
business of the national banking association or federal credit union.
(2) Subject to any applicable federal statutes and regulations and
any applicable laws of the jurisdiction under which a foreign
corporation is organized, any foreign corporation or office of a
foreign corporation that is licensed by the commissioner to transact
business in this state and that is authorized to accept shares or
deposits in this state, may purchase from the receiver of a national
banking association or federal credit union the whole or any part of
the business of the national banking association or federal credit
union.
(c) The provisions of Chapter 12 (commencing with Section 1200)
and Chapter 13 (commencing with Section 1300) of Division 1 of Title
1 of the Corporations Code shall not apply to any purchase and sale
of the type described in subdivision (a) or (b).
(d) When a purchase and sale of the type described in subdivision
(a) or (b) becomes effective, the licensee shall, ipso facto and by
operation of law and without further transfer, substitution, act, or
deed, to the extent provided in the agreement of the purchase and
sale or in the order of the court approving the purchase and sale and
except as withheld or limited by the agreement or by the order:
(1) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold, subject to the right of every
customer of a licensee to withdraw his or her shares or deposit in
full on demand after the sale, irrespective of the terms under which
the share or deposit was made.
(2) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold under all trusts, executorships,
administrations, guardianships, conservatorships, agencies, and other
fiduciary or representative capacities, to the same extent as though
the purchasing licensee had originally assumed, acquired, or owned
the same, subject to the rights of trustors and beneficiaries under
the trusts so sold to nominate another or succeeding trustee of the
trust so sold after the sale.
(3) Succeed to and be entitled to take and execute the appointment
to executorships, trusteeships, guardianships, conservatorships, and
other fiduciary and representative capacities to which the licensee
whose business is sold is or may be named in wills, whenever
probated, or to which it is or may be named or appointed by any other
instrument.
(e) For purposes of subdivision (d), any purchase and sale of the
type referred to in subdivision (d) shall be deemed to be effective
at the time provided in the agreement of the purchase and sale or in
the order of the court approving the purchase and sale.
Article 3. Conservatorship of an Uninsured Licensee
640. Whenever the commissioner deems it necessary in order to
conserve the assets of any licensee that does not have federal
deposit or share insurance for the benefit of the customers and other
creditors, he or she may appoint a conservator of the licensee and
require the conservator to post a bond as the commissioner deems
proper. The conservator, under the direction of the commissioner,
shall take possession of the books, records, and assets of every
description of the licensee and take any action as the conservator
may deem necessary to conserve the assets of the licensee pending
further disposition of its business.
641. A conservator appointed in accordance with Section 640 has
all of the powers and rights with relation to the business and the
property of the licensee for which he or she is appointed conservator
as are possessed by the commissioner under this article with
relation to a licensee of which the commissioner has taken
possession, and the conservator is subject to the same obligations as
are imposed upon the commissioner under this article. During the
time that the conservator remains in possession of the licensee the
rights of the licensee, and of all persons with respect thereto,
subject to the other provisions of this article, are the same as if
the commissioner had taken possession of the property and business of
the licensee for the purposes of liquidation. All expenses of the
conservatorship shall be paid out of the assets of the licensee and
shall be a lien thereon which shall be prior to any other lien. The
conservator shall receive a salary in an amount no greater than that
which would be paid by the commissioner to a special deputy in charge
of the liquidation of a licensee.
642. The commissioner may order an examination at the earliest
possible date of a licensee for which the commissioner has appointed
a conservator.
643. While any licensee is in the hands of a conservator, the
commissioner may require the conservator to set aside and make
available for withdrawal by customers and for payment to other
creditors on a ratable basis such amounts as in the opinion of the
commissioner may safely be used for that purpose.
644. The commissioner, in his or her discretion, may permit the
conservator to receive shares or deposits, but any shares or deposits
received while the licensee is in the hands of a conservator shall
be held as trust funds and shall not be subject to any limitation as
to payment or withdrawal. The shares or deposits shall be segregated
and shall not be used to liquidate any indebtedness of the licensee
existing at the time the conservator was appointed or for the payment
of any later indebtedness incurred for the purpose of liquidating
any indebtedness of the licensee existing at the time the conservator
was appointed. The shares or deposits shall be kept on hand in cash,
invested in direct obligations of the United States, or deposited
with the Federal Reserve Bank.
645. If the commissioner is satisfied that it may be done safely
and that it would be in the public interest, he or she may terminate
a conservatorship and permit the licensee for whom a conservator was
appointed to resume the transaction of its business under the
direction of its board, subject to any terms, conditions,
restrictions, and limitations as the commissioner may prescribe.
646. The conservator of a licensee that has been permitted to
resume accepting member shares or deposits shall first cause a notice
to be published in a newspaper of local circulation. The notice
shall state the date on which the affairs of the licensee will be
returned to its board and that the provisions of Section 644 will not
be effective after 30 days from that date. The form of the notice
and the newspaper in which the same is to be published shall be first
approved by the commissioner. On the date of the publication of the
notice, the conservator shall mail a copy of the notice to every
person who made any deposit in the licensee after the date of the
appointment of the conservator. The conservator shall address the
copy of the notice to the persons who have made the deposits at the
addresses appearing upon the books of the licensee. The conservator
shall also mail a similar notice to every person making a deposit in
the licensee after the date of the publication of the notice and
before the affairs of the licensee are returned to its board.
647. The commissioner may assess and collect from all licensees
for whom a conservator is appointed their ratable share of the costs
incurred in the administration of this article.
648. Any licensee that the commissioner has taken possession of
pursuant to Section 592, and for which a conservator has been
appointed pursuant to this article, may be reorganized under a plan
that requires the consent of any of the following:
(a) Customers and other creditors of the licensee representing at
least 75 percent in amount of its total member shares or deposits and
other liabilities as shown by the books of the licensee, excluding
member shares or deposits and other liabilities which are to be
satisfied in full under the provisions of the plan.
(b) Stockholders owning at least two-thirds of the outstanding
stock as shown by the books of the licensee.
(c) Members of the licensee.
(d) Customers and other creditors of the licensee representing at
least 75 percent in amount of its total shares or deposits and other
liabilities as shown by the books of the licensee, excluding shares
or deposits and other liabilities that are to be satisfied in full
under the provisions of the plan, and, if applicable to the licensee,
of stockholders owning at least two-thirds of its outstanding stock
as shown by the books of the licensee.
649. All customers, creditors, stockholders, if applicable, and
other interested persons shall be given notice of any proposed plan
of reorganization in the manner and at the times as the commissioner
directs.
650. No plan of reorganization shall become effective until the
commissioner finds that the plan is fair and equitable to all
customers, creditors, and stockholders, if applicable, and is in the
public interest and until the commissioner approves the same in
writing, subject to any conditions, restrictions, and limitations as
the commissioner may prescribe.
651. No creditor having security for the payment of his, her, or
its claim shall be affected in his, her, or its right to enforce the
security by the provisions of any plan for the reorganization of the
licensee. Any plan of reorganization involving the reduction of
claims of creditors shall apply only to that portion of a secured
creditor's loan that is not covered by the pledged security.
652. When any plan of reorganization becomes effective, all
books, records, and assets of the licensee shall be disposed of in
accordance with the provisions of the plan and the affairs of the
licensee shall be conducted by its board in the manner provided by
the plan and under the conditions, restrictions, and limitations that
may have been prescribed by the commissioner. When any plan of
reorganization adopted and approved as herein provided becomes
effective, all customers and other creditors and, if applicable,
stockholders of the licensee, whether or not they have consented to
the plan of reorganization, shall be fully and in all respects
subject to and bound by the plan's provisions and the claims of all
customers and other creditors shall be treated as if they had
consented to the plan of reorganization.
Article 4. Liquidation of an Uninsured Licensee
670. Upon taking possession of the property and business of a
licensee that does not have federal deposit or share insurance, the
commissioner may sell, compromise, or compound any bad or doubtful
debt owing the licensee for a principal sum not exceeding ten
thousand dollars ($10,000), upon those terms as the commissioner may
deem proper. If the principal sum thereof exceeds ten thousand
dollars ($10,000), the commissioner may compromise, compound, or sell
the debt upon those terms as the court may approve. If it appears
improbable that a recovery on a debt can be had, and that the costs
of an action to collect would be lost, and the principal sum thereof
does not exceed five hundred dollars ($500), the commissioner may
determine that no suit thereon shall be brought. If the principal sum
of that debt exceeds ten thousand dollars ($10,000), the
commissioner may determine that no suit thereon be brought after
obtaining approval of the court.
671. The commissioner may sell any real or personal property of
the licensee for cash or on credit and on any other terms and
conditions as the commissioner may deem proper, subject to the
approval of the court.
672. (a) The commissioner may, with the approval of the court,
sell any part or the whole of the business of a licensee to any other
licensee. The purchase and sale shall be approved by the purchasing
licensee, as follows:
(1) If the purchasing licensee is organized under the laws of this
state, by two-thirds of all of its directors.
(2) If the licensee is any licensee other than a licensee
organized under the laws of this state, in accordance with the laws
of the jurisdiction under which the licensee is organized.
(b) (1) Subject to any applicable federal statutes and
regulations, any bank or credit union organized under the laws of
this state may, with the approval of two-thirds of all of its
directors and of the commissioner, purchase from the receiver of a
national banking association or a federal credit union the whole or
any part of the business of the national banking association or
federal credit union.
(2) Subject to any applicable federal statutes and regulations and
any applicable laws of the jurisdiction under which a foreign
corporation is organized, any foreign corporation or any office of a
foreign corporation that is licensed by the commissioner to transact
business in this state and that is authorized to accept shares or
deposits in this state, may, with the approval of the commissioner,
purchase from the receiver of a national banking association or
federal credit union the whole or any part of the business of the
national banking association or federal credit union.
(c) The provisions of Chapter 12 (commencing with Section 1200)
and Chapter 13 (commencing with Section 1300) of Division 1 of Title
1 of the Corporations Code shall not apply to any purchase and sale
of the type described in subdivision (a) or (b).
(d) When a purchase and sale of the type described in subdivision
(a) or (b) becomes effective, the purchasing licensee shall, by
operation of law and without further transfer, substitution, act, or
deed, to the extent provided in the agreement of the purchase and
sale or in the order of the court approving the purchase and sale and
except as withheld or limited by the agreement or by the order:
(1) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the
licensee whose business is sold, subject to the right of every
customer of the licensee whose shares or deposit is sold to withdraw
his or her shares or deposit in full on demand after the sale,
irrespective of the terms under which the deposit was made.
(2) Succeed to the rights, obligations, properties, assets,
investments, shares, deposits, demands, and agreements of the whose
business is sold under all trusts, executorships, administrations,
guardianships, conservatorships, agencies, and other fiduciary or
representative capacities, to the same extent as though the
purchasing licensee had originally assumed, acquired, or owned the
same, subject to the rights of trustors and beneficiaries under the
trusts so sold to nominate another or succeeding trustee of the trust
so sold after the sale.
(3) Succeed to and be entitled to take and execute the appointment
to executorships, trusteeships, guardianships, conservatorships, and
other fiduciary and representative capacities to which the licensee
whose business is sold is or may be named in wills, whenever
probated, or to which it is or may be named or appointed by any other
instrument.
(e) For purposes of subdivision (d), any purchase and sale of the
type referred to in subdivision (d) shall be deemed to be effective
at the time provided in the agreement of the purchase and sale or in
the order of the court approving the purchase and sale.
673. Within six months after taking possession of the property
and business of any licensee that does not have federal deposit or
share insurance, the commissioner may terminate or adopt any
executory contract to which the licensee may be a party, including
leases of real or personal property. Claims for damages resulting
from the termination of any contract or lease may be filed and
allowed, but no claim of a landlord for damages resulting from the
rejection of an unexpired lease of real property or under any
covenant of the lease shall be allowed in an amount exceeding the
rent reserved by the lease, without acceleration, for the year
succeeding the date of the surrender of the premises plus the amount
of any unpaid accrued rent without acceleration. Any claim shall be
filed within 30 days of the date of the termination or within the
time that claims are to be filed under Section 680, whichever is
longer.
674. The commissioner, in his or her own name or in the name of
the licensee, may execute, acknowledge, and deliver any and all
conveyances and other instruments necessary or appropriate to
effectuate the sale of any real or personal property or to effectuate
any other transaction in connection with the liquidation of a
licensee or the distribution of its assets. Any conveyance or other
instrument executed by the commissioner pursuant to this authority
shall be valid and effectual for all purposes as though the same had
been executed by the officers of the licensee by authority of its
board of directors. Whenever the commissioner sells any real property
of the licensee a certified copy of the order of the court approving
the sale shall be recorded in the county in which any part of the
real property is located.
675. The commissioner, in the name of the delinquent licensee or
in his or her own name, may prosecute and defend any and all actions
and other legal proceedings appropriate or necessary to the
liquidation of the licensee.
676. The commissioner from time to time shall deposit all moneys
coming into his or her hands in the course of the liquidation of the
licensee in one or more state banks or state credit unions and in the
event of the suspension or insolvency of the depositary shall be
preferred before all other deposits.
677. The commissioner shall make an inventory of the assets of
the licensee in duplicate and file one in the office of the
commissioner and one with the clerk of the county in which the head
office of the licensee is located to be filed with the papers in the
liquidation proceedings. The inventory shall be open for inspection
at all reasonable times.
678. When the time fixed for the presentation of claims has
expired, the commissioner shall make in duplicate a full and complete
list of all claims presented, including and specifying claims that
have been rejected by the commissioner, and a list of all claims of
customers as shown by the books or records of the licensee for which
claims have not yet been presented, and shall file one copy of the
list in the commissioner's office and one with the clerk of the
county in which the head office of the licensee is located to be
filed with the papers in the liquidation proceedings. Before each
application to the court for leave to declare a dividend, the
commissioner shall file a supplemental list of claims presented since
the last preceding list was filed, including and specifying any
claims that have been rejected by him or her. The list of claims and
of claims of customers as shown by the books or records of the
licensee shall be open for inspection at all reasonable times.
679. The commissioner shall cause notice to be given by
advertisement in any newspapers of general circulation as he or she
may select weekly for three consecutive months, calling on all
persons who have claims against the licensee to present the same to
the commissioner and make legal proof thereof at a place to be
specified therein and within four months of the date of the first
publication of the notice, which date shall be specified in the
notice. The notice shall also state that all claims other than those
of customers appearing upon the books or records of the licensee
shall be forever barred if not filed within the four months' period
and that all claims of customers appearing upon the books or records
of the licensee will be forever barred, except as herein provided, if
not filed prior to the filing of a petition for a final dividend.
The commissioner shall also mail a similar notice to all persons,
including customers whose names appear as creditors upon the books of
the licensee and whose addresses appear upon the books or records of
the licensee, and shall enclose therewith a printed form of notice
of claim.
680. All claims of every kind against the licensee or against any
property owned or held by the licensee shall be presented to the
commissioner in writing verified by the claimant or someone on his or
her behalf within four months of the date of the first publication
of the notice to creditors. Any claim, other than the claim of a
customer whose claim appears upon the books or records of the
licensee, not presented within the four months' period shall be
forever barred and any claim of a customer whose claim appears upon
the books or records of the licensee that is not so presented prior
to the date of the filing of the petition of the commissioner with
the court for approval of the payment of the final dividend shall be
forever barred except as to any moneys remaining after all debts for
which claims were duly filed have been paid in full with interest. If
the commissioner doubts the validity of any claim, he or she may
reject the claim and serve notice of the rejection upon the claimant
either by mail or personally. An affidavit of the mailing or personal
service of the notice shall be prima facie evidence of the receipt
thereof and shall be filed with the commissioner. Any action upon a
rejected claim shall be brought within three months after the date of
mailing or personal service of the notice of rejection.
681. At any time and from time to time after the expiration of
the time fixed for the presentation of claims, the commissioner,
after obtaining approval of the court, may declare and pay one or
more dividends upon all approved claims out of the funds remaining in
his or her hands after the payment of expenses and after setting
aside an amount sufficient to pay to all customers, who have not yet
filed claims but whose claims appear upon the books or records of the
licensee, their pro rata share of the funds then available
for the payment of a dividend. At
any time after the expiration of one year from the date of the first
publication of notice to creditors and after obtaining the approval
of the court, the commissioner may declare and pay a final dividend.
682. (a) Expenses and claims of unsecured creditors have priority
in the following order:
(1) Expenses of liquidation and approved claims for fees and
assessments due the department.
(2) Approved claims given priority under other provisions of state
or federal law, including, but not limited to, Sections 676 and 710.
(3) Approved claims for "deposits," as that term is defined in 12
U.S.C. Section 1813(l), but including obligations of the type
described in 12 U.S.C. Section 1813(l)(5)(A) and (B).
(4) Approved claims for other general liabilities.
(5) Approved claims for obligations subordinated to deposits and
other general liabilities.
(b) Interest shall be given the same priority as the claim on
which it is based, but no interest shall be paid on any claim until
the principal of all claims within the same class has been paid or
adequately provided for in full.
(c) Any funds remaining shall be paid to the members or
shareholders, as appropriate.
683. Objections to any claim not rejected by the commissioner may
be made by any person interested by filing a copy of the objection
with the commissioner, who shall present the copy to the court at the
time of the next application for approval of the declaration of a
dividend. The court shall thereupon dispose of the objections or may
order a reference for that purpose, and should the objections to any
claim be sustained by the court or by the referee, the claim shall
not be allowed by the commissioner until the claimant has established
the claim by judgment.
684. Dividends remaining unpaid and any sums available for
payment of shares or deposits for which no claim was filed, which
remain in the hands of the commissioner six months after the order
for the payment of a final dividend, shall be deposited in the State
Treasury. The shares or deposits shall be deemed to have been
received under Chapter 7 (commencing with Section 1500) of Title 10
of Part 3 of the Code of Civil Procedure, and shall be subject to
claim or other disposition as provided in that chapter. The
commissioner may pay over the moneys held by him or her to the
persons respectively entitled thereto at any time prior to depositing
the shares or deposits in the State Treasury, upon being furnished
satisfactory evidence of the persons' right to the same.
685. Whenever, under the provisions of this article, the
commissioner is required to transmit unclaimed money or other
unclaimed property to any state officer for deposit in the State
Treasury, the commissioner, upon request of the Controller, shall
transmit to the Controller all signature cards and any other
identifying information available from the records of the licensee,
covering the money or other property. Upon receipt by the Controller
of the signature cards or other identifying information, the licensee
and the commissioner shall be relieved of all responsibility
therefor. The signature cards and other identifying information may
be destroyed or otherwise disposed of by the Controller whenever, in
his or her discretion, their further retention by him or her is no
longer required in the interest of the customers or the state.
686. All approved claims of customers and other creditors shall
bear interest at the rate provided by law on judgments from the date
that the commissioner takes possession of the property and business
of the licensee.
687. If the licensee has in its possession for safekeeping or
storage any jewelry, plate, money, specie, bullion, stocks, bonds,
securities, valuable papers, or other valuable personal property, or
has rented any vaults, safes, or safe-deposit boxes, the commissioner
shall cause to be mailed, by registered mail, postage prepaid, to
any known person claiming to be or appearing on the books of the
licensee to be the owner of the property or to the person in whose
name the safe, vault, or box stands a notice notifying the person to
remove all of the personal property within a specified fixed period
of not less than 60 days.
688. On the last day fixed in the notice for the removal of the
property or on the date when the property is removed or the box
surrendered, any contract between the person owning the property or
holding the box and the licensee shall cease and the amount of the
unearned prepaid rent or charges, if any, shall become a debt of the
licensee to the person.
689. If any property is not removed within the time fixed by the
notice mailed by the commissioner, the commissioner may dispose of
the property as the court, on application thereto, shall direct. The
commissioner may cause any safe, vault, or box to be opened in his or
her presence or in the presence of one of the special deputy
commissioners and of a notary not an officer or employee of the
licensee or of the commissioner. The contents thereof, if any, shall
be sealed by the notary in a package upon which the notary shall
distinctly mark the name and address of the person in whose name the
safe or box stands upon the books of the licensee and shall attach
thereon a list and a description of the property within the package.
The package so sealed and addressed, together with the list and
description may be kept by the commissioner in one or more of the
safes or boxes of the licensee or elsewhere until delivered to the
person whose name it bears or until otherwise disposed of as directed
by the court.
690. (a) When the commissioner has completed the liquidation of
the licensee, he or she shall petition the court for an order
declaring the licensee duly wound up and dissolved.
(b) After any notice as the court may direct and a hearing, the
court may make an order declaring the licensee duly wound up and
dissolved. The order shall declare all of the following:
(1) The licensee has been duly wound up.
(2) A final franchise tax return, if any, as described by Section
23332 of the Revenue and Taxation Code, has been filed with the
Franchise Tax Board as required under Part 10.2 (commencing with
Section 18401) of Division 2 of the Revenue and Taxation Code, and
any tax or penalty due under the Corporation Tax Law has been paid,
and the licensee's known debts and liabilities have been paid or
adequately provided for, or any taxes, penalties, debts, and
liabilities have been paid so far as the licensee's assets permitted,
as the case may be. If there are known debts or liabilities for the
payment of which adequate provision has been made, the order shall
describe the provision, setting forth any information necessary to
enable the creditor or other person to whom payment is to be made to
appear and claim payment of the debt or liability.
(3) All known assets of the licensee have been distributed to its
shareholders or wholly applied on account of the licensee's debts and
liabilities.
(4) The licensee is dissolved.
(c) The court may make additional orders and grant further relief
as it deems proper upon the evidence submitted.
(d) Upon the making of the order declaring the licensee dissolved,
the corporate existence of the licensee shall cease, except for the
purposes of any necessary further winding up.
(e) Upon the making of the order declaring the licensee dissolved,
the commissioner shall file with the Secretary of State a copy of
the order, certified by the clerk of the court.
691. Whenever this article requires court approval of any step in
the liquidation proceedings, approval shall be given after a hearing
upon notice as the court may direct. At the hearing, the court may
by order approve the actions of the commissioner for which he or she
has petitioned the court's approval or it may, by appropriate order,
otherwise direct the commissioner in the matter in connection with
which the petition was filed.
692. Whenever, in the opinion of the commissioner, the
liquidation or reorganization of any licensee taken in charge by him
or her would be facilitated, or the public interests and the
interests of customers or stockholders would be served, the
commissioner may borrow money on behalf of the licensee from any
federal agency authorized to lend money to receivers, trustees,
liquidating agents, or other agents or supervisory authorities in
charge of licensees that are closed or in process of liquidation and,
with approval of the court, the commissioner may secure any
borrowings by the pledge of the assets of the licensee in any manner
and amount the commissioner deems necessary, proper, or expedient.
Article 5. Disposal of Unclaimed Trust Property
700. Whenever any licensee is being liquidated or whenever the
trust business of any licensee has been discontinued and the licensee
has in its possession money or other property held by it in trust or
for safekeeping and the beneficiaries or persons entitled thereto
are unknown or cannot be found, the commissioner or the licensee,
upon obtaining approval of the superior court of the county in which
the liquidation proceedings are pending or in which the head office
of the licensee is situated, may do the following:
(a) In the case of money, deliver it to the Treasurer.
(b) In the case of other property, deliver it to the Controller
for deposit in the State Treasury.
701. Upon the delivery of any money to the Treasurer or upon the
delivery of any property to the Controller, a certified copy of the
order of the court approving the delivery shall be given to the
Controller, and upon the delivery of any money to the Treasurer a
notice giving the amount delivered shall be filed with the
Controller. Upon the receipt of any money or other properties, the
Treasurer or the Controller, as the case may be, shall issue a
receipt for the same and the receipt shall be deemed a voucher in
favor of the licensee to the same extent as though executed by the
beneficiary or other person entitled thereto.
702. All money or other property delivered to the Treasurer or
Controller pursuant to this article shall be deemed to be delivered
for deposit in the State Treasury under the provisions of Chapter 7
(commencing with Section 1500) of Title 10 of Part 3 of the Code of
Civil Procedure and shall be subject to claim or other disposition as
provided in that chapter.
Article 6. Priorities
710. The holder or transferor of a negotiable instrument
transferred to a licensee for collection has a preferred claim in the
amount of the liability of the licensee on the instrument if the
instrument was forwarded to the licensee by any person or by any
other financial institution for collection and remittance, if payment
therefor has not been made and if the same has been collected either
in whole or in part by the licensee, unless the holder or transferor
is a voluntary depositor in the licensee and the proceeds of the
collection, at his or her request, have been credited by the licensee
to his or her account.
CHAPTER 8. VOLUNTARY LIQUIDATION
720. Any licensee that voluntarily has ceased to do the business
for which it is licensed shall immediately notify the commissioner
and proceed to liquidate its affairs. Any share or deposit or other
sum that has not been paid to the person entitled thereto within six
months after the licensee ceased to conduct a business shall be paid
into the State Treasury. The deposits with the State Treasury shall
be deemed to have been received under the provisions of Chapter 7
(commencing with Section 1500) of Title 10 of Part 3 of the Code of
Civil Procedure and shall be subject to claim or other disposition as
provided in that chapter. If the commissioner has reason to conclude
that the liquidation of the licensee is not being safely or
expeditiously conducted, he or she may take possession of the
business and property of the licensee in the same manner and with the
same effect and subject to the same rights accorded the licensee as
if he or she had taken possession pursuant to Chapter 7 (commencing
with Section 600), and he or she may proceed to liquidate the
licensee's affairs in the same manner as provided in that article.
When the licensee has been completely liquidated, its corporate
existence shall be dissolved in the manner provided by law.
721. If the licensee referred to in Section 720 is a
state-chartered credit union and the commissioner has taken
possession of the business and property of the credit union, the
commissioner may appoint a liquidating agent or a liquidating
committee of three members of the credit union to liquidate the
business and assets of the credit union in the manner provided in
Article 2 (commencing with Section 15250) of Chapter 9 of Division 5,
except that, in lieu of the certificate required under Section
15252, the commissioner shall prepare and file in the office of the
Secretary of State a certificate of commencement of liquidation
proceedings upon taking possession of the business and assets, and
the commissioner or his or her authorized deputy shall countersign
the certificate referred to in Sections 15257 and 15258 whenever
liquidation is involuntary. The commissioner may, however, prepare
and file a final certificate whenever he or she retains possession of
the assets of any credit union for the purpose of liquidation. The
liquidating agent need not be a member of the credit union to be
liquidated and may be a person, firm, or corporation, as determined
by the commissioner.
CHAPTER 9. APPROVAL OF NAMES OF NONBANK CORPORATIONS
730. In this chapter:
(a) "Nonbank corporation" means any corporation incorporated or
proposed to be incorporated under the laws of this state, other than
(1) any bank or (2) any corporation incorporated or proposed to be
incorporated under the laws of this state for the purpose of
transacting business under Article 1 (commencing with Section 1850)
of Chapter 21 of Division 1.1.
(b) "Subject name," means a name of a nonbank corporation which,
as set forth, or as proposed to be set forth, in the articles of such
nonbank corporation, includes "bank," "trust," "trustee," or related
words.
731. An application for a certificate of approval of the subject
name of a nonbank corporation shall be in such form, shall contain
such information, shall be signed in such manner, and shall (if the
commissioner so requires by regulation or order) be verified in such
manner, as the commissioner may by regulation or order require.
732. The fee for filing with the commissioner an application for
a certificate of approval of the subject name of a nonbank
corporation shall be twenty-five dollars ($25).
733. If the commissioner finds, with respect to an application
for a certificate of approval of the subject name of a nonbank
corporation, that the subject name does not indicate that the nonbank
corporation is engaged in the banking, industrial banking, or trust
business, the commissioner shall issue a certificate of approval of
the subject name. If the commissioner finds otherwise, the
commissioner shall deny the application.
734. Promptly after the articles of a nonbank corporation, with
the certificate of approval of the subject name of such nonbank
corporation attached thereto, are filed with the Secretary of State,
such nonbank corporation shall file with the commissioner a copy of
such articles certified by the Secretary of State.
CHAPTER 10. LEGAL INVESTMENTS FOR NONBANK LICENSEES
800. As used in this chapter, unless the context requires
otherwise, the following terms have the following meanings:
(a) "Net direct debt" of any public corporation means all
indebtedness of every kind after deducting from the indebtedness
sinking funds available for the payment thereof, any indebtedness
evidenced by tax anticipation notes for the payment of which
nondelinquent taxes are pledged, obligations payable only from
special assessments, revenue obligations payable only from special
revenues pledged for their payment, and such proportion of any
indebtedness issued for revenue producing works, properties, or
utilities that have been in operation for at least one year as the
amount of the annual net revenue therefrom bears to the amount of the
annual debt service requirements of those bonds.
(b) "Net overlapping debt" of any public corporation means the
proportion of the net direct debt as above defined of any other
public corporation (herein called overlapping corporation) that lies
wholly or partially within the boundaries of the public corporation
as the assessed valuation of the taxable property of the overlapping
public corporation lying within the boundaries of the public
corporation as shown by the last official equalized county assessment
roll bears to the assessed valuation of all taxable property of the
overlapping public corporation as shown by the last official
equalized county assessment roll.
(c) "Funded debt," as used in this chapter, means all
interest-bearing indebtedness of a corporation not maturing within
one year of the date the indebtedness was incurred.
801. Any securities or other assets that are described in
Sections 803 to 819, inclusive, are legal investments for savings
banks.
802. Where any laws of this state provide that the moneys of any
pension fund, retirement plan, trust fund, or the moneys of any
special fund the investment of which is governed by law, or the funds
of any political subdivision or public corporation may or shall be
invested in securities which are a legal investment for savings
banks, that law shall be deemed to authorize or require, as the case
may be, that those moneys be invested in securities in which savings
banks were authorized to invest their funds by the provisions of the
Bank Act as it read prior to January 1, 1949, other than paragraph
(f) of subdivision 5 of Section 61 of that act, or in bonds,
debentures, and notes legal for investments for savings banks in the
State of New York or the State of Massachusetts as of the time the
investment is made or in securities in which commercial banks are
authorized to invest their funds by the provisions of Sections 803 to
819, inclusive.
803. Gold and silver bullion and United States mint certificates
of ascertained value.
804. Stock of a federal reserve bank or of a federal home loan
bank to the extent authorized by Section 1325.
805. Bonds or other interest-bearing notes and obligations of the
United States and those for which the faith and credit of the United
States are pledged for the payment of principal and interest.
806. Bonds of the State of California and those for which the
faith and credit of the State of California are pledged for the
payment of principal and interest and in registered warrants of the
State of California.
807. Bonds of any flood control and water conservation districts,
or any zone thereof, having an assessed valuation on taxable real
property of not less than one million dollars ($1,000,000), county,
city and county, city, metropolitan water district, municipal utility
district, special districts established by and within any municipal
utility district, transit district, rapid transit district including
sales tax revenue bonds of the district, metropolitan transit
authority, flood control district, or school district of the State of
California (herein referred to generally as public corporation)
except the bonds of any particular such public corporation which may
be declared ineligible for investment by savings banks by regulations
of the commissioner.
808. Bonds of any other political subdivision, public
corporation, or district of the State of California (herein referred
to generally as public corporations) having the power, without limit
as to rate or amount; to levy taxes to pay the principal and interest
of the bonds upon all property within its boundaries subject to
taxation by such public corporation, provided the net direct debt of
such public corporation together with its net overlapping debt does
not exceed 25 percent of the assessed valuation of the taxable
property within its boundaries according to the last official
equalized county assessment roll.
809. (a) Any of the following subject to the conditions set forth
in subdivision (b) to (d), inclusive.
(1) Bonds or other evidences of indebtedness of, or which are
unconditionally guaranteed by the Dominion of Canada, the State of
Israel, the United States of Mexico, the Commonwealth of Puerto Rico,
or any state of the United States other than California, for the
payment of both principal and interest of which in United States
dollars, the faith and credit of the entity is pledged.
(2) Limited obligations of any state of the United States, other
than California, or the Commonwealth of Puerto Rico, payable only
from special taxes that are pledged to the payment of principal and
interest of the limited obligations.
(3) Bonds or other evidences of indebtedness of any city, county,
political subdivision, public corporation, or district (herein
referred to generally as public corporations) of any state of the
United States, other than California, or of the Dominion of Canada,
or of the State of Israel, or of the United States of Mexico or of
the Commonwealth of Puerto Rico, having the power without limit as to
rate or amount to levy taxes to pay the principal and interest of
the bonds upon all property within its boundaries subject to taxation
by the public corporation.
(b) In the case of bonds constituting general obligations of any
such state, commonwealth, dominion, or country, such state,
commonwealth, dominion, or country has not within 10 years prior to
the investment defaulted for a period of more than 90 days in the
payment of any part of either principal or interest of any of its
debts.
(c) In the case of limited obligations of any state, or
commonwealth, all of the following conditions are met:
(1) The state or commonwealth has not, within 10 years prior to
the date of the investment, defaulted for a period of more than 90
days in the payment of either principal or interest of any of its
debts.
(2) The special taxes pledged for the payment of the limited
obligations shall have been collected for five years and shall have
averaged at least one and one-half times the debt service
requirements, including those for principal, interest, and sinking
fund, on all special obligations existing at the time.
(3) The special taxes for each of the five fiscal years shall have
equaled at least the amount of all the debt service requirements on
the special obligations.
(d) In the case of bonds or other evidences of indebtedness of any
public corporation of any state other than California, or of any
commonwealth, all of the following conditions are met:
(1) The public corporation has had a corporate existence or been
otherwise established and functioning for at least 10 years prior to
the time of the investment.
(2) The public corporation has a population of at least 50,000
inhabitants according to the last federal or state census.
(3) The public corporation for a period of at least 10 years prior
to the investment has not defaulted in the payment of any part of
the principal or interest of any of its debts for a period of more
than 90 days.
(4) The net direct debt together with the net overlapping debt of
the public corporation does not exceed 10 percent of the assessed
valuation of the property subject to taxation by the public
corporation according to the last official equalized assessment roll
or list upon the basis of which taxes for debt service are based.
810. Bonds of any irrigation district, water storage district,
water conservation district, county water district, reclamation
district, drainage district, and any district the primary function of
which is the irrigation, reclamation or drainage of land within its
boundaries, located in California, other than bonds referred to in
Section 807, provided either of the following conditions are met:
(a) The bonds qualify under Section 808.
(b) The bonds have been certified as legal securities for savings
banks pursuant to Chapter 1 (commencing with Section 20000) of
Division 10 of the Water Code and the certification remains unrevoked
and the total outstanding bonded indebtedness of the district
including bonds authorized but not issued, but excluding bonds
payable solely from revenues and not directly or indirectly from
assessments, does not exceed 50 percent of the aggregate of the
assessed value of the lands, exclusive of improvements, subject to
assessment by the district, and the value of the property owned by
the district or to be acquired or constructed with the proceeds of
the bonds under consideration.
811. (a) Bonds, consolidated bonds, collateral trust debentures,
consolidated debentures, or other obligations issued by federal land
banks or federal intermediate credit banks established under the
Federal Farm Loan Act, as amended, and the Farm Credit Act of 1971.
(b) Debentures and consolidated debentures issued by the Central
Bank for Cooperatives and banks for cooperatives established under
the Farm Credit Act of 1933, as amended, and the Farm Credit Act of
1971.
(c) Bonds or debentures of the Federal Home Loan Bank Board
established under the Federal Home Loan Bank Act.
(d) Bonds of any federal home loan bank established under the
Federal Home Loan Bank Act.
(e) Stocks, bonds, debentures, participations and other
obligations of or issued by the Federal National Mortgage
Association, the Student Loan Marketing Association, the Government
National Mortgage Association and the Federal Home Loan Mortgage
Corporation.
812. Bonds, notes or other obligations issued by the Federal
Financing Bank, the United States Postal Service, or issued or
assumed by the International Bank for Reconstruction and Development,
the Tennessee Valley Authority, the Inter-American Development Bank,
the Government Development Bank for Puerto Rico, the Asian
Development Bank, the International Finance Corporation, or the
African Development Bank.
813. (a) Notes with a maturity not exceeding 15 months after the
date of issue, issued in anticipation of uncollected taxes, income,
revenue, cash receipts, and other moneys of the State of California
or any city, county, city and county, or school district thereof;
provided the notes and warrants and the interest thereon shall be a
first lien and charge against, and shall be payable from, the first
moneys received by the local agency from such pledged moneys;
provided the total amount of the notes issued at any one time or
during any specified period does
not exceed 85 percent of the receipts or revenues.
(b) Grant anticipation notes issued by the agencies and payable
not later than 36 months after the date of issue, provided that the
total amount of the notes and interest payable thereon issued at any
one time or during any specified period does not exceed 80 percent of
the grant funds stated in writing by the granting authority as
committed or appropriated, and shall be paid on a specified date or
dates within a 36-month period from the dating of the notes.
814. Revenue securities of any state of the United States, or of
the Commonwealth of Puerto Rico, and of any city, county, city and
county, political subdivision, public corporation, or district
(herein referred to generally as public corporations) of any state or
commonwealth and of any department, board, agency, or authority of
any state or commonwealth or of any public corporation, if the
following conditions are met:
(a) The revenue securities constitute obligations payable out of
the revenues from a revenue-producing property owned, controlled, or
operated by a state, commonwealth, public corporation, or by a
department, board, agency, or authority thereof and are secured by
the revenues.
(b) Either of the following paragraphs apply:
(1) (A) The net income from the property available for the payment
of the securities for the five fiscal years next preceding any such
investment, shall have averaged at least one and one-tenth times all
debt service requirements for principal, interest, and sinking fund
of all revenue securities payable only out of the revenues from that
property during each of those fiscal years, and for each of the five
fiscal years shall have equaled at least all debt service
requirements for principal, interest, and sinking fund of the
securities, and for the last fiscal year shall have amounted to at
least the maximum annual debt service requirement for any fiscal year
thereafter on all such securities that were outstanding during such
last fiscal year and which will be outstanding in any fiscal year
thereafter.
(B) The gross income from the property, the net income from which
is pledged for the payment of the securities, in the last fiscal year
prior to the investment was not less than one million dollars
($1,000,000) if located in California, and was not less than five
million dollars ($5,000,000) if located elsewhere.
(C) The issuer is obligated to maintain rates at least sufficient
to meet debt service requirements and such obligation is legally
enforceable.
(2) (A) The issuer of the securities is entitled to receive under
a legally enforceable contract with a corporation any of the
securities of which are a legal investment for savings banks under
this chapter annual payments averaging not less than nine hundred
thousand dollars ($900,000) a year commencing with the completion of
a project or projects as fixed in the construction contract therefor
and continuing during the maximum term for which said revenue
securities are to mature.
(B) The issuer of the securities is obligated to maintain rates to
produce revenue, or will receive contract payments, either or both
of which will be sufficient to meet debt service requirements and
such obligation or contract is legally enforceable.
(c) The public corporation or any department, board, agency, or
authority thereof which issues the securities, if existing elsewhere
than in California, has not within 10 years prior to such investment
defaulted for a period of more than 90 days in the payment of
principal or interest on any of its debts.
815. Bonds of any local public housing agency (as defined in the
United States Housing Act of 1937, as amended) that are secured by
either of the following:
(a) An agreement between the public housing agency and the Public
Housing Administration in which the public housing agency agrees to
borrow from the Public Housing Administration, and the Public Housing
Administration agrees to lend to the public housing agency, prior to
the maturity of the obligations (which obligations shall have a
maturity of not more than 18 months), moneys in an amount that
(together with any other moneys irrevocably committed to the payment
of interest on such obligations) will suffice to pay the principal of
the obligations with interest to maturity thereon, which moneys
under the terms of the agreement are required to be used for the
purpose of paying the principal of and the interest on such
obligations at their maturity.
(b) A pledge of annual contributions under an annual contributions
contract between such public housing agency and the Public Housing
Administration if the contract shall contain the covenant by the
Public Housing Administration that is authorized by subsection (b) of
Section 22 of the United States Housing Act of 1937, as amended, and
if the maximum sum and the maximum period specified in such contract
pursuant to that subsection 22(b) shall not be less than the annual
amount and the period for payment that are requisite to provide for
the payment when due of all installments of principal and interest on
the obligations.
816. Bonds secured by an insurance commitment of the Federal
Housing Administration.
817. Evidences of indebtedness of companies incorporated in the
United States and, directly or indirectly, engaged in manufacturing,
extraction, merchandising, or commercial financing and in bonds of
authorities established pursuant to the California Industrial
Development Financing Act (Title 10 (commencing with Section 91500)
of the Government Code), to which these companies are obligated with
respect to payment subject to the following conditions:
(a) Any unsecured evidences of indebtedness shall be issued by a
company substantially all of whose property is free of mortgage and
shall carry a covenant by the obligor that they will be secured
equally with any mortgage bond, except a purchase money mortgage,
which may be later issued.
(b) The company is of a size as to attract at least statewide
interest in its publicly held securities and its gross income shall
have averaged not less than ten million dollars ($10,000,000) and its
net income shall have averaged not less than one million dollars
($1,000,000) for the five fiscal years preceding the investment and
its gross income was not less than ten million dollars ($10,000,000)
and its net income not less than one million dollars ($1,000,000) for
at least three of these five fiscal years.
(c) Working capital, as measured by consolidated current assets
less consolidated current liabilities as shown in the latest
published balance sheet, shall exceed 150 percent of the total of
consolidated debt due in longer than one year and "minority interest."
For that purpose, "minority interest" means any outstanding interest
in a subsidiary having a prior claim on the earnings of the
subsidiary. However, the foregoing ratio requirement shall not apply
in the case of evidences of indebtedness of any corporation whose
consolidated gross assets less any valuation reserves exceed five
hundred million dollars ($500,000,000) and whose consolidated current
assets exceed consolidated current liabilities by at least one
hundred million dollars ($100,000,000) as shown by the latest
published balance sheet. When new financing is involved, the changes
in gross assets, capital structure and working capital shall be
considered and reliance may be placed on the representations made in
the official prospectus prepared under the rules of the Securities
and Exchange Commission as to the application of the proceeds of the
financing.
(d) The total consolidated debt of the company including current
liabilities and "minority interest," as shown on the latest published
balance sheet, does not exceed 331/3 percent of its gross assets
less valuation reserves.
(e) The consolidated annual net income for the five fiscal years
next preceding the investment, before deduction of state and federal
taxes imposed on or measured by income or profits but after deducting
all charges, including reserves, regularly recurring charges for
amortization of discount, and expense allocable to funded debt (1)
shall have averaged not less than six times the annual consolidated
interest charges existing at the time the investment is made; (2) in
at least three of the five fiscal years shall have been at least four
times the annual consolidated interest charges for the same year;
and (3) for the fiscal year next preceding the investment shall have
been not less than six times the consolidated interest charges for
that year and not less than six times the annual consolidated charges
on the funded debt outstanding at the time of the investment.
818. Fixed interest railroad bonds meeting the requirements of
subdivisions (a) and (b); bonds secured by a mortgage on jointly
operated railroad facilities meeting the requirements of subdivision
(c); and railroad equipment trust certificates meeting the
requirements of subdivision (d).
(a) The railroad bonds are issued by or are assumed, guaranteed,
or provision made unconditionally for the payment of principal and
interest on specified dates, by a solvent railroad company that meets
all of the following conditions:
(1) Operates at least 500 miles of standard gauge road within the
continental United States and which has had average annual operating
revenues of at least ten million dollars ($10,000,000) during the
five years next preceding the investment.
(2) Has an average annual balance of income available for fixed
charges for the last 15 years for which the necessary statistical
data are available, when divided by an amount equal to its fixed
charges for the last fiscal year, shall produce a quotient which is
at least 15 percent higher than the quotient obtained by dividing the
average annual balance of income available for fixed charges of all
class 1 railroads for the same one 5-year period by an amount equal
to the fixed charges of all class 1 railroads for the last year in
the period.
(3) Has an average "balance of net income" (computed by deducting
the sum of its fixed charges and contingent interest charges for the
latest fiscal year from the average annual balance available for
fixed charges for the latest 15 years for which the necessary
statistical data are available) when divided by its average annual
railroad operating income for the same 15-year period, shall produce
a quotient at least 15 percent greater than the quotient obtained by
dividing the average balance of income of all class 1 railroads,
computed in the same manner, by the average annual railway operating
income of all class 1 railroads for the same 15-year period.
(4) Has an average balance of income available for fixed charges
for the last three fiscal years preceding the investment that has not
been less than one and one-half times its fixed charges for the last
fiscal year.
(b) The railroad bonds are secured by any of the following:
(1) A mortgage, either direct or collateral, which shall be a
first mortgage on not less than 75 percent of the mileage subject to
the mortgage.
(2) A first mortgage on terminal properties comprising the company'
s principal freight or passenger terminal in a city of not less than
250,000 population according to the latest federal or state census.
(3) A refunding mortgage on not less than 75 percent of the
railroad mileage owned or operated by the issuing company under which
bonds may be issued for retirement or refunding of all debts secured
by prior liens on all or any part of the property (other than liens
on equipment) subject to the mortgage; provided, that the amount of
debt senior to the refunding mortgage is not more than 50 percent of
the sum of all senior debt and the refunding mortgage, or that
underlying mortgage bonds in an amount equal to at least 50 percent
of the debt outstanding under the refunding mortgage are pledged as
security under the refunding mortgage.
(4) A first mortgage on railroad property leased to and operated
by the company where the lease extends beyond the maturity date of
the bonds and the company has guaranteed, assumed, or committed
itself under the terms of the lease to pay principal and interest on
the bonds.
(c) Bonds secured by a mortgage on jointly operated railroad
facilities must be secured by a first mortgage on a terminal, depot,
tunnel, or bridge used by or leased to two or more railroads which
have jointly and severally agreed unconditionally to pay the interest
and principal of the bonds or have unconditionally guaranteed or
assumed such payment, one of which railroads must meet the
requirements set forth in subdivision (a).
(d) Railroad equipment trust certificates must be issued by a
solvent class 1 railroad whose average balance of income available
for fixed charges for the last three fiscal years preceding the
investment shall be not less than one and one-half times its fixed
charges for the last fiscal year. The certificates must be issued to
provide funds for the construction or acquisition of new standard
gauge railroad equipment made with the approval of the Interstate
Commerce Commission and be secured by equipment trust, lease,
conditional sales contract, or first lien on such equipment. The
aggregate principal amount of such obligations shall not exceed 80
percent of the purchase price of the equipment and the certificates
shall mature within 15 years from date of issuance in equal annual,
semiannual, or monthly installments, beginning not later than one
year after the date of issuance.
(e) As used in this section, the terms "balance of income
available for fixed charges," "fixed charges," "contingent interest,"
and "railway operating income" shall have the same meaning as in the
accounting reports filed by common carriers by rail pursuant to
regulations of the Interstate Commerce Commission except that
"balance of income available for payment of fixed charges" shall be
computed before deduction of federal income or excess profits taxes,
and "fixed charges" and "contingent interest" of the railroad shall
be such charges existing as of the time the computation is made
excluding charges with respect to debt which has been retired or will
be retired within six months and for the payment of which funds have
been or are contemporaneously being set aside in trust but including
charges with respect to new debt issued or in the process of being
issued.
819. Bonds and debentures of gas, electric, or gas and electric
companies meeting the requirements of subdivision (a); bonds and
debentures of telephone companies meeting the requirements of
subdivision (b); and bonds and debentures of water companies meeting
the requirements of subdivision (c).
(a) Bonds or debentures of a gas, electric, or gas and electric
company shall be of an issue that originally amounted to not less
than one million dollars ($1,000,000) and, if bonds, be secured by a
mortgage on substantially all of its physical property, and, if
debentures, shall be issued by a company substantially all of whose
physical property is free of mortgage and must carry a covenant to be
secured equally with any mortgage indebtedness, except a purchase
money mortgage, subsequently issued, and both bonds and debentures
shall be issued by a public utility corporation that meets all of the
following conditions:
(1) Derives more than 50 percent of its gross operating revenue
from the business of supplying electricity, artificial gas, or
natural gas or all or any of them, and at least 80 percent of its
gross operating revenue from all or any of the public utility
businesses enumerated in this section.
(2) Shall have had a gross operating revenue of not less than
seven million five hundred thousand dollars ($7,500,000) for its most
recent fiscal year.
(3) Has a funded debt not exceeding two-thirds of the value of its
physical property as shown by the books of the corporation or by a
statement of a certified public accountant issued within one year,
which statement may be based upon the books of the corporation, less
the amount of any reserves for depreciation, retirement, or
amortization of that physical property. Physical property of a
corporation shall include the physical property of a subsidiary
corporation if the corporation owns not less than 90 percent of the
outstanding voting shares of the subsidiary corporation.
(4) Shall have had earnings including earnings of subsidiaries
mentioned in paragraph (3), available for interest payments, before
deduction of state and federal taxes imposed on or measured by income
or profits, during four of the five most recent fiscal years and
during the most recent fiscal year equal to at least twice the
existing annual interest charges on the corporation's total funded
debt during those respective fiscal years.
(b) Bonds or debentures of telephone companies shall be of an
issue originally amounting to at least one million dollars
($1,000,000) and, if bonds, be secured by a mortgage on substantially
all of the physical property of the company, and if debentures shall
be issued by a company substantially all of whose physical property
is free of mortgage and shall carry a covenant to be secured equally
with any mortgage indebtedness, except a purchase money mortgage,
subsequently issued, and both bonds and debentures shall be issued by
a company that meets all of the following conditions:
(1) During its last fiscal year had gross revenues of at least
seven million five hundred thousand dollars ($7,500,000), more than
50 percent of which was derived from owned properties used in
furnishing telephone and other communication services and at least 80
percent of its gross revenues from all or any of the public utility
businesses enumerated in this section.
(2) Whose funded debt does not exceed two-thirds of the value of
its physical property as shown by the books of the corporation or by
a statement of a certified public accountant issued within one year,
which statement may be based upon the books of the corporation, less
the amount of any reserves shown on the statement for depreciation,
retirement or amortization of such physical property. Physical
property of a corporation shall include the physical property of a
subsidiary corporation if the corporation owns not less than 90
percent of the outstanding voting shares of the subsidiary
corporation.
(3) Which for four of the five most recent fiscal years and for
the last fiscal year had earnings including earnings of subsidiaries
mentioned in paragraph (2) available for the payment of interest
charges, before deduction of state and federal taxes imposed on or
measured by income or profits, at least equal to twice the interest
charges on the company's total funded debt during such respective
fiscal years.
(c) Water company bonds or debentures shall be of an issue
originally amounting to at least one million dollars ($1,000,000) and
if bonds, be secured by a first mortgage on the company's property,
and if debentures, shall be issued by a company substantially all of
whose property is free of mortgage and shall carry a covenant to be
secured equally with any mortgage indebtedness, except a purchase
money mortgage, subsequently issued, and both bonds and debentures
shall be issued by a company that meets all of the following
conditions:
(1) Is the supplier of substantially all water for domestic use in
a community or communities having a population of not less than
25,000.
(2) Whose funded debt does not exceed two-thirds of the value of
its physical property as shown by the published statement of the
company for its next preceding fiscal period, less the amount of any
reserves shown for depreciation, retirement or amortization of such
physical property. Physical property of a corporation shall include
the physical property of a subsidiary corporation if the corporation
owns not less than 90 percent of the outstanding voting shares of the
subsidiary corporation.
(3) Which for four out of the five most recent fiscal years and
for the most recent fiscal year shall have had earnings including
those of subsidiaries mentioned in paragraph (2) available for the
payment of interest charges, before deduction of state and federal
taxes imposed on or measured by income or profits, of at least one
and one-half times the interest charges on the company's total funded
debt during the respective fiscal years.
SEC. 3. Division 1.1 (commencing with Section 1000) is added to
the Financial Code, to read:
DIVISION 1.1. BANKING
CHAPTER 1. GENERAL PROVISIONS
1000. When authorized by the commissioner as provided in Chapter
3 (commencing with Section 1040) a corporation may be formed by one
or more persons in accordance with the laws of this state for the
purpose of conducting a commercial banking business or a trust
business, or both of them. The qualification requirements of the
Corporate Securities Law of 1968 shall not apply to the offer and
sale of securities issued by and representing an interest in or a
direct obligation of a bank or trust company incorporated under the
laws of this state if the securities are offered and sold pursuant to
the commissioner's authorization described in Section 1201 or the
securities are exempt from authorization pursuant to Section 1202, or
by a regulation or order of the commissioner.
1002. No bank shall be a close corporation (as defined in Section
158 of the Corporations Code).
1003. Except where explicitly stated or the context provides
otherwise, this division is applicable to the following:
(a) All corporations engaging in commercial banking, industrial
banking, or the trust business.
(b) All national banking associations authorized to transact
business in this state to the extent that the provisions of this
division are not inconsistent with and do not infringe paramount
federal laws governing national banking associations.
(c) All other corporations that subject themselves to the special
provisions and sections of this division.
(d) All other persons, associations, copartnerships, or
corporations who, by violating any of its provisions, become subject
to the penalties provided for in this division.
1004. (a) A California state bank is a corporation incorporated
under Division 1 (commencing with Section 100) of Title 1 of the
Corporations Code that is, with the approval of the commissioner,
incorporated for the purpose of engaging in, or that is authorized by
the commissioner to engage in, the commercial or industrial banking
business.
(b) All provisions of law applicable to corporations generally,
including, but not limited to, the General Corporation Law (Division
1 (commencing with Section 100), Title 1 of the Corporations Code)
shall apply to banks. However, whenever any provision of this
division or any regulation or order issued under any provision (other
than this section) of this division applicable to banks is
inconsistent with any provision of law applicable to corporations
generally, that provision of this division or that regulation or
order shall apply and the provision of law applicable to corporations
generally shall not apply.
1005. It shall be unlawful for any person, corporation, limited
liability company, partnership, firm, or any other form of business
entity allowed by law, to engage in or transact commercial banking
business, industrial banking business, or trust business within this
state except by means of a corporation duly organized for that
purpose.
1006. No corporation shall hereafter be organized under the laws
of this state to transact the business of a commercial bank,
industrial bank, or trust company, except as provided in this
chapter.
1007. Neither the enactment of this code nor the amendment or
repeal thereof, nor the repeal of any statute affected thereby, shall
take away or impair any liability or cause of action existing or
incurred against any bank or trust company, or the shareholders,
directors, or officers thereof.
1008. The amount of funds of a bank or trust company that are
deposited in any other financial institution (other than a Federal
Reserve bank) shall not at any time exceed 10 percent of the sum of
shareholders' equity, allowance for loan and lease losses, capital
notes, and debentures of the depositing bank or trust company unless
the financial institution has been designated as a depositary for the
funds of the depositing bank or trust company by a vote of the
majority of the directors of the depositing bank or trust company,
and unless the financial institution has been approved by the
commissioner as a depositary for the purposes of this section. The
commissioner may, in his or her discretion, revoke his or her
approval of any such depositary and may, in his or her discretion,
limit the amount of funds that may be deposited by any bank or trust
company with any other financial institution. A deposit by one bank
or trust company with another financial institution shall not be
regarded as a loan.
CHAPTER 2. APPLICATION
1020. The request for authority to organize and establish a
corporation to engage in the banking or trust business shall be set
forth in an application in such form and containing such information
as the commissioner may require and shall be accompanied by a fee of
five thousand dollars ($5,000).
1021. Upon receiving a request for an application, the
commissioner shall inform the prospective applicant in writing that
the commissioner is available to confer with such prospective
applicant in advance of the filing of an application for the purpose
of discussing questions relating to such application. However, no
application shall be decided in advance of filing.
1022. Upon the filing of an application the commissioner shall
make or cause to be made a careful investigation and examination
relative to the following:
(a) The character, reputation, and financial standing of the
organizers or incorporators and their motives in seeking to organize
the proposed bank or trust company.
(b) The need for banking or trust facilities or additional banking
or trust facilities, as the case may be, giving particular
consideration to the adequacy of existing banking or trust facilities
and the need for further banking or trust facilities.
(c) The character, financial responsibility, banking or trust
experience, and business qualifications of the proposed officers of
the bank or trust company.
(d) The character, financial responsibility, business experience,
and standing of the proposed stockholders and directors.
(e) Other facts and circumstances bearing on the proposed bank or
trust company and its relation to the locality as in the opinion of
the commissioner
may be relevant.
1023. The commissioner may give or withhold his or her approval
of the application in his or her discretion, but he or she shall not
approve the application until he or she has ascertained to his or her
satisfaction:
(a) That the public convenience and advantage will be promoted by
the establishment of the proposed bank or trust company.
(b) That the proposed bank or trust company will have a reasonable
promise of successful operation.
(c) That the bank is being formed for no other purpose than the
legitimate objects contemplated by this division.
(d) That the proposed capital structure is adequate.
(e) That the proposed officers and directors have sufficient
banking or trust experience, ability, and standing to afford
reasonable promise of successful operation.
(f) That the name of the proposed bank or trust company does not
resemble, so closely as to be likely to cause confusion, the name of
any other bank or trust company transacting business in this state or
which had previously transacted business in this state.
(g) That the applicant has complied with all of the applicable
provisions of this division.
1024. (a) In this section:
(1) "Control" has the meaning set forth in Section 1250.
(2) "Officer" has the meaning set forth in Section 33057.
(b) For purposes of Section 1023, the commissioner may find:
(1) That a proposed officer or director of a proposed bank or
trust company does not have sufficient standing to afford reasonable
promise of successful operation if such person has been convicted of,
or has pleaded nolo contendere to, any crime involving fraud or
dishonesty.
(2) That the establishment of a proposed bank or trust company
will not promote the public convenience and advantage if any person
who is proposed to control the proposed bank or trust company or any
director or officer of such person has been convicted of, or has
pleaded nolo contendere to, any crime involving fraud or dishonesty.
(c) Subdivision (b) shall not be deemed to be the only grounds
upon which the commissioner may find, for purposes of Section 1023,
that a proposed officer or director of a proposed bank or trust
company does not have sufficient standing to afford reasonable
promise of successful operation or that the establishment of a
proposed bank or trust company will not promote the public
convenience and advantage.
1025. At least 30 days before denying an application, the
commissioner shall by mail or other method of service give written
notice of the intended denial of an application and of the right of
the applicant to meet with the commissioner regarding the reasons for
such denial. The request for such meeting shall be in writing and
delivered to the commissioner within 20 calendar days of the date of
giving of the notice of intended denial. If a request is made for
such meeting, the application may not be denied until after the
meeting.
1026. The commissioner may, in approving an application to
organize and establish a corporation to engage in the banking or
trust business pursuant to Section 362, impose any conditions the
commissioner deems reasonable or necessary or advisable in the public
interest.
1027. (a) With the approval of the commissioner, a bank may be
formed to facilitate a merger or an acquisition of control. The new
bank may survive the merger or acquisition of control.
(b) Sections 1020, 1021, 1022, 1023, and 1024 shall not apply to
the formation of a bank pursuant to subdivision (a).
(c) Article 4 (commencing with Section 370) of Chapter 3 of
Division 1 shall apply to a bank formed pursuant to subdivision (a).
(d) A request for approval to form a bank in accordance with
subdivision (a) shall be accompanied by a fee of two thousand five
hundred dollars ($2,500).
CHAPTER 3. AUTHORIZATION TO ENGAGE IN BANKING
1040. In this article:
(a) "Preopening expenditure" means any obligation incurred, or sum
disbursed, by a bank prior to the time when it commences to transact
banking business, for the purpose of organizing such bank.
(b) "Preopening noncapital expenditure" means any preopening
expenditure other than such preopening expenditures as may be
capitalized.
1041. The articles of incorporation of the proposed bank or trust
company shall be submitted to the commissioner for his or her
approval before they are filed with the Secretary of State pursuant
to the Corporations Code. After the articles have been filed with the
Secretary of State the proposed bank or trust company shall:
(a) File with the commissioner a copy of its articles of
incorporation, certified by the Secretary of State.
(b) File with the commissioner a statement in the form and with
any supporting data as the commissioner may require showing that the
entire contributed capital has been fully paid in lawful money,
unconditionally, and that the funds representing the contributed
capital, less sums spent as authorized by this article for preopening
expenditures are on deposit in a state or national bank in this
state, subject to withdrawal on demand.
(c) Pay to the commissioner a fee of two thousand five hundred
dollars ($2,500).
1042. If the commissioner finds that the proposed bank or trust
company has in good faith complied with all the requirements of law
and fulfilled all the conditions precedent to commencing business
imposed by this code or by regulation, the commissioner shall, within
30 days after the statement and supporting data specified in Section
1041 have been filed with him or her, issue in duplicate a
certificate of authorization to transact business as a bank or trust
company, as the case may be, and shall transmit one copy to the bank
or trust company and place one copy on file in the department. The
certificate of authorization shall state that the corporation named
therein has complied with all the provisions of this code governing
organization of banks or trust companies and that it is authorized to
transact the business specified therein.
1043. It shall be unlawful to accept payment of subscriptions for
shares of any corporation proposing to engage in the banking or
trust business unless authority to organize such corporation has been
granted by the commissioner.
1044. No corporation organized to transact a commercial banking
or trust business shall transact any business until the commissioner
has issued his or her certificate authorizing it to transact such
business. No bank or trust company shall incur any indebtedness
except that which is incidental to its organization until the amount
of its contributed capital has been fully paid in lawful money to the
cashier or chief financial officer thereof.
1045. If the proposed bank or trust company fails to file
evidence of incorporation and organization with the commissioner
pursuant to Section 1041 within one year after the approval of the
application for authority to organize the bank or trust company, the
right to organize the bank or trust company automatically terminates.
The commissioner, however, for good cause on written application
filed before the expiration of the original period or any additional
period, as the case may be, and payment of a fee of one hundred
dollars ($100), may extend for additional periods not in excess of
six months each the time within which the bank or trust company may
be organized.
1046. If the proposed bank or trust company fails to open for
business within 90 days after the issuance of the certificate of
authorization, the right to transact business automatically
terminates. The commissioner, however, for good cause on written
application filed before the end of said 90-day period, may extend
for one additional period of not to exceed 90 days the time within
which the bank or trust company may open for business.
1047. It is unlawful to apply any part of the funds collected
from subscribers or shareholders to the payment of commissions or
fees for obtaining subscriptions or selling shares or, except with
the prior approval of the commissioner, to the payment of preopening
noncapital expenditures.
1048. Every bank and trust company shall keep posted in a
conspicuous place in its banking room at its head office the
certificate of authority to transact a banking or trust business
issued by the commissioner.
CHAPTER 4. BANK OFFICES
1070. For purposes of this chapter, the following definitions
apply:
(a) "Automated teller machine" means any electronic information
processing device used by a financial institution and its customers
for the primary purpose of executing transactions solely between the
financial institution and its customers, if the transactions are not
incidental to sales between the customer and a business entity other
than a financial institution.
(b) "Branch office" means any office at which core banking
business is conducted other than an automated teller machine, a
device used to facilitate check guarantee or check authorization, or
a remote service facility as defined in subsection (d) of Section
345.12 of Title 12 of the Code of Federal Regulations.
(c) "Core banking business" means the business of receiving
deposits, paying checks, making loans, and other activities that the
commissioner may specify by order or regulation. "Core banking
business," when used to describe the trust business, includes
receiving fiduciary assets and administering fiduciary accounts.
(d) "Facility," means an office in this state at which a bank
engages in noncore banking business but at which it does not engage
in core banking business.
(e) "Head office" means the office designated by the bank as its
headquarters.
(f) "Noncore banking business" means all activities permissible
for banks, except core banking business, and except those activities
prohibited by law or determined by the commissioner by regulation or
order not to be noncore banking business.
(g) "Office" means the head office, any branch office, and any
facility office of a bank.
(h) "Redesignate offices" means (1) the relocation by a bank of
its head office to the site of a branch or facility office in this
state and the concurrent establishment by the bank of an office at
the former site of the head office, or (2) the relocation by a bank
of a branch office to the site of a facility office and the
concurrent establishment by the bank of a branch or facility office
at the former site of the branch office.
1071. The commissioner shall issue a certificate in duplicate
authorizing a bank to establish and maintain an office. A bank shall
pay a fee of twenty-five dollars ($25) for every certificate the
commissioner issues pursuant to this section.
1072. Every bank shall establish and maintain a head office which
shall be located in this state.
1073. A bank, with the approval of its board, may establish and
maintain one or more offices.
1074. A bank, with the approval of its board, may relocate an
office.
1075. A bank, with the approval of its board, may redesignate
offices.
1076. Each time a bank establishes an office, relocates an
office, or redesignates an office, the bank shall, within 10 days of
the establishment, relocation, or redesignation of the offices, file
a notice with the commissioner. The notice shall include:
(a) The type of office or offices to be established, relocated, or
redesignated.
(b) The complete address of the office or offices to be
established, relocated, or redesignated. If an office is being
relocated, the old address of the office and the address at which the
office will be relocated.
(c) The date the office or offices were established, relocated, or
redesignated.
(d) The appropriate fee for the certificate or certificates to be
issued by the commissioner.
1077. On or before January 1 of each year, every bank shall file
with the commissioner a list of all offices that are currently
maintained and operated by the bank. The report shall designate the
type of each office that is being maintained and operated, and the
complete address of each office.
1078. (a) A bank may close or discontinue the operation of any
branch office if, before the closing or discontinuance, (1) the bank
files with the commissioner a notice containing the information in
subdivision (b), and (2) the commissioner within 60 days after the
filing of the notice or any longer period to which the bank consents,
filing of the notice or any longer period to which the bank
consents, either (A) issues a written statement not objecting to the
notice, or (B) does not issue a written objection to the notice.
(b) (1) A notice filed under subdivision (a) shall contain all of
the following information:
(A) The name of the California state bank.
(B) The location of the branch office proposed to be closed or
discontinued.
(C) The location of the office to which the business of the branch
office proposed to be closed or discontinued is proposed to be
transferred.
(D) The proposed date of closing or discontinuance.
(E) A detailed statement of the reasons for the decision to close
the branch office.
(F) Statistical or other information in support of the reasons
consistent with the institution's written policy for branch office
closings.
(G) Any other information that the commissioner may require.
(2) A notice filed under subdivision (a) shall be in the form,
shall be signed in the manner, and shall, if the commissioner
requires, be verified in the manner that the commissioner may
require.
(c) For purposes of subdivision (a), a notice is deemed to be
filed with the commissioner at the time when the complete notice,
including any amendments or supplements, containing all the
information required by the commissioner, and otherwise complying
with subdivision (b), is received by the commissioner.
(d) In determining whether or not to object to a notice filed
under subdivision (a), except if the commissioner finds that it is
necessary in the interests of safety and soundness that the branch
office be closed or discontinued, the commissioner shall consider
whether the closing or discontinuance of the branch office will have
a seriously adverse effect on the public convenience or advantage.
1079. If the commissioner finds for any reason that the
establishment, relocation, or redesignation of office would be unsafe
or unsound for a bank, the commissioner may order the bank not to
establish, relocate, or redesignate offices without the prior
approval of the commissioner. The order may contain any other
restrictions and conditions as the commissioner deems necessary.
1080. If a bank violates any provision of this chapter or fails
to comply with any order, the commissioner may levy a penalty against
the bank pursuant to Section 216.3.
1081. A bank, with the approval of its board, may discontinue a
facility office. Within 10 days of the date of the closure of the
facility office, the bank shall file a notice of that discontinuance
with the commissioner. The notice shall contain the information
required by Section 1076. There shall be no fee associated with the
discontinuance of a facility office.
1082. Any bank that establishes a branch office in this state in
accordance with Section 36(g)(1)(A) of the National Bank Act (12
U.S.C. Sec. 36(g)(1)(A)), or Section 18(d)(4)(A)(i) of the Federal
Deposit Insurance Act (12 U.S.C. Sec. 1828(d)(4)(A)(i)), as those
sections were amended by the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, shall, within 10 days of the
establishment, relocation, or redesignation of the offices, file a
notice with the commissioner that includes all of the following:
(a) The name of the bank establishing the branch office or
offices.
(b) The home state or state of incorporation of the bank
establishing the branch office or offices.
(c) The complete address of the office or offices established or
to be established.
(d) The date the branch office or offices were or will be opened.
(e) Any other information, if any, that the commissioner deems
necessary.
CHAPTER 4.5. BANK EXTRAORDINARY SITUATION CLOSING
1090. This chapter is known and may be cited as the "Bank
Extraordinary Situation Closing Act."
1091. "Extraordinary situation" means any condition or
occurrence, other than as set forth in Section 592, that may
interfere or is inconsistent with the conduct of normal business
operations at one or more offices of a bank or which poses a threat
to the safety or security of persons or property, or both.
1092. Whenever the commissioner determines that an extraordinary
situation exists anywhere in this state the commissioner may, by
proclamation, authorize banks located in the affected area or areas
to close any or all of their offices. The office or offices so closed
shall remain closed until the commissioner proclaims that the
extraordinary situation has ended or until such earlier time as the
officers of the bank determine that one or more closed offices should
reopen and in either event for such further time thereafter as may
reasonably be required to reopen.
1093. (a) Whenever the officers of a bank are of the opinion that
an extraordinary situation exists which affects or may affect one or
more of a bank's offices, they shall have the authority in the
reasonable and proper exercise of their discretion to determine not
to open such offices on any business or banking day, or, if such
offices have opened to close one or more of them during the
continuation of such extraordinary situation even if the commissioner
has not issued and does not issue a proclamation of extraordinary
situation. The office or offices so closed shall remain closed until
such time as the officers determine with respect to each such office
that the extraordinary situation has ended and for such further time
thereafter as may reasonably be required to be reopened; however, in
no case shall such office or offices remain closed for more than 48
consecutive hours excluding other legal holidays without requesting
the approval of the commissioner nor, in case such request is denied
by the commissioner, for more than 24 consecutive hours excluding
other legal holidays after such denial.
(b) The officers of a bank may close one or more of the bank's
offices on any day or days designated for mourning, rejoicing, or
other special observance by proclamation of the Governor or the
President of the United States.
1094. A bank closing an office or offices pursuant to the
authority granted under subdivision (a) of Section 1093 shall give
prompt notice of its action to the commissioner, by any means
available.
1095. Any day on which a bank or any one or more of its offices
is closed pursuant to the authorization granted by this chapter shall
be, with respect to such bank or any of its offices which are
closed, a legal holiday for all purposes with respect to any banking
business of any character. No liability, or loss of rights of any
kind, on the part of any bank or director, officer, or employee
thereof, shall accrue or result by virtue of any closing authorized
by this chapter.
1096. Provisions of this chapter shall be construed and applied
as being in addition to, and not a substitution for, or limitation
of, any other law of this state or the United States authorizing the
closing of a bank or excusing the delay by a bank in the performance
of its duties and obligations because of extraordinary situations or
conditions beyond the bank's control or otherwise.
CHAPTER 5. CORPORATE REQUIREMENTS
Article 1. Articles, Bylaws, and Names
1100. The articles of each bank shall contain the applicable one
of the following statements:
(a) In case the bank is, or is proposed to be, a commercial bank
not authorized to engage in trust business, that the purpose of the
corporation is to engage in commercial banking business and any other
lawful activities which are not, by applicable laws or regulations,
prohibited to a commercial bank.
(b) In case the bank is, or is proposed to be, a commercial bank
authorized to engage in trust business, that the purpose of the
corporation is to engage in commercial banking business and trust
business and any other lawful activities which are not, by applicable
laws or regulations, prohibited to a commercial bank authorized to
engage in trust business.
(c) In case the bank is, or is proposed to be, an industrial bank
not authorized to engage in trust business, that the purpose of the
corporation is to engage in industrial banking business and any other
lawful activities which are not, by applicable laws or regulations,
prohibited to an industrial bank.
(d) In case the bank is, or is proposed to be, an industrial bank
authorized to engage in trust business, that the purpose of the
corporation is to engage in industrial banking business and trust
business and any other lawful activities which are not, by applicable
laws or regulations, prohibited to an industrial bank authorized to
engage in trust business.
(e) In case the bank is, or is proposed to be, a trust company
(other than a commercial bank authorized to engage in trust
business), that the purpose of the corporation is to engage in trust
business and any other lawful activities which are not, by applicable
laws or regulations, prohibited to a trust company.
1101. (a) In this section:
(1) "Assessment provision" means the provision in the articles of
a bank that complies with the requirements of Section 600.2, as in
effect immediately before the effective date of this section, or any
predecessor statute.
(2) "Bank" means any (A) California state bank or (B) corporation
organized under the laws of this state for the purpose of transacting
business pursuant to Article 1 (commencing with Section 1850) of
Chapter 21.
(b) On and after the effective date of this section, the
assessment provision in the articles of a bank shall no longer be of
any force or effect.
(c) Notwithstanding Sections 902 and 903 of the Corporations Code,
a bank may, on or after the effective date of this section, amend
its articles by deleting the assessment provision with the approval
of its board alone and without any approval of its outstanding
shares.
(d) (1) Any order issued before the effective date of this section
by the commissioner pursuant to Section 662, as in effect
immediately before the effective date of this section or any
predecessor statute, shall, if and to the extent that the bank has
not before that date levied and collected through sale of shares or
otherwise, an assessment on its common shares, be deemed rescinded.
(2) Any proceeding commenced before the effective date of this
section by a bank to assess its common shares in accordance with an
order issued by the commissioner pursuant to Section 662, as in
effect immediately before the effective date of this section or any
predecessor statute, shall be terminated on the effective date of
this section. On and after the effective date of this section, the
bank shall take no further action to levy or collect the assessment
on its common shares, and any lien on the common shares created by
the assessment shall be deemed extinguished.
1102. (a) No amendment of the articles of a bank (other than an
amendment set forth in an agreement of merger or in a certificate of
ownership executed pursuant to Section 1110 of the Corporations Code
that requires the approval of the commissioner pursuant to Chapter 4
(commencing with Section 4880) of Division 1.6) shall become
effective unless the certificate of amendment or other instrument
setting forth the amendment is filed with the Secretary of State with
the commissioner's approval endorsed thereon. Promptly after the
amendment becomes effective, the bank shall file with the
commissioner a copy of the certificate of amendment or other
instrument certified by the Secretary of State.
(b) Any amendment of the articles of a bank set forth in an
agreement of merger or in a certificate of ownership executed
pursuant to Section 1110 of the Corporations Code that requires the
approval of the commissioner pursuant to Chapter 4 (commencing with
Section 4880) of Division 1.6, shall become effective at the time
when the merger becomes effective pursuant to this division.
1103. No restated articles of a bank shall become effective
unless the certificate setting forth such restated articles is filed
with the Secretary of State with the commissioner's approval endorsed
thereon. Promptly after the restated articles become effective, such
bank shall file with the commissioner a copy of such certificate
certified by the Secretary of State.
1104. No certificate of determination of a bank shall become
effective unless such certificate of determination is filed with the
Secretary of State with the commissioner's approval endorsed thereon.
Promptly after the certificate of determination becomes effective,
such bank shall file with the commissioner a copy of the certificate
of determination certified by the Secretary of State.
1105. No certificate of correction of a bank shall become
effective unless such certificate of correction is filed with the
Secretary of State with the commissioner's approval endorsed thereon.
Promptly after the certificate of correction becomes effective, such
bank shall file with the commissioner a copy of the certificate of
correction certified by the Secretary of State.
1106. No certificate of revocation of a bank shall become
effective unless such certificate of revocation is filed with the
Secretary of State with the commissioner's approval endorsed thereon.
Promptly after the certificate of revocation becomes effective, such
bank shall file with the commissioner a copy of the certificate of
revocation certified by the Secretary of State.
1107. (a) A bank may change its name if it files with the
commissioner a report on the proposed change not less than 30 days
before the change. The report shall be in the form, shall contain the
information, shall be signed in the manner, and shall, if the
commissioner so requires, be verified in the manner the commissioner
may require.
(b) Whenever a bank changes its name, the bank shall surrender to
the commissioner for cancellation the certificates of authority under
its old name for its head office, any branch offices, and any places
of business. The commissioner shall issue to the bank replacement
certificates under the bank's new name and the bank shall pay to the
commissioner a fee of twenty-five dollars ($25) for each replacement
certificate.
(c) The commissioner may not deny an application for approval of
an amendment of the articles of incorporation of a bank which changes
the name of the bank or any other application of a bank relating to
a change in the name of the bank because the new name of the bank
resembles so closely, as to be likely to cause confusion, the name of
any other bank.
Article 2. Shares
1120. A bank may, with the approval of its board, determine and
from time to time redetermine the par value of any class or series of
its shares unless its articles provide that such shares shall have
par value and specify the par value of such shares.
1121. No bank or trust company after October 1, 1949, shall issue
any shares before they are fully paid for.
1122. No bank shall issue any shares in consideration of:
(a) Services rendered in the organization of such bank; or
(b) Any note (whether or not negotiable and whether or not
secured) made by the purchaser of such shares.
Article 3. Distributions to Shareholders
1130. This article does not apply to any distribution made to the
shareholders of a bank in any proceeding to wind up and dissolve or
to liquidate such bank.
1131. Section 500 of the Corporations Code does not apply to the
making by a bank or by any majority-owned subsidiary of a bank of any
distribution to the shareholders of such bank.
1132. Neither a bank nor any majority-owned subsidiary of a bank
shall make any distribution to the shareholders of such bank in an
amount which exceeds the lesser of:
(a) The retained earnings of the bank; or
(b) The net income of the bank for its last three fiscal years,
less the amount of any distributions made by the bank or by any
majority-owned subsidiary of the bank to the shareholders of the bank
during such period.
1133. Notwithstanding the provisions of Section 1132, a bank or a
majority-owned subsidiary of a bank may, with the prior approval of
the commissioner, make a distribution to the shareholders of such
bank in an amount not exceeding the greatest of:
(a) The retained earnings of the bank;
(b) The net income of the bank for its last fiscal year; or
(c) The net income of the bank for its current fiscal year.
1134. Notwithstanding the provisions of Section 1132, a bank may:
(a) With the prior approval of the commissioner, make a
distribution to its shareholders by means of redeeming its redeemable
shares; and
(b) With the prior approval of its outstanding shares and of the
commissioner, otherwise make a distribution to its shareholders in
connection with a reduction of its contributed capital.
1135. If the commissioner finds that the shareholders' equity of
a bank is not adequate or that the making by a bank or by any
majority-owned subsidiary of a bank of a distribution to the
shareholders of the bank would be unsafe or unsound for the bank, the
commissioner may order the bank and its majority-owned subsidiaries
not to make any distribution to the shareholders of the bank. In
addition to the order authorized by this section, the commissioner
may levy a civil penalty against the bank pursuant to Section 329.
Article 4. Shareholders' Equity
1150. In determining for purposes of this division whether the
shareholders' equity of a bank or of a proposed bank is adequate, the
commissioner shall consider:
(a) The nature and volume of the business of the bank;
(b) The amount, nature, quality, and liquidity of the assets of
the bank;
(c) The amount and nature of the liabilities (including, but not
limited to, any capital notes or debentures and any contingent
liabilities) of the bank;
(d) The amount and nature of the fixed charges of the bank;
(e) The history of, and prospects for, the bank to earn and retain
income;
(f) The quality of the operations of the bank;
(g) The quality of the management of the bank;
(h) The nature and quality of the ownership of the bank; and
(i) Such other factors as are in the opinion of the commissioner
relevant.
1151. For purposes of any statute, regulation, or requirement of
any governmental official or agency which refers to the capital
(including, without limitation, stated capital, paid-in capital, and
paid-up capital, but excluding contributed capital), surplus, or
undivided profits of a bank, a bank, with the approval of its board,
may establish and maintain capital, surplus, and undivided profits
accounts and may from time to time allocate and reallocate its
shareholders' equity among such accounts; provided, however:
(a) That no part of the contributed capital of the bank shall be
allocated to the undivided profits account of the bank;
(b) That the undivided profits account of the bank shall at no
time exceed the retained earnings of the bank; and
(c) That, in case the articles of the bank provide that any of the
bank's shares shall have par value and specify the par value of such
shares or in case the bank has determined the par value of any of
its shares pursuant to Section 1120, the capital account of the bank
shall be not less than the aggregate par value of such shares which
are outstanding.
1152. A bank which has deficit retained earnings may, with the
prior approval of its outstanding shares and of the commissioner,
readjust its accounts in a quasi-reorganization. Such readjustment
may include, without limitation, eliminating such deficit retained
earnings.
Article 5. Directors
1170. Any reference in this article to the time a notice is given
or sent shall be construed in accordance with Section 118 of the
Corporations Code.
1171. The board of a bank or trust company hereafter organized
shall consist of not less than 5 nor more than 25 directors, and no
bank or trust company shall amend its articles or bylaws so as to
reduce the number of directors below five.
1172. The board of each bank and of each trust company shall hold
a meeting not less than once each calendar quarter. Regular meetings
of the board shall be held within this state. Any regular or special
meeting is valid wherever held if held upon written consent of all
members of the board given either before or after the meeting and
filed with the secretary of the corporation. Special meetings of the
board may be held upon four days' notice by mail, unless the articles
or bylaws provide otherwise, or 24 hours' notice delivered
personally or by telephone or by telegraph, unless the articles or
bylaws provide for a shorter period.
1173. The commissioner may, in the name of the people of this
state, bring or intervene in an action under Section 709 of the
Corporations Code to determine the validity of any election or
appointment of any director of a bank to the same extent as a
shareholder of such bank might bring such an action.
1174. (a) The commissioner shall be deemed to be a party in
interest within the meaning of Section 306 of the Corporations Code
with respect to a bank and may, in the name of the people of this
state, bring or intervene in an action under Section 306 of the
Corporations Code for the appointment of directors of a bank.
(b) The commissioner may, in the name of the people of this state,
bring or intervene in an action under Section 308 of the
Corporations Code for the appointment of a provisional director or
directors of a bank to the same extent as a shareholder who held 50
percent of the voting power of such bank might bring such an action.
1175. (a) For purposes of Section 316 of the Corporations Code,
to the extent that the making by a bank or by any majority-owned
subsidiary of a bank of a distribution to any shareholder of the bank
is contrary to any provision of Article 3 (commencing with Section
1130), the making of the distribution shall, to that extent, be
deemed to be contrary to the provisions of Section 500 of the
Corporations Code.
(b) The commissioner may, in the name of the people of this state,
bring or intervene in an action under Section 316 of the
Corporations Code for the benefit of a bank against any or all of the
directors of the bank or of any majority-owned subsidiary of the
bank on account of the making of a distribution to any shareholder of
the bank contrary to any provision of Article 3 (commencing with
Section 1130) or any provision of Sections 501, 502, and 503 of the
Corporations Code, to the same extent as a creditor of the bank who
did not consent to the illegal distribution and who had a valid claim
against the bank that arose prior to the time of the illegal
distribution and exceeded the amount of the illegal distribution, may
bring the action in the name of the bank.
(c) As an alternative to the action provided for in subdivision
(b), the commissioner may levy a civil penalty against the bank
pursuant to Section 329.
1176. (a) For purposes of Section 316 of the Corporations Code,
the making of a loan or guarantee by a bank or any other extending of
credit by a bank contrary to any provision of this division shall be
deemed to be contrary to Section 315 of the Corporations Code.
(b) The commissioner may, in the name of the people of this state,
bring or intervene in an action under Section 316 of the
Corporations Code for the benefit of a bank against any or all of the
directors of the bank on account of the making of a loan or
guarantee or any other extending of credit contrary to any provision
of this division, to the same extent as a creditor of the bank who
did not consent to the illegal making of the loan or guarantee or the
other illegal extending of credit and who had a valid claim against
the bank which arose prior to the time of the illegal making of the
loan or guarantee or the other illegal extending of credit and which
exceeded the amount of loss suffered by the bank as a result of the
illegal making of the loan or guarantee or the other illegal
extending of credit, might bring the action in the name of the bank.
(c) As an alternative to the action provided for in subdivision
(b), the commissioner may levy a civil penalty against the bank
pursuant to Section 329.
Article 6. Shareholders
1190. (a) Paragraph (1) of subdivision (b) of Section 1501 of the
Corporations Code does not apply to the annual report of any bank
with respect to any transaction consisting of an extension of credit
by such bank or by any of its majority-owned subsidiaries.
(b) The annual report of a bank which would, but for the
provisions of subdivision (a), be subject to paragraph (1) of
subdivision (b) of Section 1501 of the Corporations Code, shall
disclose such information regarding debts owing to such bank or to
any of its majority-owned subsidiaries and transactions consisting of
extensions of credit by the bank or by any of its majority-owned
subsidiaries, as the commissioner may by regulation require. In
issuing any such regulation, the commissioner shall give due
consideration to regulations regarding such matters issued by federal
bank regulatory agencies under the Securities Exchange Act of 1934.
CHAPTER 6. SECURITIES
1200. Unless the context otherwise requires, in this chapter:
(a) "Offer" or "offer to sell" includes every attempt or offer to
dispose of, or solicitation of an offer to buy, a security for value.
(b) "Sale" or "sell" includes every contract of sale of, contract
to sell, or disposition of, a security for value. "Sale" or "sell"
includes any exchange of securities and any change in the rights,
preferences, privileges, or restrictions of or on outstanding
securities.
(c) "Security" means any stock, capital note, or debenture, or any
warrant, right, or option to subscribe to or purchase any of the
foregoing.
(d) The terms defined in subdivisions (a) and (b) do not include
any stock dividend payable with respect to common stock of a bank
solely (except for any cash or scrip paid for fractional shares) in
shares of such common stock, if such bank has no other class of
voting stock outstanding, provided that shares issued in any such
dividend shall be subject to any conditions previously imposed by the
commissioner applicable to the shares with respect to which they are
issued.
1201. No bank organized under the laws of this state shall offer
or sell any security issued by it unless the commissioner has issued
a permit authorizing such sale.
1202. The following transactions are exempt from Section 1201:
(a) (1) Any offer (but not a sale) not involving a public offering
by a bank organized under the laws of this state of its securities
and the execution and delivery of any agreement for the sale of the
securities pursuant to the offer if no part of the consideration for
the securities is paid to or received by the bank and none of the
securities are issued until the sale of the securities is authorized
by the commissioner or exempted from authorization.
(2) For purposes of paragraph (1), an offer does not involve any
public offering if the offers are not made to more than 25 persons
and any agreement for the sale of the securities is not entered into
with more than 10 of those 25 persons, and if all of the offerees
either have a preexisting personal or business relationship with the
bank or its officers, directors, or controlling persons, or by reason
of their business or financial experience the offerees could be
reasonably assumed to have the capacity to protect their own
interests in connection with the transaction.
(b) Any stock split by a bank organized under the laws of this
state that is effected pursuant to an amendment to its articles, an
agreement of merger, or a certificate of ownership that has been
approved by the commissioner, unless this exemption is withheld by
order of the commissioner.
(c) Any offer or sale of securities by a bank organized under the
laws of this state that is either (1) to a person actually approved
by the commissioner pursuant to Section 1253 to acquire control of
the bank if all of the material terms and conditions of the offer and
sale of securities are disclosed in the application for approval
specified in Section 1253 and the offer and sale of securities is in
accordance with the terms and subject to the conditions of the
approval to acquire control or (2) in a transaction exempted from the
approval requirement of Section 1251 by a regulation or an order of
the commissioner, unless this exemption is withheld by order of the
commissioner.
1203. An application for a permit shall be in such form and
contain such information as the commissioner may prescribe.
1204. The commissioner shall charge and collect fees for
applications filed under this chapter as fixed in this section.
(a) The fee for a negotiating permit shall be fifty dollars ($50).
(b) The fee for a permit to exchange a security or to make any
change in the rights, preferences, privileges, or restrictions of or
on outstanding securities shall be fifty dollars ($50).
(c) The fee for any permit to sell securities other than as
specified in subdivision (b) shall be one hundred dollars ($100) plus
one-tenth of one percent (0.1%) of the aggregate value of the
securities sought to be sold, up to a maximum aggregate fee of one
thousand seven hundred fifty dollars ($1,750).
1205. If the commissioner finds that the proposed sale of
securities is fair, just, and equitable, he or she shall issue to the
applicant a permit authorizing it to offer and sell the securities
in such amount and upon such terms and conditions as he or she may
provide in the permit. If the commissioner finds otherwise, he or she
shall deny the application.
1206. The commissioner may impose conditions in any permit issued
under Section 1205, requiring the deposit in escrow of securities,
imposing a legend condition restricting the transferability thereof,
impounding the proceeds from the sale thereof, limiting the expense
in connection with the sale thereof, or such other conditions as he
or she deems reasonable and necessary or advisable in the public
interest.
1207. Every permit issued pursuant to Section 1205 shall recite
that it is permissive only and does not constitute a recommendation
or endorsement of the securities permitted to be sold.
1208. The commissioner may amend, alter, suspend, or revoke any
permit issued pursuant to Section 1205.
1209. Whenever a bank applies for a permit to issue any security
or to deliver any other consideration (whether or not such security
or such transaction is exempt from, or not subject to, the provisions
of Section 1202) in exchange for one or more bona fide outstanding
securities (as defined in Section 25019 of the Corporations Code),
claims, or property interests, or partly in such exchange and partly
for cash, the commissioner is authorized to approve the terms and
conditions of such issuance and exchange or such delivery and
exchange and the fairness of such terms and conditions and is
authorized to hold a hearing on the fairness of such terms and
conditions, at which all persons to whom it is proposed to issue any
security or to deliver any other consideration in such exchange shall
have the right to appear.
1210. There shall be exempted from the provisions of Section 1201
any transaction or security, including, without limitation, any type
or class of transactions or securities, which the commissioner by
regulation or order exempts as not being comprehended within the
purposes of this chapter and the regulation of which he or she finds
is not necessary or appropriate in the public interest or for the
protection of investors.
1211. A bank at any time may, with the approval of its board,
issue, sell or hypothecate its capital notes or debentures which may
be payable upon such terms and may bear such rate of interest, if
any, as may be provided therein or which may be convertible into
shares. Such capital notes and debentures shall be subordinate to the
claims of creditors and depositors and it shall be provided in any
such capital notes or debentures that in the event of liquidation all
depositors and other creditors of the bank shall be entitled to be
paid in full with such interest as may be provided by law before any
payment shall be made on account of principal of or interest on such
capital notes or debentures and it may be provided in any such
capital notes or debentures that after payment in full of all sums
owing to such depositors and creditors the holders of such capital
notes or debentures shall be entitled to be paid from the remaining
assets of the bank the unpaid principal amount of the capital notes
or debentures plus accrued and unpaid interest thereon before any
payment or other distribution, whether in cash, property or
otherwise, shall be made on account of any shares of the bank. It
shall be provided in such capital notes or debentures that no payment
shall at any time be made on account of the principal thereof,
unless following such payment the aggregate of the shareholders'
equity and capital notes or debentures thereafter outstanding shall
be the equal of such aggregate at the date of the original issue of
such capital notes or debentures, or as may be otherwise authorized
by the commissioner.
1212. Nothing contained in this chapter shall affect the
Corporate Securities Law of 1968, Division 1 (commencing with Section
25000) of Title 4 of the Corporations Code.
CHAPTER 7. ACQUISITION OF CONTROL
1250. Unless the context otherwise requires, in this chapter:
(a) "Bank" means a bank organized under the laws of this state.
(b) "Control" means possession, direct or indirect, of the power:
(1) To vote 25 percent or more of any class of the voting
securities issued by a person; or
(2) To direct or cause the direction of the management and
policies of a person, whether through the ownership of voting
securities, by contract (other than a commercial contract for goods
or nonmanagement services), or otherwise; provided, however, that no
individual shall be deemed to control a person solely on account of
being a director, officer, or employee of such person.
For purposes of paragraph (2) of this subdivision, a person who,
directly or indirectly, owns, controls, holds with the power to vote,
or holds proxies representing, 10 percent or more of the then
outstanding voting securities issued by another person is presumed to
control such other person.
For purposes of this chapter, the commissioner may determine
whether a person in fact controls another person.
(c) "Controlling person" means a person who, directly or
indirectly, controls a bank.
(d) "Person" means an individual, a corporation, an association, a
syndicate, a partnership, a limited liability company, a business
trust, an estate, a trust, or an organization of any kind, or any
combination of any of the foregoing acting in concert.
(e) "Shareholder" means:
(1) In the case of a corporation, a holder of a share of any class
or series.
(2) In the case of a nonprofit or charitable corporation, an
unincorporated association, or a syndicate, a member.
(3) In the case of a partnership, a partner.
(4) In the case of a business trust, an estate, or a trust, a
holder of a beneficial interest.
(5) In the case of an organization of any other kind, a holder of
an ownership interest.
1251. No person shall, directly or indirectly, unless the
commissioner has approved such acquisition of control, do any of the
following:
(a) Make a tender offer for, a request or invitation for tenders
of, or an offer to exchange securities for, any voting security or
any security convertible into a voting security of a bank or a
controlling person if the person making such tender offer, request or
invitation for tenders, or offer to exchange securities would, by
consummation thereof, directly or indirectly, acquire control of such
bank or such controlling person.
(b) Solicit approval of any shareholder of a controlling person
for a merger, consolidation, sale of assets, or other transaction by
which any person other than such controlling person would acquire
control of the bank controlled by such controlling person.
(c) Acquire control of a bank or a controlling person; provided,
however, that nothing in this subdivision shall be deemed to prohibit
any person from negotiating to acquire (but not acquiring) control
of a bank or a controlling person.
1252. Notwithstanding any other provision of this chapter, except
for those persons approved by the commissioner prior to September 1,
2002, and for those persons who control industrial banks as of
September 1, 2002, no person may directly or indirectly, including
through any merger, consolidation, or any other type of business
combination, acquire control of an industrial bank, as defined in
Section 111, unless the person is engaged only in the activities
permitted for financial holding companies, as provided in Section 103
of the federal Gramm-Leach-Bliley Act (12 U.S.C. Sec. 1843(k)(1)),
or is a credit union, as defined in Section 165, when the industrial
bank is a credit union service organization, as defined in Section
14651. Nothing in this section shall be construed to exempt a person
seeking to acquire control of a bank that otherwise qualifies to do
so pursuant to this section, from the requirements of Sections 1250
to 1263, inclusive. For the purposes of this section, the term
"control" has the same meaning as in subdivision (b) of Section 1250.
1253. An application for approval to acquire control of a bank or
a controlling person shall be in such form and contain such
information as the commissioner may require by regulation or order
and shall be accompanied by the following fee:
(a) In case the applicant has been a director or officer of the
bank for not less than two years (or, if the bank has been in
business for less than two years, for such lesser period), a fee of
five hundred dollars ($500); and
(b) In any other case, a fee of one thousand five hundred dollars
($1,500).
1254. If the commissioner finds, with respect to the proposed
acquisition of control of a bank or a controlling person, that any of
the factors set forth in subdivisions (a) to (g), inclusive, is
true, he or she shall deny the application. If the commissioner finds
that none of such factors is true, he or she shall approve the
application.
(a) That the proposed acquisition of control would result in a
monopoly or would be in furtherance of any combination or conspiracy
to monopolize or to attempt to monopolize the business of banking in
any part of this state;
(b) That the effect of the proposed acquisition of control in any
section of the state may be substantially to lessen competition or to
tend to create a monopoly or that the proposed acquisition of
control would in any other manner be in restraint of trade, and that
the anticompetitive effects of the proposed acquisition of control
are not clearly outweighed in the public interest by the probable
effect of the transaction in meeting the convenience and needs of the
community to be served;
(c) That the financial condition of any acquiring person is such
as might jeopardize the financial stability of the bank or the
controlling person, or prejudice the interests of the depositors,
creditors, or shareholders of the bank or the controlling person;
(d) That plans or proposals to liquidate the bank or the
controlling person, to sell the assets of the bank or the controlling
person, to merge or consolidate the bank or the controlling person,
or to make any other major change in the business, corporation
structure or management of the bank or the controlling person are not
fair and reasonable to the depositors, creditors, and shareholders
of the bank or the controlling person;
(e) That the competence, experience, or integrity of any acquiring
person indicates that it would not be in the interest of the
depositors, creditors, or shareholders of the bank or the controlling
person or in the interest of the public to permit such person to
control the bank or the controlling person;
(f) That the proposed acquisition is unfair, unjust, or
inequitable to the bank or the controlling person or to the
depositors, creditors, or shareholders of the bank or the controlling
person; or
(g) That the applicant neglects, fails, or refuses to furnish to
the commissioner all the information required by the commissioner.
1255. (a) In this section, "officer" has the meaning set forth in
Section 33057.
(b) For purposes of Section 1254, the commissioner may find:
(1) That the integrity of an acquiring person indicates that it
would not be in the interest of the depositors, creditors, or
shareholders of a bank or controlling person or in the interest of
the public to permit the
acquiring person to control the bank or controlling person if the
acquiring person or any director or officer of the acquiring person
has been convicted of, or has pleaded nolo contendere to, any crime
involving fraud or dishonesty.
(2) That a plan to make a major change in the management of a bank
or controlling person is not fair and reasonable to the depositors,
creditors, or shareholders of the bank or controlling person if the
plan provides for a person who has been convicted of, or has pleaded
nolo contendere to, any crime involving fraud or dishonesty to become
a director or officer of the bank or controlling person.
(c) Subdivision (b) shall not be deemed to be the only grounds
upon which the commissioner may find, for purposes of Section 1254,
that the integrity of an acquiring person indicates that it would not
be in the interest of the depositors, creditors, or shareholders of
a bank or controlling person or in the interest of the public to
permit the acquiring person to control the bank or controlling person
or that a plan to make a major change in the management of a bank or
controlling person is not fair and reasonable to the depositors,
creditors, or shareholders of the bank or controlling person.
1256. The commissioner may, in approving a proposal to acquire
control of a bank or a controlling person pursuant to Section 1254,
impose such conditions as the commissioner deems reasonable or
necessary or advisable in the public interest.
1257. The commissioner may, for good cause, amend, alter,
suspend, or revoke any approval of a proposal to acquire control of a
bank or a controlling person issued pursuant to Section 1254.
1258. Notwithstanding any other provision of this chapter, any
application for approval to acquire control of a bank or a
controlling person which is not denied or approved by the
commissioner within a period of 60 days after such application is
filed with the commissioner or, if the applicant consents to an
extension of the period within which the commissioner may act, within
such extended period, shall be deemed to be approved by the
commissioner as of the first day after such period of 60 days or such
extended period, as the case may be.
For purposes of this section, an application for approval to
acquire control of a bank or a controlling person is deemed to be
filed with the commissioner at the time when the complete
application, including any amendments or supplements, containing all
the information in the form required by the commissioner, is received
by him or her.
1259. (a) The commissioner, before determining whether, for
purposes of this chapter, a person controls another person or before
denying or approving an application for approval to acquire control
of a bank or controlling person, may hold a hearing.
(b) After determining whether, for purposes of this chapter, a
person controls another person or after denying or approving an
application for approval to acquire control of a bank or controlling
person, the commissioner, upon the filing of a written request for a
hearing by any person prejudiced by the commissioner's decision,
shall hold a hearing and upon such hearing shall affirm, modify, or
reverse his or her decision. Any such hearing shall commence within a
period of 30 days after the written request for the hearing is filed
with the commissioner or, if the person filing the written request
for the hearing consents to an extension of the period within which
the hearing is to commence, within such extended period.
1260. There shall be exempted from the provisions of Section 1251
any transaction, including, without limitation, any type or class of
transactions, which the commissioner by regulation or order exempts
as not being comprehended within the purposes of this chapter and the
regulation of which the commissioner finds is not necessary or
appropriate in the public interest or for the protection of a bank, a
controlling person, or the depositors, creditors, or shareholders of
a bank or a controlling person.
1261. Whenever it appears to the commissioner that any person has
committed or is about to commit a violation of any provision of this
chapter or of any regulation or order of the commissioner issued
pursuant to this chapter, the commissioner may apply to the superior
court for an order enjoining such person from violating or continuing
to violate this chapter or any such regulation or order and for
other equitable relief as the nature of the case or the interests of
the bank, the controlling person, the depositors, creditors, or
shareholders of such bank or such controlling person, or the public
may require.
1262. No person shall be entitled to vote or to give a written
consent with respect to any security acquired in contravention of any
provision of this chapter or of any regulation or order of the
commissioner issued pursuant to this chapter for a period of three
years after such acquisition. If a security of a bank or a
controlling person is acquired in contravention of this chapter or
any such regulation or order, such bank, such controlling person, any
shareholder of such bank or such controlling person, or the
commissioner may apply to the superior court for equitable relief,
including costs and (except with respect to the commissioner)
attorney fees, to enjoin prospectively any person from voting or
giving any written consent with respect to such security for a period
of three years after such acquisition, and the commissioner may
apply to the superior court for equitable relief, including costs, to
void any voting or any giving of a written consent with respect to
such security which has occurred since such acquisition.
1263. If any provision or clause of this chapter or the
application thereof to any person or circumstance is held invalid,
illegal, or unenforceable, such invalidity, illegality, or
unenforceability shall not affect other provisions or applications of
this article which can be given effect without the invalid, illegal,
or unenforceable provision or application, and to this end, the
provisions of this chapter are declared to be severable.
CHAPTER 8. BANK HOLDING COMPANIES
1280. "Bank holding company" means:
(a) Any person or company which:
(1) Directly or indirectly owns, controls, or holds with power to
vote, 10 percent or more of the outstanding stock of any domestic
bank, or 10 percent or more of the outstanding stock of any domestic
bank together with 10 percent or more of the shares or proxy of
shares of any national bank located in California.
(2) Controls in any manner whether by the holding of proxy, or
otherwise, the election of a majority of the directors of any
domestic bank, or of both any domestic bank and any national bank
located in California.
(3) The commissioner determines, after reasonable notice and
opportunity for hearing, directly or indirectly exercises, or has
power to exercise, a controlling influence over the management and
policies of any domestic bank, or of both any domestic bank and any
national bank located in California.
(b) Any company which controls in any manner any company which is
or becomes a bank holding company by virtue of this chapter.
(c) Bank holding company does not include a trust company
controlled by or under common control with a title insurance company.
1281. "Company" means any domestic or foreign corporation, voting
trust, business trust, limited partnership, partnership fund, joint
stock company, association, syndicate, organized group of persons, or
similar organization or group, whether incorporated or not.
1282. "Subsidiaries," with respect to a specified bank holding
company, means:
(a) Any company 10 percent or more of whose voting securities are
directly or indirectly owned or controlled by such bank holding
company;
(b) Any company a majority of whose directors are controlled in
any manner by such holding company;
(c) Any company 10 percent or more of whose voting securities are
held by trustees or nontrustees for the benefit of the stockholders,
shareholders, or members of such holding company; or
(d) Any company 10 percent or more of the legal or beneficial
ownership of which is directly or indirectly owned or controlled by
such holding company.
1283. The commissioner may from time to time require, under oath
or otherwise, reports from any bank holding company and its
subsidiaries in such form and as to such matters as the commissioner
may deem necessary and appropriate, and which are relevant to the
jurisdiction and responsibilities of the commissioner under this
division.
1284. Each bank holding company and its subsidiaries shall be
subject to examination by the commissioner. The commissioner may use,
for this purpose, his or her own examiners or independent public
accountants who are disinterested persons. In lieu of making an
examination, the commissioner may accept the examination of any
holding company made by any federal agency, any other agency of this
state, or any agency of any other state of the United States and may
examine any such holding company in conjunction with these agencies.
If the commissioner examines a bank holding company or any of its
subsidiaries, other than a domestic bank, using the commissioner's
own examiners, the bank holding company shall pay, within 10 days
after receipt of a statement from the commissioner, a fee of two
hundred dollars ($200) per day for each examiner engaged in the
examination plus, in the event it is necessary for any examiner
engaged in the examination to travel outside this state, the travel
expenses of the examiner. If the commissioner examines a bank holding
company or any of its subsidiaries, other than a domestic bank,
using independent public accountants, the bank holding company shall
pay, within 10 days after receipt of a statement from the
commissioner, the fee of the independent public accountants.
1285. With respect to a trust company controlled by or under
common control with a title insurance company, the commissioner in
cooperation with the Insurance Commissioner shall adopt reasonable
rules and regulations for the conduct of the inspection and
examination authorized by Sections 1282 and 1284. Any such
examination or inspection shall be conducted pursuant to the
provisions of Article 4.7 (commencing with Section 1215) of Chapter 2
of Part 2 of Division 1 of the Insurance Code.
1286. Nothing in this chapter shall be construed to authorize the
commissioner to require reports from a national bank or to examine a
national bank contrary to federal law.
1287. Pursuant to the authority contained in Section 1 of Article
XV of the California Constitution, the restrictions upon rates of
interest contained in Section 1 of Article XV of the California
Constitution shall not apply to any obligations of, loans made or
arranged by, or forbearances of or arranged by, a bank holding
company or a subsidiary of a bank holding company which is not a
bank. As used in this section, the terms "bank holding company" and
"subsidiary" mean a bank holding company or subsidiary as defined in
Chapter 17 (commencing with Section 1841) of Title 12 of the United
States Code.
This section creates and authorizes an exempt class of persons
pursuant to Section 1 of Article XV of the Constitution. This section
does not exempt a bank holding company or a subsidiary of a bank
holding company from complying with all other applicable provisions
of law regulating the business of these companies.
This section does not exempt a bank holding company or a
subsidiary thereof from complying with all other laws or regulations
governing the business in which the bank holding company or
subsidiary is engaged.
CHAPTER 9. AUTHORIZATIONS FOR BANKS
1300. (a) Notwithstanding the provisions of Sections 1051, 1052,
and 1054 of the Labor Code and Section 2947 of the Penal Code, a bank
or any affiliate thereof, licensed under the laws of any state or of
the United States, or any officer or employee thereof, may deliver
fingerprints taken of a director, an officer, an employee, or an
applicant for employment to local, state, or federal law enforcement
agencies for the purpose of obtaining information as to the existence
and nature of a criminal record, if any, of the person fingerprinted
relating to convictions, and to any arrest for which that person is
released on bail or on his or her own recognizance pending trial, for
the commission or attempted commission of a crime involving robbery,
burglary, theft, embezzlement, fraud, forgery, bookmaking, receiving
stolen property, counterfeiting, or involving checks or credit cards
or using computers.
(b) The Department of Justice shall, pursuant to Section 11105 of
the Penal Code, and a local agency may, pursuant to Section 13300 of
the Penal Code, furnish to the officer of the bank or affiliate
responsible for the final decision regarding employment of the person
fingerprinted, or to his or her designees having responsibilities
for personnel or security decisions in the usual scope and course of
their employment with the bank or affiliate, summary criminal history
information when requested pursuant to this section. If, upon
evaluation of the criminal history information received pursuant to
this section, the bank or affiliate determines that employment of the
person fingerprinted would constitute an unreasonable risk to that
bank or affiliate or its customers, the person may be denied
employment.
(c) Banks and their affiliates shall submit to the Department of
Justice fingerprint images and related information required by the
Department of Justice of all directors, officers, employees, or an
applicant for employment for the purpose of obtaining information
regarding the existence and content of a record of state and federal
convictions and also information regarding the existence and content
of a record of state and federal arrests for which the Department of
Justice establishes that the person is free on bail, or on his or her
own recognizance, pending trial or appeal.
(d) When the Department of Justice receives a request under this
section for federal summary criminal history information, it shall
forward the request to the Federal Bureau of Investigation. Once the
information is received from the Federal Bureau of Investigation, the
Department of Justice shall review, compile, and disseminate the
information to the federally chartered bank or affiliate pursuant to
paragraph (1) of subdivision (o) of Section 11105 of the Penal Code.
(e) When the Department of Justice receives a request for federal
summary criminal history information from a nonchartered bank, it
shall forward the request to the Federal Bureau of Investigation.
Once the information is received from the Federal Bureau of
Investigation, the Department of Justice shall review and provide a
fitness determination on an applicant for employment based on
criminal convictions or on arrests for which the person is released
on bail or on his or her own recognizance pending trial for the
commission or attempted commission of crimes specified in subdivision
(a).
(f) A bank or affiliate may request from the Department of Justice
subsequent arrest notification service, as provided pursuant to
Section 11105.2 of the Penal Code, for persons described in
subdivision (a).
(g) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the requests described in this section.
(h) Any criminal history information obtained pursuant to this
section is confidential and no recipient shall disclose its contents
other than for the purpose for which it was acquired.
(i) "Affiliate," as used in this section, means any corporation
controlling, controlled by, or under common control with, a bank,
whether directly, indirectly, or through one or more intermediaries.
1301. (a) Notwithstanding Section 726 of the Code of Civil
Procedure or any other provision of law to the contrary, a state or
nationally chartered bank, its subsidiaries or affiliates transacting
business in this state, or any successor in interest thereto, that
originates, acquires, or purchases, in whole or in part, any loan
secured directly or collaterally, in whole or in part, by a mortgage
or deed of trust on real property, or any interest therein, may bring
an action for recovery of damages, including exemplary damages not
to exceed 50 percent of the actual damages, against a borrower where
the action is based on fraud under Section 1572 of the Civil Code and
the fraudulent conduct by the borrower induced the original lender
to make that loan.
(b) The provisions of this section shall not apply to loans
secured by single-family, owner-occupied residential real property,
when the property is actually occupied by the borrower as represented
to the lender in order to obtain the loan and the loan is for an
amount of one hundred fifty thousand dollars ($150,000) or less, as
adjusted annually, commencing on January 1, 1987, to the Consumer
Price Index as published by the United States Department of Labor.
(c) Any action maintained under this section for damages shall not
constitute a money judgment for deficiency or a deficiency judgment
within the meaning of Section 580a, 580b, or 580d of the Code of
Civil Procedure.
CHAPTER 10. RESTRICTIONS AND PROHIBITED PRACTICES
Article 1. General Provisions
1320. A bank or trust company may purchase, acquire, hold, or
lease real property or an interest therein only as follows:
(a) Such as may be necessary or convenient for the use, operation
or housing of its head office and branch offices, or for the storage
of records or other personal property, or for office space for use by
its officers or employees, or which may be reasonably necessary for
future expansion of its business, or which is otherwise reasonably
related to the conduct of its business. Real property used by a bank
as its banking premises may include in addition to the space required
for the transaction of its business other space which may be let as
a source of income.
(b) Such as may be conveyed to it in satisfaction in whole or in
part of debts previously contracted in the course of its business.
(c) Such as it may purchase or acquire at foreclosure sales under
mortgages or deeds of trust held by it, or under judgments or decrees
in its favor.
(d) Such as it may purchase or otherwise acquire when necessary to
minimize or prevent the loss or destruction of any lien or interest
therein.
(e) Such as it may purchase or otherwise acquire pursuant to
Section 1322.
A bank or trust company may sell, lease, or encumber real property
or any interest therein owned by it, or, with the written approval
of the commissioner, exchange the same for other real property.
1321. Any real property not held for any purpose permitted by
subdivisions (a) and (e) of Section 1320 shall be sold whenever the
same can be sold for an amount sufficient to reimburse the bank or
trust company for all loss arising out of the loan for which such
real property was security or arising out of the original investment.
A bank or trust company shall not by the retention of any real
property acquired pursuant to this section engage in any business not
authorized by this division except to the extent necessary in the
orderly liquidation of an indebtedness owing to the bank.
1322. (a) The Legislature finds and declares:
(1) That it is necessary to increase job opportunities in real
estate development and construction and to provide additional housing
and commercial facilities in this state.
(2) That within the commercial banking community there exists the
expertise and ability to promote and assist in expansion of real
estate development projects in this state.
(3) That it is proper and appropriate to utilize that expertise
and ability by authorizing commercial banks to engage in real estate
development and management on an entrepreneurial basis.
(b) As used in this section, "real property investment" means all
forms of investing in real property, whether direct or in the form of
partnerships, joint ventures, or other methods of investment. It
includes, but is not limited to, the purchasing, subdividing, and
developing of real property or any interest therein, the building of
residential housing or commercial improvements, and the owning,
renting, leasing, managing, operating for income, or selling of that
property.
(c) A commercial bank may acquire and hold stock of one or more
corporations the primary activities of which are engaging in real
property investment, in which event the sum of (1) investments made
by a commercial bank pursuant to the authority of this subdivision,
(2) any loans and guarantees extended by a commercial bank to, or for
the benefit of, corporations whose stock it holds pursuant to the
authority of this subdivision, and (3) real property investments made
pursuant to the authority of subdivision (d), unless a higher
percentage is approved by the commissioner in writing, shall not
exceed 10 percent of the total assets of the bank.
(d) A commercial bank may engage in real property investment. The
total of all real property investments made pursuant to the authority
of this subdivision, unless a higher percentage is approved by the
commissioner in writing, shall not exceed the total shareholders'
equity of the bank.
(e) Prior to initially engaging in real property investment
activities authorized by this section, a commercial bank shall make
application with the commissioner for approval of its general plan of
real property investment. The application for approval shall be in
letter form, shall contain a copy of the general plan for real
property investment as approved or adopted by the board of directors
of the bank, which shall include a brief description of either the
activities of the corporations the bank will invest in or the
activities the bank will engage in, or both, the approximate amount
to be invested, the extent, if any, of diversification of those
activities or investment, and the approximate date of the initial
investment, and shall be signed by the chief executive officer of the
bank. Unless the commissioner finds (1) that the capital, assets,
management, earnings, and liquidity of the commercial bank are, on a
composite basis, not satisfactory, or (2) that the plan for the
commercial bank to engage in real property investment or to acquire
and hold the stock of one or more real property investment
corporations is unsafe or unsound, the commissioner shall approve the
application. An application for approval shall be deemed approved on
the 46th day after the application is filed with the commissioner,
unless the commissioner earlier makes a final decision on the
application or extends the period for approving or denying the
application. For purposes of this subdivision, an application for
approval shall be deemed to be filed with the commissioner on the
date when the application, substantially in compliance with the
requirements of this subdivision, is received by the commissioner.
Upon the filing of the application for approval, the applicant shall
pay to the commissioner a filing fee of five hundred dollars ($500).
(f) The legality of any investment lawfully made pursuant to this
section as it read prior to the amendment of this section shall not
be affected by the existing form of this section, nor shall this
section be construed to require the changing of any investments
heretofore lawfully made.
1323. Any director, officer, or employee of a bank or of a
foreign banking corporation who asks for or receives, or consents or
agrees to receive, any commission, emolument, or gratuity or any
money, property, or thing of value for his own personal benefit or of
personal advantage for procuring or endeavoring to procure for any
person any loan from such bank, or the purchase or discount of any
note, draft, check, bill of exchange, or other obligation by such
bank, or for permitting any person to overdraw any account with such
bank, is guilty of a felony.
1324. Any director, officer, agent, or employee of any bank who
knowingly receives or possesses himself or herself of any of its
property otherwise than in payment of a just demand, and with intent
to defraud, omits to make or cause to be made a full and true entry
thereof in its books and accounts or concurs in omitting to make any
material entry thereof is guilty of a felony.
1325. Any director, officer, agent, or employee of a bank who
knowingly concurs in making or publishing any written report,
exhibit, or statement of its affairs or pecuniary condition
containing any material statement which is false, or having the
custody of its books willfully refuses or neglects to make any proper
entry in such books as required by law, or to exhibit or allow the
same to be inspected or extracts to be taken therefrom by the
commissioner or his or her deputies or examiners, is guilty of a
felony.
1326. No bank shall publish a statement of its resources or
liabilities in connection with those of any other bank, unless such
statement shall show the resources and liabilities of each bank
separately.
1327. (a) Any person who willfully and knowingly makes,
circulates, or transmits to another or others, any statement or
rumor, written, printed, or by word of mouth, which is untrue in fact
and is directly or by inference derogatory to the financial
condition or affects the solvency or financial standing of any bank
doing business in this state, or who knowingly counsels, aids,
procures, or induces another to start, transmit, or circulate any
such statement or rumor, is guilty of a misdemeanor punishable by a
fine of not more than one thousand dollars ($1,000), or by
imprisonment for not more than one year, or both.
(b) The provisions of Section 329 shall not apply to this section.
1328. (a) A bank or trust company may engage in the business of
renting safe deposit boxes and may receive personal property for
safekeeping and storage on its banking premises.
(b) A copy of any safe deposit rental agreement, or personal
property safekeeping and storage agreement, which is prepared by the
bank or trust company and signed by the customer shall be delivered
to the customer at the time the agreement is signed if the agreement
is signed at a place of business of the bank or trust company. If the
agreement is not signed at a place of business of the bank or trust
company, the bank or trust company shall mail or deliver a copy of
the agreement to the customer within 10 calendar days after the bank
or trust company receives it. The contract shall not contain any
blank spaces to be filled in after
the customer signs the contract. If more than one
customer has signed the agreement, the bank or trust company may
comply with this section by mailing or delivering the copy to any one
of the customers who reside at the same address. A copy shall also
be mailed or delivered to any other customer who has signed the
agreement and who does not reside at the same address. As used in
this section, "copy" means a reproduction, facsimile, or duplicate. A
bank or trust company which fails to comply with this section is
liable to its customer for any actual damages suffered by the
customer as a result of that failure. The remedy provided by this
section is nonexclusive and is in addition to any remedies or
penalties available under other laws of this state.
1329. (a) In this section, "subject person," when used with
respect to a bank, means any director or officer of the bank, any
controlling person of the bank, or any director or officer of a
controlling person of the bank. For purposes of this subdivision,
"controlling person" has the meaning set forth in subdivision (c) of
Section 1250.
(b) No bank shall purchase any real or personal property or any
interest in real or personal property, including, but not limited to,
a leasehold, or any contract arising from the sale of real or
personal property or any note or bond in which any subject person of
such bank is personally or financially interested, directly or
indirectly, for such person's own account, for such person, or as the
partner or agent of others, without the prior approval by the board
of directors of the bank and for not more than the current market
value of the property purchased.
1330. (a) In this section, "subject person" has the meaning set
forth in subdivision (a) of Section 1329.
(b) No subject person of a bank shall purchase, directly or
indirectly, or be interested in the purchase of, any of the bank's
obligations or assets without the prior approval of the board of the
directors of the bank and for an amount less than the then current
market value. Every person violating this section shall be liable to
the people of this state, for each offense, for twice the market
value of the assets so purchased.
1331. (a) For purposes of this section, the following terms have
the following meanings:
(1) "Carrying a security" means maintaining, reducing, or retiring
indebtedness originally incurred to acquire a security.
(2) "Controlling person" has the same meaning specified in Section
1250.
(3) "Security" has the following meanings:
(A) When used with respect to a bank, "security" has the same
meaning set forth in subdivision (c) of Section 1200.
(B) When used with respect to any other person, "security" has the
same meaning set forth in Section 25019 of the Corporations Code.
(b) No bank shall acquire, hold, extend credit on the security of,
or extend credit for the purpose of acquiring or carrying, any
security of the bank or of any controlling person of the bank.
(c) (1) Any bank which acquires or holds securities in violation
of this section shall be liable to the people of this state for twice
the market, book, or face value of the securities, whichever is
greatest.
(2) Any bank which extends credit in violation of this section
shall be liable to the people of this state for twice the amount of
the credit so extended.
(d) This section does not apply to any of the following
transactions:
(1) Any acquisition or extension of credit by a bank which is
necessary to reduce or prevent loss to the bank on debts previously
contracted in good faith.
(2) Any redemption by a bank of any of its redeemable shares in
accordance with applicable provisions of this division and of
Division 1 (commencing with Section 100) of Title 1 of the
Corporations Code.
(3) Any acquisition by a bank of any of its shares, other than an
acquisition of the type described in paragraph (1) or (2), if the
acquisition is approved in advance by the commissioner.
(e) The provisions of Section 329 shall not apply to this section.
1332. Any officer, director, trustee, employee, or agent of any
bank in this state, who abstracts or willfully misapplies any of the
money, funds, or property of the bank, or willfully misapplies its
credit, is guilty of a felony. Upon conviction, the court shall, in
addition to any other punishment imposed, order the person to make
full restitution to the bank. Nothing in this section shall be deemed
or construed to repeal, amend or impair any existing provision of
law prescribing a punishment for such an offense.
1333. (a) Every director of a bank in this state who does either
of the following is guilty of a misdemeanor:
(1) In case of the fraudulent insolvency of such bank, the
director participated in the fraud.
(2) Willfully does any act as the director that is expressly
forbidden by law or willfully omits to perform any duty imposed by
law upon him or her as the director.
(b) The insolvency of a bank is deemed fraudulent for the purposes
of this section, unless its affairs appear upon investigation to
have been administered clearly, legally, and with the same care and
diligence that agents receiving a compensation for their services are
bound, by law, to observe.
1334. An officer or agent of any bank in this state, who makes or
delivers any guaranty or endorsement on behalf of such bank, whereby
it may become liable upon any of its discounted notes, bills or
obligations, in a sum beyond the amount of loans and discounts which
such bank may legally make, is guilty of a misdemeanor.
1335. A director of a bank, organized under the laws of this
state, who concurs in any vote or act of the directors of such
corporation, or any of them, by which it is intended to make a loan
or discount to any director of such corporation, or upon paper upon
which any such director is liable or responsible to an amount
exceeding the amount allowed by the statutes is guilty of a
misdemeanor.
1336. Any director, trustee, officer, or employee of any bank
organized under the laws of this state, who makes or maintains, or
attempts to make or maintain, a deposit of such bank's funds with any
other corporation on condition, or with the understanding, express
or implied, that the corporation receiving such deposit make a loan
or advance, directly or indirectly, to any director, trustee,
officer, or employee of the corporation so making or maintaining or
attempting to make or maintain such deposit is guilty of a felony.
1337. Any officer or employee of any bank organized under the
laws of this state, who intentionally conceals from the directors of
the bank any discounts or loans made by it between the regular
meetings of its board, or the purchase of any securities or the sale
of its securities during that period, or knowingly fails to report to
the board when required to do so by law, all discounts or loans made
by it and all securities purchased or sold by it between the regular
meetings of its board, is guilty of a misdemeanor.
1338. Every officer, agent, teller, or clerk of any bank, and
every individual banker, or agent, teller, or clerk of any individual
banker, who receives any deposits, knowing that the bank,
association, or banker is insolvent, is guilty of a misdemeanor.
1339. Any officer, director, trustee, employee, or agent of any
bank, who willfully makes a false or untrue entry in any book or
record or in any report, tag, or statement of the business, affairs,
or condition or in connection with any transaction of the bank, with
intent to deceive any officer, director or trustee thereof, or any
agent or examiner, private or official, employed or lawfully
appointed to examine into its condition or into any of its affairs or
transactions, or any public officer, office, or board to which the
bank is required by law to report, or which has authority by law to
examine into its affairs or transactions, or into any of its affairs
or transactions, or who, with like intent, willfully omits to make a
new entry of any matter particularly pertaining to the business,
property, condition, affairs, transactions, assets, or accounts of
the bank in any book, record, report, statement, or tag of the bank,
or who with like intent alters, abstracts, conceals, or destroys any
book, record, report, statement, or tag of the bank made, written, or
kept, or required to be made, written, or kept by him or her or
under his or her direction, is guilty of a felony.
1340. Unless specifically authorized by law or by the
commissioner, a bank shall not become, act as, or in any other manner
assume the duties or liabilities of, a general partner. For purposes
of this section, "general partner" has the meaning set forth in
subdivision (m) of Section 15901.02 of the Corporations Code.
1341. A bank, or the agent of a bank, that has received a notice
pursuant to Section 7507.6 of the Business and Professions Code,
shall not make a subsequent assignment to skip trace, locate, or
repossess a vehicle without simultaneously, and in the same manner by
which the assignment is given, advising the assignee of the
assignment of the information contained in the notice. As used in
this section, "assignment" has the same meaning set forth in Section
7500.1 of the Business and Professions Code.
Article 2. Loans to Insiders
1360. It is the intent of the Legislature that the provisions of
this article, insofar as they are contained in Regulation O (12
C.F.R. Part 215) of the Federal Reserve Board, conform, and be
interpreted by anyone construing the provisions of this article to so
conform, to Regulation O, to any rule or interpretation promulgated
thereunder by the Board of Governors of the Federal Reserve System,
and to any interpretation issued by an official or employee of the
Federal Reserve System duly authorized to issue the interpretation.
1361. As used in this article:
(a) "Bank" means:
(1) Any commercial bank, industrial bank, or trust company
incorporated under the laws of this state.
(2) Any foreign (other nation) bank that is licensed by the
commissioner under Article 3 (commencing with Section 1800) of
Chapter 20 to maintain a depositary agency or branch office, as
defined in Section 1750, in this state, with respect to any office of
that type.
(3) Any corporation incorporated under the laws of this state that
is incorporated for the purpose of engaging in, or that is
authorized by the commissioner to engage in, business under Article 1
(commencing with Section 1850) of Chapter 21.
(4) Any foreign corporation that is licensed by the commissioner
under Article 1 (commencing with Section 1850) of Chapter 21 to
maintain an office in this state and to transact at the office
business under that article, with respect to any office of that type.
(5) When used to designate a person that extends credit, any
subsidiary of a bank, as defined in paragraph (1), (2), (3), or (4).
(b) "Company" has the meaning set forth in subdivision (b) of
Section 215.2 of Regulation O.
(c) "Executive officer" has the meaning set forth in paragraph (1)
of subdivision (e) of Section 215.2 of Regulation O. Also,
"executive officer," when used with respect to any bank of the type
described in paragraph (2) or (4) of subdivision (a), includes the
manager of each office of the type referred to in paragraph (2) or
(4) of subdivision (a) that the bank maintains in this state.
(d) "Extension of credit" has the meaning set forth in Section
215.3 of Regulation O. However, for purposes of this subdivision, the
term "member bank," as used in Section 215.3, means a bank.
(e) "Regulation O" means Regulation O (Part 215 (commencing with
Section 215.1) of Title 12 of the Code of Federal Regulations) of the
Board of Governors of the Federal Reserve System.
(f) "Subsidiary" has the meaning set forth in Section 1841(d) of
Title 12 of the United States Code. However, for purposes of this
subdivision, the term "bank holding company," as used in Section 1841
(d) of Title 12 of the United States Code, means a bank holding
company, as defined in Section 1841(a) of Title 12 of the United
States Code, or a bank, and the term "board," as used in Section 1841
(d) of Title 12 of the United States Code, means the commissioner.
1362. Sections 215.2, 215.3, 215.4, 215.5, 215.8, and 215.9 of
Regulation O in all of their particulars, including footnotes, are
hereby referred to, incorporated by reference into this article, and
adopted, subject to the following:
(a) The term "this Subpart," as used in the referenced sections of
Regulation O, means this article.
(b) Subdivision (j) of Section 215.2 of Regulation O is not
applicable. Instead, the term "member bank," as used in the
referenced sections of Regulation O, means a bank.
(c) The term "executive officer," as used in the referenced
sections of Regulation O, includes, in the case of a bank of the type
described in paragraph (2) or (4) of subdivision (a) of Section
1361, the manager of each office of the type referred to in paragraph
(2) or (4) of subdivision (a) of Section 1361 that the bank
maintains in this state.
(d) The definition of "lending limit" in subdivision (i) of
Section 215.2 of Regulation O is not applicable; instead, the term
"lending limit," as used in the referenced sections of Regulation O,
means an amount equal to the limit on obligations of a single obligor
set forth in Section 1481, and any reference in the referenced
sections of Regulation O to the lending limit specified in
subdivision (i) of Section 215.2 is considered to be a reference to
the limit specified in Section 1481.
(e) (1) Any company which is majority owned by one or more
executive officers or directors of a bank, individually or
collectively, is deemed to be a related interest of each of those
executive officers or directors for purposes of the referenced
sections of Regulation O.
(2) In case an individual who is an executive officer of a bank is
also a director or executive officer of a company, the company is
deemed to be a related interest of the individual for purposes of the
referenced sections of Regulation O except subdivision (c) of
Section 215.4. However, this paragraph shall not apply to an
extension of credit by a bank to any of the following companies:
(A) A bank holding company of which the bank is a subsidiary.
(B) Any subsidiary of the bank holding company.
(C) Any nonprofit company engaged in religious, charitable,
educational, scientific, literary, social, or recreational purposes,
provided that the individual whose position as a director or
executive officer of the company at issue does not receive
compensation in excess of one thousand dollars ($1,000) per year for
serving as a director or executive officer of the company.
(3) In case a bank in making an extension of credit becomes
subject to the requirements set forth in subdivision (b)(1)(i) of
Section 215.4 of Regulation O because of paragraph (1) or (2), the
bank shall be deemed to fulfill the requirement if the extension of
credit is promptly reported to the board of the bank.
1363. No bank shall extend credit in an aggregate amount greater
than the amount permitted in paragraph (4) of subdivision (c) of
Section 215.5 of Regulation O to any company that is majority owned
by one or more executive officers of the bank, individually or
collectively. For purposes of paragraph (4) of subdivision (c) of
Section 215.5 of Regulation O, the total amount of credit extended by
the bank to the company is considered to be extended to each of
those executive officers.
1364. In making any extension of credit that is subject to this
article, a bank shall comply with all other applicable provisions of
this division relating to extensions of credit by banks.
1365. No provision of this article or of Article 3 (commencing
with Section 1480) of Chapter 14 shall apply to an advance of money
made by a bank pursuant to Section 317 of the Corporations Code.
1366. A bank may make a loan, otherwise complying with the
provisions of this division, for the benefit of a trust,
notwithstanding that the bank or any one or more executive officers
or directors of the bank are trustees of the trust.
1367. Any bank that makes an extension of credit in violation of
this article is subject to a civil penalty pursuant to Section 329.
Any person, other than the bank making the extension of credit, who
knowingly makes or procures an extension of credit in violation of
this article is guilty of a felony.
CHAPTER 11. AGENCY ACTIVITIES
Article 1. General Provisions
1380. In this chapter, unless the context otherwise requires:
(a) "Authorized agency activities" means receiving deposits,
renewing time deposits, closing loans, servicing loans, and receiving
payments on loans and other obligations. "Authorized agency
activities" includes ministerial functions such as providing loan
applications, assembling documents, providing a location for
returning documents necessary for making a loan, providing loan
account information, receiving payments, disbursing loan funds,
evaluating loan applications, and other activities that the
commissioner may specify by order or regulation. However, "authorized
agency activities" does not include any other activities that the
commissioner may specify by order or regulation.
(b) "Insured depository institution" means any bank, savings and
loan association, savings association, savings bank, or industrial
loan company the deposits of which are insured by the Federal Deposit
Insurance Corporation. "Insured depository institution" includes any
depository institution affiliate within the meaning of Section 18(r)
of the Federal Deposit Insurance Act (12 U.S.C. Sec. 1828(r)).
1381. This chapter does not apply to a California state bank
having an insured depository institution engage in authorized agency
activities as its agent or to a California state bank engaging in
authorized agency activities as agent for an insured depository
institution in any case other than a case where, but for the
provisions of Sections 1389 and 1396, an office of the agent would
for regulatory purposes be considered to be an office of the
principal.
1382. (a) In this section, "affiliated," when used with respect
to a California state bank and an insured depository institution,
means that the California state bank controls the insured depository
institution, the insured depository institution controls the
California state bank, or the California state bank and the insured
depository institution are under common control, directly or
indirectly through one or more intermediaries. For purposes of this
subdivision, "control" has the meaning set forth in Section 1250.
(b) In case a California state bank and an insured depository
institution are affiliated, the prior approval requirement set forth
in Section 1384 or 1391 is deemed to be satisfied if the California
state bank files a notice with the commissioner and, within 30 days
or any longer period to which the California state bank consents, the
commissioner either (1) issues a written statement not objecting to
the notice or (2) does not issue a written objection to the notice.
(c) (1) A notice filed by a California state bank under
subdivision (b) shall contain the following information:
(A) The name of the California state bank.
(B) The name and location of the main or head office of the
affiliated insured depository institution.
(C) A description of the proposed agency, including identification
of the institution that is to be the principal, identification of
the institution that is to be the agent, and specification of the
activities in which the agent is to engage on behalf of the
principal.
(D) Any other information that the commissioner may require.
(2) A notice filed by a California state bank under subdivision
(b) shall be in the form, shall be signed in the manner, and shall,
if the commissioner requires by regulation or order, be verified in
the manner that the commissioner may by regulation or order require.
(3) A notice filed by a California state bank under subdivision
(b) shall be accompanied by a filing fee of two hundred fifty dollars
($250).
(d) For purposes of subdivision (b), a notice by a California
state bank is deemed to be filed with the commissioner at the time
when the complete notice, including any amendments or supplements,
containing all the information required by the commissioner, and
otherwise complying with subdivision (c) is received by the
commissioner.
(e) In determining whether or not to object to a notice by a
California state bank, the commissioner shall consider the factors
set forth in Section 1387 or 1394, as the case may be.
Article 2. California State Bank as Principal
1384. Notwithstanding the provisions of Chapter 4 (commencing
with Section 1070), a California state bank may, with the prior
approval of the commissioner and subject to any regulations that the
commissioner may prescribe, have an insured depository institution
engage in authorized agency activities as its agent.
1385. An application by a California state bank for approval to
have an insured depository institution engage in authorized agency
activities as its agent shall be in the form, shall contain the
information, shall be signed in the manner, and shall, if the
commissioner so requires by regulation or order, be verified in the
manner that the commissioner may, by regulation or order, require.
1386. An application by a California state bank for approval to
have an insured depository institution engage in authorized agency
activities as its agent shall be accompanied by a filing fee of two
hundred fifty dollars ($250).
1387. In determining whether to approve or deny an application by
a California state bank for approval to have an insured depository
institution engage in authorized agency activities as its agent, the
commissioner shall consider both of the following:
(a) Whether the proposed agency arrangement is consistent with the
safe and sound operation of the California state bank.
(b) Any other factors that the commissioner deems relevant.
1388. No California state bank may have an insured depository
institution conduct as its agent any activity that the California
state bank is prohibited from conducting itself.
1389. No office of an insured depository institution that is
performing authorized agency activities as agent for a California
state bank in accordance with this article shall, on that account, be
deemed to be an office of the California state bank.
1390. If the commissioner finds that any activity performed by an
insured depository institution as agent for a California state bank
is not an authorized agency activity or that the agency arrangement
is inconsistent with safe and sound banking practices, the
commissioner may order the California state bank to terminate the
agency arrangement.
Article 3. California State Bank as Agent
1391. Notwithstanding the provisions of Chapter 4 (commencing
with Section 1070), a California state bank may, with the prior
approval of the commissioner and subject to any regulations that the
commissioner may prescribe, engage in authorized agency activities as
agent for an insured depository institution.
1392. An application by a California state bank for approval to
engage in authorized agency activities as agent for an insured
depository institution shall be in the form, shall contain the
information, shall be signed in the manner, and shall, if the
commissioner so requires by regulation or order, be verified in the
manner that the commissioner may, by regulation or order, require.
1393. An application by a California state bank for approval to
engage in authorized agency activities as agent for an insured
depository institution shall be accompanied by a filing fee of two
hundred fifty dollars ($250).
1394. In determining whether to approve or deny an application by
a California state bank for approval to engage in authorized agency
activities as agent for an insured depository institution, the
commissioner shall consider both of the following factors:
(a) Whether the proposed agency arrangement is consistent with the
safe and sound operation of the California state bank.
(b) Any other factors that the commissioner deems relevant.
1395. No California state bank may conduct any activity as an
agent for an insured depository institution that the California state
bank would be prohibited from conducting as a principal.
1396. (a) No office of a California state bank that conducts
authorized agency activities as agent for an insured depository
institution in accordance with this article shall, on that account,
be deemed to be an office of the insured depository institution.
(b) For purposes of this division, no insured depository
institution that has a California state bank engaged in authorized
agency activities as its agent shall on that account be deemed to be
transacting business in this state.
1397. If the commissioner finds that any activities performed by
a California state bank as agent for an insured depository
institution are not authorized agency activities or that the agency
arrangement is inconsistent with safe and sound banking practices,
the commissioner may order the California state bank to terminate the
agency arrangement.
CHAPTER 12. DEPOSITS
Article 1. Depositors
1400. A bank account by or in the name of a minor shall be held
for the exclusive right and benefit of such minor and shall be paid
to such minor or to his order and payment so made is a valid release
and discharge to the bank for such deposit or any part thereof.
1401. A bank account by or in the name of a married person shall
be held for the exclusive right and benefit of the person, shall be
free from the control or lien of any other person except a creditor,
and shall be paid to the person or to the order of the person, and
payment so made is a valid and sufficient release and discharge to
the bank for the deposit or any part thereof.
1402. A bank account that is a multiple-party account as defined
in Section 5132 of the Probate Code is governed by Part 2 (commencing
with Section 5100) of Division 5 of the Probate Code.
1403. No bank, directly or indirectly, by any device whatever,
shall pay any interest on any demand deposit except to the extent
that the payment of interest on demand deposits is permitted to
member banks of the Federal Reserve System or to banks whose deposits
are insured by the Federal Deposit Insurance Corporation or any
successor federal agency insuring bank deposits. This
section shall not apply to any deposit
which is payable only at an office of the bank located outside of the
states of the United States and the District of Columbia.
1404. Notwithstanding Section 10145 of the Business and
Professions Code or any other provision of law, but subject to the
limitations of Section 854, benefits accruing from the placement in a
noninterest bearing account of a financial institution of funds
received by a real estate broker who collects payments or provides
services in connection with a loan secured by a lien on real property
under subdivision (d) of Section 10131 or Section 10131.1 of the
Business and Professions Code shall inure to the broker, unless
otherwise agreed in writing by the broker and the lender or note
owner on the loan. A borrower shall receive at least 2 percent simple
interest per annum on impound account payments covered by Section
2954.8 of the Civil Code. For purposes of this section "financial
institution" means any institution the business of which is engaging
in financial activities as described in Section 1843(k) of Title 12
of the United States Code.
1405. (a) Notwithstanding Section 10145 of the Business and
Professions Code or any other provision of law, benefits accruing
from the placement in an interest bearing account of a financial
institution of funds received by a real estate broker, as defined in
Section 10131 of the Business and Professions Code, who collects
payments or provides services for an institutional investor in
connection with a loan secured by commercial real property may inure
to the real estate broker, if agreed to in writing by the real estate
broker and that institutional investor as to that loan.
(b) For purposes of this section, the following definitions shall
apply:
(1) "Commercial real property" means real estate improved with
other than a one-to-four family residence.
(2) "Financial institution" means any institution the business of
which is engaging in financial activities as described in Section
1843(k) of Title 12 of the United States Code.
(3) "Institutional investor" has the meaning set forth in
subdivision (i) of Section 50003.
1406. (a) In this section:
(1) "Creditor" includes, but is not limited to, a depositor.
(2) "Insolvency," when used with respect to a bank, means that the
bank is unable to pay its debts as they come due.
(b) This section does not apply to any of the following:
(1) Any transaction authorized under Section 1463 or 1465.
(2) Any transaction made by a bank in the ordinary course of its
business.
(c) No bank may pay or secure a creditor if the bank does so (1)
after committing an act of insolvency or in contemplation of
insolvency and (2) with a view to preventing the application of its
assets in the manner prescribed in Chapter 7 (commencing with Section
600) of Division 1 or with a view to the preference of one creditor
to another.
(d) Any transaction made by a bank in violation of this section is
void.
1407. An overdraft of more than 90 days standing shall not be
allowed as an asset of any bank.
1408. A bank may act as a depositary, paying agent, trustee, or
fiscal agent for the holding or handling of public funds or
securities notwithstanding the fact that a member of the legislative
body or an officer or employee of the depositor is an officer,
employee, or stockholder of such bank, or of a holding company that
owns any of the stock of such bank. Such member of a legislative
body, or such officer or employee thereof, shall not be deemed
"interested in any contract" as that phrase is used in Section 1090
of the Government Code, if his sole interest is the fact that he is
an officer, employee, or stockholder of the bank selected to act as
such depositary, paying agent or fiscal agent.
An officer or employee of a local public agency shall be deemed to
have only a "remote interest" in a contract, as that phrase is used
in Section 1091 of the Government Code, where such contract is
entered into without competitive bidding under a procedure
established by law, if his sole interest is that of an officer,
director, or employee, of a bank, bank holding company, or savings
and loan association with which a party to the contract has the
relationship of borrower or depositor, debtor or creditor, and if the
conditions of subdivision (a) of Section 1091 of the Government Code
are met.
1409. When a statement of account has been rendered by a bank to
a depositor accompanied by vouchers, if any, which are the basis for
debit entries in such account, such account shall, after the period
of four years from the date of its rendition, in the event no
objection thereto has been theretofore made by the depositor, be
deemed finally adjusted and settled and its correctness conclusively
presumed and such depositor shall thereafter be barred from
questioning the correctness of such account for any cause.
A statement of account within the meaning of this section shall be
deemed to have been rendered on a savings or time account when the
bank, by making a notation in the depositor's bank book or in some
other manner reasonably calculated to give notice thereof to the
depositor indicates that a certain sum is the correct balance of the
account.
Nothing herein shall be construed to relieve the depositor from
the duty now imposed by law of exercising due diligence in the
examination of such account and vouchers, if any, when rendered by
the bank and of immediate notification to the bank upon discovery of
any error therein, nor from the legal consequences of neglect of such
duty; nor to prevent the application of subsection (3) of Section
340 of the Code of Civil Procedure to cases governed thereby.
1410. (a) No bank shall impose any charge on a savings account or
on a depositor for the failure of a depositor to deposit, or for the
late deposit of, any agreed periodic installment deposit into that
account. A bank shall pay interest on savings accounts as to which a
depositor has agreed to make periodic installment deposits at a rate
of interest per annum that is not less than the lowest rate paid on
other types of savings deposits.
(b) As used in this section "savings account" means a Christmas
club account, a vacation club account, or other similar periodic
installment deposit account maintained by a natural person,
irrespective of its classification as a savings deposit or time
deposit open account for purposes of state or federal law or
regulations.
1411. (a) For the purposes of this section:
(1) "Customer" means one or more natural persons.
(2) "Debt" means an interest-bearing obligation or an obligation
which by its terms is payable in installments, which has not been
reduced to judgment, arising from an extension of credit to a natural
person primarily for personal, family, or household purposes, and
does not mean a charge for bank services or a debit for uncollected
funds or for an overdraft of an account imposed by a bank on a
deposit account.
(b) A bank is limited in exercising any setoff for a debt claimed
to be owed to the bank by a customer in that a setoff shall not
result in an aggregate balance of less than one thousand dollars
($1,000) as shown on the records of the bank for all demand deposit
accounts maintained by a customer with the bank or any branch
thereof.
(c) Not later than the day following the exercise of any setoff
with respect to a deposit account for any debt claimed to be owed to
the bank by a customer, the bank shall deliver to each customer
personally or send by first-class mail postage prepaid to the address
of each customer as shown on the records of the bank a written
notice in at least 10-point type containing the following:
(1) A statement that the bank has set off a debt or a portion
thereof against the customer's deposit account, identifying the
account, and giving the respective balances before and after the
setoff.
(2) A statement identifying the debt set off against the account
and giving the respective balances due before and after the setoff.
(3) A statement that if the customer claims that the debt has been
paid or is not now owing, or that the funds in the deposit account
consist of moneys expressly exempt pursuant to Chapter 4 (commencing
with Section 703.010) of Division 2 of Title 9 of Part 2 of the Code
of Civil Procedure, and listed in the notice, the customer may
execute and return the notice to the bank by mail at the address
shown or personally to the bank branch where the customer's account
is maintained not later than 20 days after the date of mailing or
personal delivery.
(4) A statement that if the notice is executed and returned, the
bank may file an action in court to collect the debt; that if a
lawsuit is filed, the customer will be notified and have an
opportunity to appear and defend; and that if the bank is successful,
the customer will be liable for court costs, and attorney's fees, if
the debt so provides.
(5) A response form in at least 10-point type containing
substantially the following:
""The debt described in the Notice of Setoff
received from the
bank is ____ is not ____ my debt or the debt of
another
person in whose name the account is maintained.
""I claim that the debt:
____ has been paid.
____ is not now owing.
____ is not subject to setoff because the money
in the account is:
_____ Paid earnings (CCP 704.070)
Proceeds from execution sale of or
_____ insurance for loss
of a motor vehicle (CCP 704.010)
Proceeds from execution sale of
____ household furnishings
or other personal effects (CCP 704.020)
_____ Relocation benefits (CCP 704.180)
_____ Life insurance proceeds (CCP 704.100)
Disability and health insurance
_____ benefits (CCP
704.130)
_____ Workers' compensation benefits (CCP
704.160)
_____ Unemployment or strike benefits (CCP
704.120)
Retirement benefits including, but not
limited to,
_____ social security benefits (CCP 704.080,
704.110,
704.115)
Public assistance benefits including
welfare payments
_____ and supplemental security income (SSI)
or charitable
aid (CCP 704.170)
Proceeds from sale of or insurance for
damage or
_____
destruction of a dwelling (CCP
704.720, CCP 704.960)
Proceeds from execution sale of or
_____ insurance for loss
of tools of a trade (CCP 704.060)
Award of damages for personal injury
_____ (CCP 704.140)
or wrongful death (CCP 704.150)
Financial aid paid by an institution
of higher
_____ education to a student for expenses
while attending
school (CCP 704.190)
""I declare under penalty of perjury
under the laws of the State of
California that the foregoing is true and correct.
Date: _________ Signed: ______________________''
(Customer)
(d) If the response form described in subdivision (c) executed by
the customer is received by the bank not later than 20 days after the
date of mailing or personal delivery of the written notice, the
amount of the setoff for any debt claimed to be owed to the bank by a
customer, and any bank service charges resulting from the setoff,
shall be reversed and such amount shall be credited to the deposit
account not later than the end of the business day following receipt
of such executed response form.
(e) The limitations provided in this section do not apply to a
deposit account, other than a demand deposit account, in which the
bank has a security interest expressed by a written contract as
collateral for the debt owing to the bank by the customer.
(f) The limitations provided in this section do not apply when a
customer previously has authorized a bank in writing to periodically
debit a deposit account as the agreed method of payment of the debt.
(g) The limitations provided in this section shall apply only to
the exercise by a bank a setoff with respect to debts claimed to be
owing to it by customers on or after July 1, 1976.
(h) Nothing in this section shall prejudice a person's right to
assert exemptions under Chapter 4 (commencing with Section 703.010)
of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure, or
to assert a claim or defense as to the validity of the debt, in a
judicial proceeding.
Article 2. Disclosure of Delayed Availability Policy
1420. As used in this article:
(a) "Depository institution" means any of the following:
(1) Any insured bank as defined in Section 3 of the Federal
Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.) or any bank which
is eligible to make application to become an insured bank under
Section 5 of the act.
(2) A mutual savings bank as defined in Section 3 of the Federal
Deposit Insurance Act (12 U.S.C. Sec. 1811 et seq.) or any bank which
is eligible to make application to become an insured bank under
Section 5 of the act.
(3) A savings bank as defined in Section 3 of the Federal Deposit
Insurance Act (12 U.S.C. Sec. 1811 et seq.) or any bank which is
eligible to make application to become an insured bank under Section
5 of the act.
(4) An insured credit union as defined in Section 101 of the
Federal Credit Union Act (12 U.S.C. Sec. 1751 et seq.) or any credit
union which is eligible to make application to become an insured
credit union pursuant to Section 201 of that act.
(5) Any member as defined in Section 2 of the Federal Home Loan
Bank Act (12 U. S.C. Sec. 1421 et seq.).
(6) Any insured institution as defined in Section 401 of the
National Housing Act (12 U.S.C. Sec. 1701 et seq.) or any institution
which is eligible to make application to become an insured
institution under Section 403 of that act.
(b) "Deposit account" means an account in a depository institution
on which the account holder is permitted to make withdrawals from
time to time in person by negotiable or transferable instrument,
payment orders of withdrawal, telephone transfers, or other similar
items for the purpose of making payments or transfers to third
persons or others. The term includes demand deposits, negotiable
order of withdrawal draft accounts, savings deposits subject to
automatic transfers, share draft accounts, and all savings deposits
and share accounts, other than time deposits.
1421. (a) Prior to opening a deposit account a depository
institution shall provide a written disclosure to the potential
customer of its general policy with respect to when a customer may
withdraw funds deposited by check or similar instrument into the
customer's deposit account.
(b) A depository institution shall furnish its customers
preprinted deposit slips, envelopes for automatic teller machine
deposits, or other individual notice bearing a conspicuous summary
statement of its general policy with respect to when a customer may
withdraw funds deposited by check or similar instrument into the
customer's deposit account; and, in the case of a particular deposit
by check or similar instrument into a deposit account for which funds
may not be immediately available for withdrawal, provide specific
notice of the time the customer may withdraw such funds.
1422. For the purposes of computing the amount of interest or
dividends payable with respect to an interest-bearing deposit
account, a depository institution shall not delay beginning to
compute interest on funds deposited by check or similar instrument to
such an account beyond the date on which that depository institution
receives provisional credit for the check or similar instrument.
However, the payment of interest with respect to funds deposited by
check or similar instrument which is returned unpaid shall not be
required.
1423. Except as otherwise provided in this section, any
depository institution which fails to comply with any requirement
imposed pursuant to this article shall be liable to the aggrieved
party in an amount equal to the sum of any actual damage sustained by
the person as a result of the failure; and, in the case of an
individual action an additional amount as the court may allow, except
that the amount shall not be less than fifty dollars ($50) or
greater than five hundred dollars ($500); or, in the case of a class
action, such amount as the court may allow, except that as to each
member of the class no minimum recovery shall be applicable, and the
total recovery in any class action or series of class actions arising
out of the same failure to comply by the same depository institution
shall not be more than the lesser of five hundred thousand dollars
($500,000) or 1 percent of the net worth of the depository
institution; and, in the case of any successful action to enforce the
foregoing liability, the costs of the action, together with a
reasonable attorney's fee as determined by the court.
In determining the amount of award in any class action, the court
shall consider, among other relevant factors, the amount of any
actual damages awarded, the frequency and persistence of failures of
compliance, the resources of the depository institution, the number
of persons adversely affected, and the extent to which the failure of
compliance was intentional.
A depository institution may not be held liable in any action
brought under this section for a violation of this article if the
violation was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adapted to
avoid any such error. Examples of a bona fide error include, but are
not limited to, clerical, calculation, computer malfunction and
programming, and printing errors. An error of legal judgment with
respect to a person's obligations under this article shall not
constitute a bona fide error.
Any action under this section may be brought in any court of
competent jurisdiction, within one year from the date of the
occurrence of the violation.
No provision of this section imposing any liability shall apply to
any act done or omitted in good faith in conformity with any rule,
regulation, or interpretation thereof by the Federal Reserve Board or
in conformity with any interpretation or approval by an official or
employee of the Federal Reserve System duly authorized by the board
to issue interpretations or approvals under such procedures as the
board may prescribe therefor, notwithstanding that after any act or
omission has occurred, the rule, regulation, interpretation, or
approval is amended, rescinded, or determined by judicial or other
authority to be invalid for any reason.
1424. The commissioner shall issue administrative regulations to
define a reasonable time for permitting customers to draw on items
received for deposit in the customer's account. It is the public
policy of this state to provide retail banking customers with the
right to withdraw against items deposited with any depository
institution located in this state within a reasonable period of time.
1425. Pursuant to Section 1424, the commissioner shall promulgate
regulations which shall be reviewed annually to establish a
reasonable period of time within which a depository institution must
permit a customer to draw as a matter of right on an item which has
been received for deposit in the customer's account.
In determining what constitutes a reasonable period of time the
commissioner shall consider the following factors:
(a) The actual time for processing and transport between the
depository and payer institutions.
(b) The fastest air transport time between depository and payer
institutions to be used for purposes of setting the reasonable time
for transport.
(c) The most expeditious route and means for processing of
returned items.
1426. The commissioner is authorized to gather from depository
institutions such information as may be necessary for the formulation
and promulgation of the regulations required by Section 1424.
1427. The first regulations issued pursuant to this article shall
be issued on or before July 1, 1984.
1428. The commissioner is authorized to issue regulations which
provide for a different period of time for withdrawal as a matter of
right against deposited items, if there has been a determination that
the application of the regulations adopted pursuant to this article
would result in unsafe or unsound practices by a depository
institution subject to the regulatory jurisdiction of the
commissioner.
1429. (a) Funds deposited in an account at a depository
institution shall be available on the second business day after the
business day on which those funds are deposited in the case of a
cashier's check, certified check, teller's check, or depository check
subject to the following:
(1) The check is endorsed only by the person to whom it was
issued.
(2) The check is deposited in a receiving depository institution
that is staffed by individuals employed by that institution.
(3) The check is deposited with a special deposit slip that
indicates it is a cashier's check, certified check, teller's check,
or depository check, as the case may be.
(4) The check is deposited into an account in the name of a
customer that has maintained any account with the receiving
depository institution for a period of 60 days or more.
(5) The face amount of the check is for five thousand dollars
($5,000) or less.
In the case of funds deposited on any business day in an account
at a depository institution by depository checks, the aggregate
amount of which exceeds five thousand dollars ($5,000), this
subdivision shall apply only with respect to the first five thousand
dollars ($5,000) of the aggregate amount.
(b) Subdivision (a) does not apply to a depository check if the
receiving depository institution reasonably believes that the check
is uncollectible from the originating depository institution. For
purposes of this subdivision, "reasonable cause to believe" requires
the existence of facts that would cause a well-grounded belief in the
mind of a reasonable person. These reasons shall include, but not be
limited to, a belief that (1) the drawer or drawee of the depository
check has been, or will imminently be, the subject of an order for
relief in bankruptcy or placed in receivership or (2) the depository
check may be involved in a fraud or in a scheme commonly known as
"kiting." In these situations, the depository institution electing to
proceed under this subdivision shall so notify the drawer and drawee
no later than the close of the next business day following deposit
of the depository check.
(c) For purposes of this section, the following terms have the
following meanings:
(1) "Account" means any demand deposit account and any other
similar transaction account at a depository institution.
(2) "Business day" means any day other than a Saturday, Sunday, or
legal holiday.
(3) "Cashier's check" means any check that is subject to the
following:
(A) The check is drawn on a depository institution.
(B) The check is signed by an officer or employee of the
depository institution.
(C) The check is a direct obligation of the depository
institution.
(4) "Certified check" means any check with respect to which a
depository institution certifies the following:
(A) That the signature on the check is genuine.
(B) The depository institution has set aside funds that are equal
to the amount of the check and will be used only to pay that check.
(5) "Depository check" means any cashier's check, certified check,
teller's check, and any other functionally equivalent instrument, as
determined by the Board of Governors of the Federal Reserve System
or the commissioner.
(6) "Depository institution" has the meaning given in clauses (i)
to (vi), inclusive, of Section 19(b)(1)(A) of the Federal Reserve
Act.
(7) "Teller's check" means any check issued by a depository
institution and drawn on another depository institution.
(d) Except for the specific circumstances and checks described in
this section, this section is not intended to restrict or preempt the
regulatory authority of the commissioner.
(e) In the event of a suspension or modification of any similar
provisions in the federal Expedited Funds Availability Act, the
effect of this section shall be similarly suspended or modified.
Article 3. Dormant Accounts
1440. Any bank which delivers or has heretofore delivered to the
State Treasurer pursuant to law any unclaimed or abandoned deposit
shall not thereafter be liable to any person for the same and any
action which may be brought by any person against a bank for money so
delivered to the State Treasurer shall be defended by the Attorney
General without cost to the bank.
CHAPTER 13. WITHDRAWALS AND COLLECTIONS
Article 1. General
1450. Notice to any bank of an adverse claim (the person making
the adverse claim being hereinafter called "adverse claimant") to a
deposit standing on its books to the credit of or to personal
property held for the account of any person shall be disregarded, and
the bank, notwithstanding the notice, shall honor the checks, notes,
or other instruments requiring payment of money by or for the
account of the person to whose credit the account stands and on
demand shall deliver that property to, or on the order of, the person
for whose account the property is held, without any liability on the
part of the bank; subject, however, to the exceptions provided in
subdivisions (a) and (b):
(a) If an adverse claimant delivers to the bank at the office at
which the deposit is carried or at which the property is held an
affidavit of the adverse claimant stating that of the adverse
claimant's own knowledge the person to whose credit the deposit
stands or for whose account the property is held is a fiduciary for
the adverse claimant and that the adverse claimant has reason to
believe the fiduciary is about to misappropriate the deposit or the
property, and stating the facts on which the claim of fiduciary
relationship and the belief are founded, the bank shall refuse
payment of the deposit and shall refuse to deliver the property for a
period of not more than three court days (including the day of
delivery) from the date that the bank received the adverse claimant's
affidavit, without liability on its part and without liability for
the sufficiency or truth of the facts alleged in the affidavit.
(b) If at any time, either before, after, or in the absence of the
filing of an affidavit by the adverse claimant, the adverse claimant
procures and serves
upon the bank at the office at which the deposit is carried or at
which the property is held a restraining order, injunction, or other
appropriate order against the bank from a court of competent
jurisdiction in an action in which the adverse claimant and all
persons in whose names the deposit stands or for whose account the
property is held are parties, the bank shall comply with the order or
injunction, without liability on its part.
(c) This section shall be applicable even though the name of the
person appearing on the bank's books to whose credit the deposit
stands or for whose account the property is held is modified by a
qualifying or descriptive term such as "agent," "trustee," or other
word or phrase indicating that the person may not be the owner in his
or her own right of the deposit or property.
(d) Nothing in the California Multiple-Party Accounts Law
contained in Part 2 (commencing with Section 5100) of Division 5 of
the Probate Code limits the applicability of this section.
1451. When the depositor of a commercial or savings account has
authorized any person to make withdrawals from the account, the bank,
in the absence of written notice otherwise, may assume that any
check, receipt, or order of withdrawal drawn by such person in the
authorized form or manner, including checks drawn to his personal
order and withdrawal orders payable to him personally, was drawn for
a purpose authorized by the depositor and within the scope of the
authority conferred upon such person.
1452. A bank need not recognize or give any effect to (1) any
claim to a deposit of cash or securities standing on its books to the
credit of, or held by it for the account of, any corporation, firm
or association in occupied territory or (2) any advice, statute, rule
or regulation purporting to cancel or to give notice of the
cancellation of the authority of any person at the time appearing on
the books of such bank as authorized to withdraw or otherwise dispose
of cash or securities of such corporation, firm or association,
unless such bank is required so to do by appropriate process procured
against it in a court of competent jurisdiction in the United States
in a cause therein instituted by or in the name of such corporation,
firm or association, or unless the person making such claim or
giving such advice or invoking such statute, rule or regulation, as
the case may be, shall execute to such bank, in form and with
sureties acceptable to it, a bond indemnifying it from any and all
liability, loss, damage, costs and expenses for and on account of
recognizing or giving any effect to such claim, advice, statute, rule
or regulation.
For the purposes of this section (1) the term "occupied territory"
shall mean territory occupied by a dominant authority asserting
governmental, military or police powers of any kind in such
territory, but not recognized by the United States as the de jure
government of such territory, and (2) the term "corporation, firm or
association in occupied territory" shall mean a corporation, firm or
association which has, or at any time has had, a place of business in
territory which has at any time been occupied territory.
The provisions of this section shall be effective only in cases
where (1) such claim or advice purports or appears to have been sent
from or is reasonably believed to have been sent pursuant to orders
originating in, such occupied territory during the period of
occupation, or (2) such statute, rule or regulation appears to have
emanated from such dominant authority and purports to be or to have
been in force in such occupied territory during the period of
occupation.
This section applies to claims, advices, statutes, rules or
regulations given or invoked either before or after the effective
date of this section.
Article 2. Certified Checks
1455. Whenever a bank certifies a check, the amount thereof shall
be immediately charged against the account of the drawer.
1456. It shall be unlawful for any officer or employee of a bank
to certify any check drawn upon such bank, unless the drawer has on
deposit with the bank, at the time such check is certified, an amount
to his credit on the books of the bank not less than the amount
specified therein.
Any bank officer or employee who wilfully violates the provisions
of this section or who resorts to any device or receives any
fictitious obligations directly or indirectly in order to evade the
provisions of this section is guilty of a felony.
CHAPTER 14. LOANS AND INVESTMENTS
Article 1. General Provisions
1460. A commercial bank shall not rediscount, borrow money, or
hypothecate its assets as security for money borrowed except to the
extent and upon the conditions set forth in this division.
1461. Assets hypothecated by a commercial bank as security for
moneys borrowed shall not exceed in value the amount borrowed by more
than 50 percent except with the prior written consent of the
commissioner.
1462. A commercial bank may borrow money by discounting or
otherwise, and may borrow money secured by real property owned by the
bank, to an amount not in excess of its shareholders' equity, but
shall not borrow money except as provided in Sections 1464 and 1465
in excess of such amount without the prior written approval of the
commissioner.
The amounts of moneys so borrowed by a commercial bank together
with the amount of any of its deposits secured by surety bonds shall
not at any one time exceed the amount of its shareholders' equity
without the prior written approval of the commissioner.
1463. A commercial bank may hypothecate its assets in any manner
provided by law to secure the deposits of moneys of the United
States, of postal savings funds, of estates in bankruptcy cases, of
the State of California, or of any political subdivision, public
corporation, or district of the State of California. With the prior
approval of the commissioner a bank may hypothecate its assets to
secure moneys payable to other states.
1464. A commercial bank may borrow for the purpose of buying from
the United States, United States bonds, United States Treasury
certificates, or notes or other obligations of the United States.
1465. A commercial bank may rediscount with, borrow money from,
or hypothecate its assets as security for money borrowed from a
Federal Reserve bank, the Federal Deposit Insurance Corporation, or
the Federal Home Loan Bank.
1466. A commercial bank may issue negotiable certificates of
deposit transferable by endorsement and delivery and nonnegotiable
certificates transferable only on the books of the bank.
1467. A commercial bank located in a place the population of
which does not exceed 5,000 persons according to the most recent
official federal or state census may act as agent for any fire, life,
or other insurance company authorized to do business in California
by soliciting and selling insurance and collecting premiums and may
receive for such services such fees and commissions as may be agreed
upon with the insurance company if the bank is engaged in such
business on October 1, 1949, and is duly licensed under the Insurance
Code, and may act also as the broker or agent for others in making
or procuring loans on real property located within 100 miles of the
place in which the bank is located and may receive for such services
a fee or a commission if it is engaged in such business on October 1,
1949, and is duly licensed. In engaging in either of such businesses
the bank shall comply with all rules and regulations of the
commissioner relating thereto and shall not guarantee either the
principal or interest of any loan procured by it as broker or agent
or assume or guarantee the payment of any premium on insurance
policies written through it as agent or broker or guarantee the truth
of any statement made by an insured in filing an application for
insurance.
Article 2. Loan and Investment Limitations
1470. (a) In this article and in Article 4 (commencing with
Section 1710) of Chapter 19, "affiliate," when used with respect to a
specified person, means any person controlling, controlled by, or
under common control with, the specified person, directly or
indirectly, through one or more intermediaries.
(b) "Control" has the meaning set forth in Section 1250.
(c) "Regulated corporation" means any corporation or limited
liability company or similar entity in which a bank makes an equity
investment and which the bank controls.
(d) "Securities issued by a person" means any debt, equity, or
other security issued by a person, and any and all affiliates of that
person, issued for the benefit of that person or for the benefit of
an affiliate of that person.
1471. (a) Subject to the limitations and exceptions in Sections
1481 and 1510, a bank may hold both obligations made by a person, and
securities issued by that same person.
(b) The total amount of obligations and securities held by a bank
pursuant to subdivision (a) shall not exceed 25 percent of the sum of
the shareholders' equity, allowance for loan and lease losses,
capital notes and debentures of the bank.
1472. Subject to prior approval by the commissioner and to any
limitations the commissioner may impose, the limitations in Sections
1471, 1481, and 1510 shall not apply to loans made by a bank to, and
the bank's investments in securities of, its regulated corporations.
1473. Sections 1481 and 1510 shall not apply to investments held
by a bank prior to the operative date of this section. All
authorizations regarding investments by a bank issued by the
commissioner prior to the operative date of this section are
terminated.
Article 3. Loan Limits
1480. For the purpose of this article:
(a) "Obligations" means the total sums for the payment of which a
person is obligated, primarily or secondarily, to a commercial bank.
(b) Obligations of a person include obligations of others to a
commercial bank arising out of loans made by the bank for the benefit
of the person.
(c) Obligations of an individual include the obligations of a
partnership or association for which obligations the individual is
liable.
(d) Obligations of a partnership include the obligations of its
members who are liable for its obligations.
(e) Obligations of a corporation include the obligations of all
subsidiaries in which it owns or controls a majority interest, except
to the extent and under such restrictions as the commissioner may
prescribe in specific instances upon special application made by any
bank prior to the creation of the obligations.
(f) Obligations of a sovereign government or agency include the
obligations of instrumentalities or political subdivisions of the
government or agency, except to the extent and under such
restrictions as the commissioner may prescribe in specific instances
upon special application made by any bank prior to the creation of
the obligations.
(g) Obligations of a limited liability company include the
obligations of all subsidiaries in which it owns or controls a
majority interest, except to the extent and under any restrictions
the commissioner may prescribe in specific instances upon special
application made by any bank prior to the creation of the
obligations.
1481. The obligations, as defined in Section 1480, excepting the
obligations described in Section 1485 and the obligations described
in Section 1483, of any one person owing to a commercial bank at any
one time shall not exceed the following limitations:
(a) Obligations which are unsecured shall not exceed 15 percent of
the sum of the shareholders' equity, allowance for loan losses,
capital notes, and debentures of the bank.
(b) Obligations, secured and unsecured, in all shall not exceed 25
percent of the sum of the shareholders' equity, allowance for loan
losses, capital notes, and debentures of the bank.
Obligations arising out of the discount of commercial or business
paper actually owned by the person negotiating the same and endorsed
by such person without limitation, together with the secured and
unsecured obligations, if any, of such person, shall not exceed 40
percent of the sum of the shareholders' equity, allowance for loan
losses, capital notes, and debentures of the bank.
No commercial bank shall be required, solely by reason of the
amendments of this article, to dispose of or reduce any loan which
complied with the applicable limitations of this division at the time
such loan was made, nor shall any such bank be prevented solely by
reason of the provisions of this article from renewing any such loan
from time to time.
1482. An obligation shall not be deemed secured by personal
property or collateral unless the personal property or collateral
held as security is of a kind which has not been declared ineligible
by the commissioner and unless it has a market value at least 15
percent greater than the amount of the obligations secured thereby
or, if the security is a bank deposit, it shall have a face value at
least equal to the amount of the obligations secured thereby. The
commissioner may by general regulation declare any particular kinds
or classes of personal property ineligible as security. An obligation
shall not be deemed secured by real property unless the obligation
and the lien securing the same conform to the provisions of Section
1486, 1489, 1494, 1495, or 1496 or the first sentence of Section
1493. Secured and unsecured loans shall be represented by separate
notes and shall not be combined in any way within one note or notes.
1483. (a) In addition to the limitations contained in Section
1481 a commercial bank may issue letters of credit and a commercial
bank may accept drafts or bills of exchange drawn upon it having not
more than six months' sight to run, exclusive of days of grace, which
grow out of transactions involving the importation or exportation of
goods; or which grow out of transactions involving the domestic
shipment of goods; or which are secured at the time of acceptance by
a warehouse receipt or other such document conveying or securing
title covering readily marketable staples. A commercial bank shall
not accept such drafts or bills in the aggregate to an amount
exceeding 150 percent of the sum of its shareholders' equity,
allowance for loan losses, capital notes, and debentures or, when
authorized by the commissioner, to an amount exceeding 200 percent of
the sum of its shareholders' equity, allowance for loan losses,
capital notes, and debentures. A commercial bank shall not accept
such drafts or bills for any one person to an amount exceeding 10
percent of the sum of its shareholders' equity, allowance for loan
losses, capital notes, and debentures, unless the bank is and remains
secured by either attached documents or some other actual security
growing out of the same transaction as the acceptance.
(b) With respect to a bank which issues an acceptance, the
limitations contained in this section shall not apply to that portion
of an acceptance which is issued by such bank and which is covered
by a participation agreement sold to another institution.
1484. With the approval of the commissioner a commercial bank may
accept drafts or bills of exchange drawn upon it having not more
than three months' sight to run, exclusive of days of grace, drawn by
banks or bankers in foreign countries for the purpose of furnishing
dollar exchange as required by the usages of trade in the respective
countries; provided, no commercial bank shall accept such drafts or
bills of exchange for any one bank to any amount exceeding 10 percent
of the sum of the shareholders' equity, allowance for loan losses,
capital notes, and debentures of the accepting bank unless the draft
or bill of exchange is accompanied by documents conveying or securing
title or unless the bank is secured by some other adequate security.
A commercial bank shall not accept such drafts or bills, whether
secured or unsecured, in the aggregate to an amount exceeding 50
percent of the sum of its shareholders' equity, allowance for loan
losses, capital notes, and debentures.
1485. The limitations of Section 1481 shall not apply to the
following and the following shall not be included among the
obligations of a person for the purpose of applying these
limitations:
(a) Loans secured by obligations of the United States or by
obligations unconditionally guaranteed both as to principal and
interest by the United States, having a market value at least 10
percent in excess of the loans secured thereby.
(b) Loans in an amount and of a type or class previously approved
in writing by the commissioner that are secured by not less than a
like amount of obligations of the United States or by obligations
unconditionally guaranteed both as to principal and interest by the
United States.
(c) Loans to the extent that they are covered by guarantees or by
commitments to take over or to purchase without recourse made by (1)
any Federal Reserve bank, (2) the United States, (3) any department,
bureau, board, commission, agency, or establishment of the United
States, including any corporation wholly owned directly or indirectly
by the United States, or (4) any small business development
corporation, urban development corporation, or rural development
corporation incorporated pursuant to the California Job Creation Law
(Part 5 (commencing with Section 14000) of Division 3 of Title 1 of
the Corporations Code).
(d) Drafts or bills of exchange drawn in good faith against actual
existing values with negotiable bills of lading attached, whether or
not accepted by the drawee.
(e) Bankers' acceptances of other banks which are eligible for
rediscount with a Federal Reserve bank.
(f) Obligations resulting from daily clearances through any
clearinghouse association.
(g) Obligations that are fully guaranteed or fully insured or
covered by a commitment to fully guarantee or fully insure by the
Federal Housing Administrator.
(h) Obligations, including portions thereof, to the extent secured
by a segregated deposit account in the lending bank, provided a
security interest in the deposit has been perfected under applicable
law, and subject to all of the following conditions:
(1) Where the deposit is eligible for withdrawal before the
secured obligation matures, the lending bank shall establish internal
procedures to prevent release of the security without the lending
bank's prior consent.
(2) A deposit that is denominated and payable in a currency other
than that of the obligation that it secures may be eligible for this
exception if the currency is freely convertible to United States
dollars.
(A) This exception applies only to that portion of the obligation
that is covered by the United States dollar value of the deposit.
(B) The lending bank shall establish procedures to periodically
revalue foreign currency deposits to ensure that the loan or
extension of credit remains fully secured at all times.
1486. A commercial bank may lend on the security of a first lien
on real property or a first lien on a leasehold under a lease which
does not expire, or which has been extended or renewed so that it
does not expire, for at least 10 years beyond the maturity date of
the loan, if:
(a) The term of the loan does not exceed 10 years and the amount
does not exceed 60 percent of the sound market value of the property
or leasehold, together with the improvements located on the property
which are made subject to the lien, as determined by proper
appraisal.
(b) The term of the loan does not exceed 30 years, is repayable in
substantially equal installments not less often than monthly (or a
variation therefrom as may be authorized under a loan executed
pursuant to Section 1916.5 or 1916.8 of the Civil Code), with
payments commencing not later than 60 days from the date of the loan
or, in the case of a construction loan, commencing not later than one
year from the date of the loan, and the amount does not exceed 90
percent of the sound market value of the property or leasehold,
together with the improvements located on the property which are made
subject to the lien, as determined by proper appraisal, provided,
however, the loan may exceed 90 percent of the sound market value of
the property or leasehold if that portion of the loan which is in
excess of 90 percent is guaranteed or insured by a private insurer
licensed by the Insurance Commissioner.
(c) The loan is made pursuant to and in conformance with
regulations adopted under Section 1916.12 of the Civil Code.
(d) The loan is on a farm or productive agricultural lands, the
term does not exceed 30 years, is repayable in substantially equal
installments not less often than annually, and the amount does not
exceed 90 percent of the sound market value of the property or
leasehold, together with the improvements located on the property
which are made subject to the lien, as determined by proper
appraisal.
(e) The term of the loan does not exceed six months and the amount
does not exceed 85 percent of the sound market value of the property
or leasehold, together with the improvements located on the property
which are made subject to the lien, as determined by proper
appraisal.
(f) The term of the loan does not exceed 60 months, the amount
does not exceed 85 percent of the sound market value of the property
or leasehold, together with the improvements located on the property
which are made subject to the lien, as determined by proper
appraisal, and the loan is for the purpose of financing building
operations under a plan providing for payment of the loan or
providing for refinancing by loans otherwise permitted by this
chapter.
A commercial bank may make a loan without regard to the above
restrictions when necessary to facilitate the sale of real property
owned by the bank.
1487. (a) The provisions of any deed of trust or mortgage on real
property which authorize any state or nationally chartered bank to
accelerate the maturity date of the principal and interest on any
loan secured thereby or to exercise any power of sale or other remedy
contained in the deed of trust or mortgage, upon the failure of the
trustor or mortgagor to pay, at the times provided under the terms of
the deed of trust or mortgage, any taxes, rents, assessments, or
insurance premiums with respect to the real property securing the
loan, or upon the failure to pay any advances made with respect to
the deed of trust or mortgage by the state or nationally chartered
bank, shall be enforceable whether or not an impairment of the
security interest in the real property has resulted from the failure
of the trustor or mortgagor to pay the taxes, rents, assessments,
insurance premiums, or advances.
(b) "State or nationally chartered bank," as used in this section
and Section 1488, includes any person authorized by this state to
make or arrange loans secured by real property, or a holding company
of a state or nationally chartered bank or any successor in interest.
1488. The provisions of any deed of trust or mortgage on real
property which authorize any state or nationally chartered bank to
receive and control the disbursement of the proceeds of any policy of
fire, flood, or other hazard insurance respecting the real property
shall be enforceable whether or not an impairment of the security
interest in the property has resulted from the event that caused the
proceeds of the insurance policy to become payable.
1489. A commercial bank may lend on the security of a first lien
on real property or a first lien on a leasehold under a lease which
does not expire, or which has been extended or renewed so that it
does not expire, for at least 10 years beyond the maturity date of
the loan, if the criteria of any of the following subdivisions are
satisfied:
(a) The loan is fully guaranteed or insured or covered by a
commitment to guarantee or insure by the United States, the Federal
Housing Administrator, or by any other agency of the United States
which the commissioner shall have approved for the purposes of this
subdivision as an issuer of insurance or guarantees of loans on real
property, whether the proceeds of the guarantee or insurance is
payable in cash or in obligations of the United States.
(b) The loan is fully guaranteed by the United States or any
agency thereof pursuant to the "Servicemen's Readjustment Act of 1944"
or any act of Congress supplementary or amendatory thereof, or, if a
portion of the loan is so guaranteed, then if the unguaranteed
portion of the loan does not exceed 80 percent of the sound market
value of the property or leasehold for loan purposes as determined by
proper appraisal.
(c) The loan is one in which the Small Business Administration
cooperates through agreements to participate on an immediate or
deferred basis under the Small Business Act, as amended.
1490. A commercial bank shall not lend in the aggregate more than
5 percent of its assets upon the security of the stock of any one
corporation or upon the security of the bonds of any one obligor
except bonds of the United States or for the payment of which the
credit of the United States is pledged, bonds of the State of
California or for the payment of which the credit of the State of
California is pledged, and bonds of any county, city and county,
city, metropolitan water district, school district, or irrigation
district of the State of California which qualify as investments for
savings banks.
1491. No loan shall be made by any commercial bank upon the
securities of one or more corporations, the payment of which loan is
undertaken, in whole or in part, severally, but not jointly, by two
or more persons in any of the following circumstances:
(a) If the borrowers or underwriters are obligated absolutely or
contingently to purchase the securities, or any of them, collateral
to the loan, unless the borrowers or underwriters have paid on
account of the purchase of the securities an amount in cash, or its
equivalent, equal to at least 25 percent of the several amounts for
which they remain obligated in completing the purchase of the
securities.
(b) If the commercial bank making the loan is liable, directly or
indirectly, or contingently, for the repayment of the loan or any
part thereof.
(c) If its term, including any renewal thereof by agreement,
express or implied, exceeds the period of one year.
(d) Or to an amount under any circumstances in excess of 25
percent of the sum of the commercial bank's shareholders' equity,
allowance for loan losses, capital notes, and debentures.
1492. Nothing in this chapter restricts a commercial
bank in taking any lien on or pledge of any property as additional
security for a loan already made in good faith.
1493. A commercial bank holding a first lien on real property may
take, or purchase and hold, or loan upon another and immediately
junior lien but all such loans shall not exceed in the aggregate 90
percent of the sound market value of the property as determined by
proper appraisal. A commercial bank may loan not to exceed the face
value of a deed of trust or mortgage which constitutes a first lien
upon real property, but in no event shall any such loan exceed 90
percent of the sound market value of the property covered by said
mortgage or deed of trust as determined by proper appraisal.
1494. A commercial bank may lend on the security of a first
security interest on stock or a membership certificate issued to a
tenant-stockholder or resident-member by a completed fee simple
cooperative housing corporation, as defined in Section 216 of the
U.S. Internal Revenue Code, and the assignment by way of security of
the borrower's interest in the proprietary lease or right of tenancy
in property issued by such cooperative housing corporation, provided
all of the real property owned by such corporation is located within
the state, and further provided, that:
(a) The term of the loan does not exceed 30 years, is repayable in
substantially equal installments (or such variation therefrom as may
be authorized under a loan executed pursuant to Section 1916.5 or
1916.8 of the Civil Code), not less often than monthly, with payments
commencing not later than 60 days from the date of the loan, and the
amount does not exceed 80 percent of the sound market value of such
certificates of stock or membership certificates; and
(b) The proprietary lease or right of tenancy in the property
provides:
(1) That no sublease in excess of one year, amendment or
modification to such proprietary lease or right of tenancy in the
property shall be permitted or created without the lender's prior
written consent, and
(2) That in the event of the borrower's default under such loan,
the lender shall have the right, without the prior consent or
approval of the cooperative housing corporation, to sell such shares
or membership certificates at public or private sale following at
least 30 days prior written notice to the borrower and to the
cooperative housing corporation, at the address of the premises
subject to the proprietary lease or right of tenancy in the property,
and assign such proprietary lease or right of tenancy in the
property to the purchaser who shall agree as a condition of such
assignment to cure any defaults thereunder.
For all purposes of this division, such loan shall be considered a
secured residential real estate loan and shall be subject to rules
and regulations implementing the provisions of this section issued by
the commissioner.
1495. (a) A commercial bank may make amortized loans upon the
security of residential real property to finance the purchase and
installation of material or equipment designed to promote energy
conservation or the efficient use of energy in the residential real
property securing the loan, if,
(1) The residential real property securing the loan consists of
not more than four dwelling units;
(2) The loan is made in connection with a concurrent loan
authorized under Section 1486; and
(3) The loan is in an amount not to exceed 10 percent of the loan
made under the authority of Section 1486.
(b) A commercial bank may make additional advances, or additional
loans, to an existing borrower in order to finance the purchase and
installation of material and equipment designed to promote energy
conservation or the efficient use of energy in the residential real
property securing the loan, if,
(1) The residential real property securing the loan consists of
not more than four dwelling units; and
(2) The aggregate of the additional loan or advance and the unpaid
balance of the existing loan will not exceed that percent of the
appraised value of the residential real property securing the loan
permitted by Section 1227 immediately after the purchase and
installation of such material and equipment.
1496. For the purpose of determining whether any loan or
investment is secured by a first lien on real property as required by
any provision of this division, none of the following shall be
deemed a prior encumbrance unless any installment or payment
thereunder, other than a rental or royalty under a lease, is due and
delinquent:
(a) The lien of any tax, assessment, or bond levied or issued by
any state or territory of the United States or by any district,
political subdivision, or municipal corporation thereof, except the
lien of an assessment levied against a particular parcel of real
property and of any bond given or issued pursuant to law in lieu of
the payment of the assessment.
(b) A lien created by a contract and given to secure the payment
for water to be furnished under the contract for the irrigation of
the real property or any part thereof.
(c) A lease of the real property under which all rents or
royalties are reserved to the owner.
(d) The lien of a bond given or issued pursuant to law in lieu of
the payment of an assessment levied against a particular parcel of
real property and the lien of any assessment levied to pay that bond,
if the unpaid balance of the bond and the amount of the loan or
investment combined do not exceed the percentage of the sound market
value of the real property permitted to be so loaned or invested by
any provision of this division.
(e) A lien given to secure the payment of any assessment or
subscription to meet the requirements of any law of the United States
in respect to any irrigation project of the United States in any
state or territory of the United States which may be levied, made, or
received by any corporation or association formed to carry out the
provisions of that law, if the unpaid balance of the assessment or
subscription and the amount of the loan or investment combined do not
exceed the percentage of the sound market value of the real property
permitted to be so loaned or invested by any provision of this
division.
1497. No loan made by any bank in excess of any limitations
contained in this division or which is made in violation of any of
the provisions of this division shall be invalid or illegal as to the
lender for that reason, nor shall any loan made to any bank in
excess of the amounts permitted by this division be invalid or
illegal as to the lender for that reason.
1498. (a) Any state-chartered bank that makes a refund
anticipation loan to a covered borrower, as defined in Section 232 of
Title 32 of the Code of Federal Regulations, as published on August
31, 2007, in Volume 72 of the Federal Register, shall comply with the
provisions of Section 670 of Public Law 109-364 and Section 232 of
Title 32 of the Code of Federal Regulations, as published on August
31, 2007, in Volume 72 of the Federal Register pertaining to refund
anticipation loans.
(b) With respect to any refund anticipation loan covered by
Section 670 of Public Law 109-364 and Section 232 of Title 32 of the
Code of Federal Regulations, as published on August 31, 2007, in
Volume 72 of the Federal Register, a person that does not market or
extend those loans to covered borrowers shall not be in violation of
Section 394 of the Military and Veterans Code.
Article 4. Investments
1510. The total amount invested by a bank in the securities
issued by a person shall not exceed 15 percent of the sum of the
shareholders' equity, allowance for loan and lease losses, capital
notes and debentures of the bank, except:
(a) Obligations of the United States and those for which the faith
and credit of the United States are pledged for the payment of
principal and interest.
(b) Bonds, consolidated bonds, collateral trust debentures, or
other obligations issued by the Federal Financing Bank, the United
States Postal Service, federal land banks, or federal intermediate
credit banks established under the Federal Farm Loan Act; in
debentures and consolidated debentures issued by the Central Bank for
Cooperatives and banks for cooperatives established under the Farm
Credit Act of 1933; in consolidated notes, bonds, debentures, and
other obligations issued by federal land banks, federal intermediate
credit banks, and banks for cooperatives under the Farm Credit Act of
1971; in the bonds of any federal home loan bank established under
the Federal Home Loan Bank Act; and in stock, bonds, debentures,
participations, and other obligations of or issued by the Student
Loan Marketing Association, the Federal National Mortgage
Association, the Government National Mortgage Association, and the
Federal Home Loan Mortgage Corporation.
(c) Obligations of the State of California and those for which the
credit of the State of California is pledged for the payment of
principal and interest.
(d) Obligations of a local agency or district of the State of
California having the power, without limit as to rate or amount, to
levy taxes to pay the principal and interest of the bonds upon all
property within its boundaries subject to taxation by the local
agency or district.
(e) Capital stock of the Federal Reserve bank serving the district
in which the bank is located.
(f) Capital stock of a federal home loan bank in the manner
provided in the Federal Home Loan Bank Act.
(g) Capital stock of the Federal Deposit Insurance Corporation.
1511. Section 1510 shall not apply to investments made pursuant
to this section. A bank may invest in shares of an investment company
(1) registered with the Securities and Exchange Commission pursuant
to the federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1
et seq.) and for which the shares are registered under the federal
Securities Act of 1933 (15 U.S.C. Sec. 77a et seq.), and (2) the
portfolio of which consists solely of the following:
(a) Debt obligations in which a bank is permitted to invest
without limitation pursuant to subdivision (a), (b), (c), or (d) of
Section 1510 and repurchase agreements fully collateralized by those
obligations.
(b) Loans of federal funds and similar loans of unsecured day(s)
funds, maturing in six months or less to institutions insured by the
Federal Deposit Insurance Corporation Federal Funds. Loans under this
subdivision are limited to transactions described in subsection (a)
or (b) of Section 32.102 of Title 12 of the Code of Federal
Regulations involving investment companies in which the entire
beneficial interest is held exclusively by depository institutions,
as permitted by Section 204.123 of Title 12 of the Code of Federal
Regulations.
(c) Cash or its equivalent.
1512. Notwithstanding Section 1510, a bank may purchase, acquire,
or hold the stock of any corporation pursuant to a plan of
reorganization approved by the commissioner by which all of the stock
of one or more banks organized under the laws of this state shall be
acquired and immediately reissued proportionately to the
stockholders of the acquiring bank.
1513. If any commercial bank has made investments which it was
authorized to make at the time they were made it shall not be
required to dispose of such investments by reason of adoption of the
Banking Code, this code, or any amendments to this article.
1514. A commercial bank may organize, sponsor, operate, control,
or render investment advice to, an investment company, or underwrite,
distribute, or sell securities of any investment company which has
qualified to sell its securities in this state pursuant to Part 2
(commencing with Section 25100) of Division 1 of Title 4 of the
Corporations Code, if the officers and employees of the bank who sell
these securities meet such standards with respect to training,
experience, and sales practices as established by the Secretary of
the Business, Transportation and Housing Agency or the secretary's
designee. For the purpose of this section, "investment company" means
an investment company as defined in the Investment Company Act of
1940 (15 U.S.C., Sec. 80a-1 et seq.).
1515. A bank or trust company may acquire stock in settlement or
reduction of a loan or in exchange for an investment previously made
in good faith where the acquisition of the stock is necessary in
order to minimize or avoid loss arising out of the loan or
investment. The limitation in Section 1510 shall not apply to the
stock acquired in accordance with this section. Whenever any stock
that is acquired in accordance with this section can be sold for an
amount sufficient to reimburse the bank or trust company for all loss
arising out of the loan for which the stock was security or arising
out of the original investment by the bank or trust company, the bank
or trust company shall sell the same or shall convert the stock to
an investment subject to Section 1330.
Article 5. Miscellaneous
1520. Whenever the public administrator becomes the administrator
of the estate of a decedent who at the time of his death left money
on deposit with a commercial bank, the public administrator may allow
such deposit to remain in the commercial bank and may deposit
therein to the account of the decedent any moneys of said estate not
required for current expenses of administration, and in such cases
the public administrator need not deposit the same with the county
treasurer. Moneys so deposited, whether by the decedent or by the
public administrator, may be withdrawn upon the order of the public
administrator countersigned by a judge of the superior court when
required for the purpose of administration or otherwise.
1521. A commercial bank accepting savings deposits shall provide
by its bylaws or by contract with its savings depositors the time and
condition on which repayment is to be made to such depositors. The
bank shall not waive any requirement of notice before payment of any
savings deposit except as to all savings deposits.
Whenever there is any call by savings depositors for repayment of
a greater amount than the bank may have disposable for that purpose,
the bank must not make any new loan or investment until such excess
call has ceased.
1522. For the purposes of any law authorizing or providing for
the deposit of funds with a savings bank, a commercial bank accepting
savings deposits shall be deemed a savings bank.
CHAPTER 15. INDUSTRIAL BANKS
Article 1. General Provisions
1530. Chapter 15 (commencing with Section 1530) is a restatement
of Division 7 (commencing with Section 18000) as that division
pertains to the licensing and regulation of industrial banks and to
the insurance of deposits of industrial banks. Chapter 15 is a
continuation, simplification, and recodification of the licensing and
regulation of deposit-taking industrial banks.
1531. (a) Any reference in a provision of any statute or
regulation of this state to banks or commercial banks includes
industrial banks.
(b) Subdivision (a) does not apply in any of the following cases:
(1) In case the provision or a related provision expressly
provides otherwise.
(2) In the case of any provision of Division 1.6 (commencing with
Section 4800) or this division.
1532. The Industrial Loan Account of the Financial Institutions
Fund is renamed to be the Industrial Bank Account.
1533. (a) The commissioner shall annually levy on and collect
from industrial banks authorized to transact industrial banking
business in this state, pro rata on the basis of total assets, an
assessment in a total amount that is sufficient in the commissioner's
judgment to (1) meet the expenses of the department in administering
laws relating to industrial banks or to the industrial banking
business that are not otherwise provided for and (2) provide a
reasonable reserve for contingencies.
(b) The amount of the annual assessment on any industrial bank
authorized to transact the industrial banking business shall be the
greater (1) five thousand dollars ($5,000) or (2) the sum of the
products determined by multiplying (A) increments of the bank's or
trust company's total assets by (B) percentages of the base
assessment rate according to the following table:
Total
Assets
(In Percentage of Base
Millions) Assessment Rate
First $2 ................. 100.0
Next $18 ................. 50.0
Next $80 ................. 12.0
Next $100 ................ 6.25
Next $800 ................ 6.0
Next $1,000 .............. 4.0
Next $4,000 .............. 3.5
Next $14,000 ............. 3.0
Next $20,000 ............. 2.5
Excess over $40,000 ...... 1.5
(c) (1) For purposes of the annual assessment, the total assets of
an industrial bank authorized to transact industrial banking
business shall be determined as of a date fixed by the commissioner.
However, if an industrial loan company is not authorized to transact
industrial banking business as of that date but is so authorized as
of the date when the annual assessment is levied, its total assets
for purposes of the annual assessment shall be determined as of the
date of the levy.
(2) (A) In determining for purposes of the annual assessment on
the total assets of industrial banks that are authorized to transact
industrial banking business and that have one or more foreign (other
state) branch offices or facilities, the assets of the foreign (other
state) branch offices and facilities shall be excluded from total
assets. However, the commissioner may order the assets of foreign
(other state) branch offices and facilities to be included in total
assets if and to the extent that it is necessary or advisable in the
commissioner's judgment to (i) meet the expenses of the department on
account of foreign (other state) branch offices and facilities that
are not otherwise provided for and (ii) provide a reasonable reserve
for contingencies.
(B) If the commissioner finds that an industrial bank authorized
to transact industrial banking business allocated any asset to a
foreign (other state) branch office or facility for the purpose, in
whole or in part, of reducing its annual assessment, the commissioner
may, for purposes of calculating the annual assessment on the
industrial bank, reallocate the asset to the industrial bank's head
office.
(d) The base assessment rate for each annual assessment shall be
fixed by the commissioner but shall not exceed two dollars and twenty
cents ($2.20) per one thousand dollars ($1,000) of total assets.
Article 2. Industrial Bank Business
1540. Each industrial bank shall be an insured bank at all times
while it is engaged in the industrial banking business.
1541. Subject to any order or regulation of the commissioner, an
industrial bank may accept deposits evidenced by a deposit account or
by certificates, that are redeemable prior to their stated maturity,
but may not accept demand deposits.
1542. In addition to other provisions of this division that are
otherwise applicable to an industrial bank, the following provisions
of this division apply to the industrial bank as if it were a
California state commercial bank:
(a) Chapter 4 (commencing with Section 1070).
(b) Chapter 4.5 (commencing with Section 1090).
(c) Chapter 5 (commencing with Section 1100).
(d) Chapter 8 (commencing with Section 1280).
(e) Chapter 10 (commencing with Section 1320).
(f) Chapter 11 (commencing with Section 1380).
(g) Chapter 12 (commencing with Section 1400).
(h) Chapter 13 (commencing with Section 1450).
(i) Chapter 14 (commencing with Section 1460).
(j) Chapter 16 (commencing with Section 1550).
(k) Chapter 17 (commencing with Section 1620).
(l) Chapter 18 (commencing with Section 1660).
(m) Chapter 19 (commencing with Section 1670).
(n) Chapter 5 (commencing with Section 500) of Division 1.
(o) Chapter 6 (commencing with Section 550) of Division 1.
(p) Division 1.6 (commencing with Section 4800).
CHAPTER 16. TRUST COMPANIES
Article 1. General Provisions
1550. No corporation shall engage in the trust business unless:
(a) Its articles comply with the requirements of subdivision (b),
(d), or (e) of Section 1100; and
(b) It has received from the commissioner a certificate of
authority pursuant to Section 1042 to engage in the trust business,
or, if it is a bank, has received the authorization of the
commissioner to engage in the trust business; and
(c) It has deposited with the State Treasurer money or securities
in compliance with Article 3 (commencing with Section 1570) of this
chapter.
1551. Any commercial bank or industrial bank, with the prior
authorization of the commissioner, may engage in the trust business,
if its articles comply with the requirements of subdivision (b) of
Section 1100. Any bank so authorized shall, in the conduct of its
trust business, comply with and be governed by all of the provisions
of this chapter, except the provisions of Section 1580. An
application for such authorization shall be in such form and contain
such information as the commissioner may require, and be accompanied
by a fee of one thousand dollars ($1,000).
1552. No California state bank may engage in trust business at a
place unless the place is its head office, an authorized branch
office, or an authorized place of business.
1553. The following persons are exempt from Section 1550:
(a) Any natural person serving as trustee of one or more trusts
where at least one trustor is a family member of that trustee. For
purposes of this section, "family member" means any lineal ancestor,
lineal descendant, person having a common lineal ancestor of not more
than four generations distant, spouse, father-in-law, mother-in-law,
sister-in-law, brother-in-law, stepparent, or stepchild.
(b) Any member of the State Bar, as specified in Section 6002 of
the Business and Professions Code, any certified public accountant,
as defined in Section 5033 of the Business and Professions Code, and
any professional corporation of one or more members of the State Bar
or certified public accountants, where these professionals are acting
as trustee of a trust established by them for their respective
clients, provided that the member of the State Bar, certified public
accountant, or professional corporation engages in no advertising for
trust business in this state.
(c) Subject to all applicable limitations and restrictions in law
for nonprofit corporations, any nonprofit corporation acting as
trustee incidental to the purposes for which it was organized.
(d) Any person appointed as receiver, trustee, or other fiduciary
by a court of competent jurisdiction acting pursuant to that
authority.
(e) Any person licensed as a professional fiduciary pursuant to
Chapter 6 (commencing with Section 6500) of Division 3 of the
Business and Professions Code.
1554. In this section, "subject national banking association"
means a national banking association that (a) maintains its main
office or a branch office in this state, (b) is authorized to
transact a trust business, and (c) has complied with the requirements
of Article 3 (commencing with Section 1570) of this chapter and of
all other laws of this state relating to the deposit of securities
for the protection of court and private trusts. A subject national
banking association may engage in and conduct a trust business and
may be appointed by any court to act in any fiduciary capacity in
which a trust company is authorized to act. All acts provided in this
code to be performed by the commissioner, the State Treasurer, or
other public officials for or in respect to the deposit of securities
by trust companies, shall be performed for subject national banking
associations equally with trust companies. Every subject national
banking association shall be permitted to use the word "trust" in its
corporate name and to advertise its authority to engage in and
conduct a trust business and to advertise for and solicit trust
business in this state, notwithstanding any contrary provision in
this division or in any other law. The commissioner shall have access
to reports of examination made by the Comptroller of the Currency
insofar as they relate to the trust department of a subject national
banking association. For purposes of Article 3 (commencing with
Section 1570), the principal place of business of a national banking
association that maintains its main office in another state of the
United States and maintains a California branch office shall be
deemed to be situated in the city where the California branch office
is located or, if the national banking association maintains
California branch offices in two or more cities, in the city with the
largest population.
1555. No foreign corporation, other than a national banking
association or a foreign (other state) state bank that is authorized
to conduct a trust business in this state, shall have or exercise the
powers of a trust company nor directly or indirectly transact or
conduct in this state a trust business as defined in Section 115.
However, a foreign corporation that is authorized by its articles to
exercise trust powers may act as trustee for the following purposes:
(a) To deliver bonds and receive payments therefor.
(b) To deliver permanent bonds in exchange for temporary bonds of
the same issue.
(c) To deliver refunding bonds in exchange for those of a prior
issue or issues.
(d) To register bonds or to exchange registered bonds for coupon
bonds or coupon bonds for registered bonds.
(e) To pay interest on the bonds, and take up and cancel coupons
representing the interest payment.
(f) To redeem and cancel bonds when called for redemption or to
pay and cancel bonds when due.
(g) To certify registered bonds for the purpose of exchanging
registered bonds for coupon bonds.
A foreign corporation that is authorized by its articles to
exercise trust powers may be appointed and may accept appointment and
act as trustee under any mortgage, deed of trust, or other
instrument securing bonds or other obligations issued or to be issued
by any railroad corporation that owns a railroad operating in the
State of California and extending into another state.
A foreign corporation exercising in this state the powers
conferred by this section shall not establish or maintain directly or
indirectly any branch office or agency in this state unless it has
complied with all of the applicable provisions of Chapter 20
(commencing with Section 1750) or of Chapter 19
(commencing with Section 1670).
1556. Pursuant to the authority contained in Section 1 of Article
XV of the California Constitution, the restrictions upon rates of
interest contained in Section 1 of Article XV of the California
Constitution shall not apply to any obligations of, loans made or
arranged by, or forbearances of, any of the following that is
authorized to engage in the trust business, when acting in its
fiduciary capacity:
(a) Any California state bank.
(b) Any national bank that maintains its main office or a branch
office in this state.
(c) Any foreign (other state) state bank that maintains a branch
office in this state.
This section creates and authorizes an exempt class of persons
pursuant to Section 1 of Article XV of the Constitution.
This section does not exempt a bank authorized to transact a trust
business or a subsidiary thereof from complying with all other laws
and regulations governing the business in which the bank or
subsidiary is engaged.
1557. The Legislature finds and declares that it is important to
inform taxpayers that they may make voluntary contributions to
certain funds or programs, as provided on the state income tax
return. The Legislature further finds and declares that many
taxpayers remain unaware of the voluntary contribution check-offs on
the state income tax return. Therefore, it is the intent of the
Legislature to encourage all persons who prepare state income tax
returns to inform their clients in writing, prior to the completion
of any tax return, that they may make a contribution to any voluntary
contribution check-off on the state income tax return if they so
choose.
Article 2. Fiduciary Activities
1560. It is the intent of the Legislature that the provisions of
this article, insofar as they are contained in the regulations
regarding fiduciary activities of national banks (Part 9 (commencing
with Section 9.1) of Title 12 of the Code of Federal Regulations) of
the Office of the Comptroller of the Currency, conform, and be
interpreted by anyone construing the provisions of this article to so
conform, to those regulations, any rule or interpretation
promulgated thereunder by the Office of the Comptroller of the
Currency, and to any interpretation issued by an official or employee
of the Office of the Comptroller of the Currency duly authorized to
issue the interpretation.
1561. For purposes of Section 1562, the following terms have the
following meanings:
(a) "Bank" means any of the following:
(1) A commercial bank, industrial bank, or trust company
incorporated under the laws of this state.
(2) A foreign (other state) bank that may establish a branch
office in this state in accordance with Article 2 (commencing with
Section 1680) of Chapter 19.
(b) "Fiduciary Regulations" means the regulations regarding
fiduciary activities of national banks promulgated by the Office of
the Comptroller of the Currency (Part 9 (commencing with Section 9.1)
of Title 12 of the Code of Federal Regulations), as amended from
time to time.
(c) "Affiliate" has the meaning set forth in Section 150 of the
Corporations Code.
(d) "Applicable law" means the law of the state, another state, or
other jurisdiction governing a bank's fiduciary relationships, any
applicable federal laws governing those relationships, or any court
order pertaining to those relationships.
(e) "Custodian under a uniform gifts to minors act" means a
fiduciary relationship established pursuant to the California Uniform
Transfers to Minors Act (Part 9 (commencing with 3900) of Division 4
of the Probate Code).
(f) "Fiduciary account" means an account administered by a bank
acting in a fiduciary capacity.
(g) "Fiduciary capacity" means trustee, executor, administrator,
registrar of stocks and bonds, transfer agent, guardian, assignee,
receiver, or custodian under a uniform gifts to minors act;
investment adviser, if the bank receives a fee for its investment
advice; any capacity in which the bank possesses investment
discretion on behalf of another; or any other similar capacity.
(h) "Fiduciary powers" means the powers granted a bank by virtue
of its receipt of the authority to engage in trust business from the
commissioner.
(i) "Guardian" means the guardian or conservator, by whatever name
used by law, of the estate of a minor, an incompetent person, an
absent person, or a person over whose estate a court has taken
jurisdiction, other than under bankruptcy or insolvency laws.
(j) "Investment discretion" means, with respect to an account, the
sole or shared authority, whether or not that authority is
exercised, to determine what securities or other assets to purchase
or sell on behalf of that account. A bank that delegates its
authority over investments and a bank that receives delegated
authority over investments shall both be deemed to have investment
discretion.
(k) "Trust office" means an office of a bank, other than a main
office, at which the bank engages in the trust business. A trust
office that engages in core banking business, as defined in
subdivision (b) of Section 1670, is considered a branch office of the
bank.
(l) "Trust representative office" means a facility as defined in
subdivision (c) of Section 1670.
1562. (a) Sections 9.4 to 9.6, inclusive, Sections 9.8 to 9.15,
inclusive, and Sections 9.18 to 9.101, inclusive, of the Fiduciary
Regulations in all of their particular, including footnotes, are
hereby referred to, incorporated by reference into this article, and
adopted.
(b) All references to the term "national bank" or "national banks"
used in the Fiduciary Regulations shall mean "bank" or "banks" for
purposes of this article.
Article 3. Deposits with State Treasurer
1570. Every trust company shall deposit with the State Treasurer
money or securities of the character described in Section 1572 as
security for its court and private trusts as follows:
(a) If the trust company's principal place of business is situated
in a city the population of which does not exceed 100,000 persons,
it shall deposit with the State Treasurer money or securities having
a market value of at least fifty thousand dollars ($50,000) as
security for the faithful performance and execution of all court
trusts accepted by it, and money or securities having a market value
of at least fifty thousand dollars ($50,000) as security for the
faithful performance and execution of all private trusts accepted by
it.
Whenever any such trust company receives trust funds or property,
other than real property, from court trusts accepted by it to the
amount of five hundred thousand dollars ($500,000), it shall
forthwith give the commissioner written notice thereof, and within 30
days thereafter shall make an additional deposit with the State
Treasurer of money or securities having a market value of fifty
thousand dollars ($50,000) as security for its court trusts, and
money or securities having a market value of fifty thousand dollars
($50,000) as additional security for its private trusts.
(b) If the trust company's principal place of business is situated
in a city the population of which exceeds 100,000 persons, it shall
deposit with the State Treasurer money or securities having a market
value of at least one hundred thousand dollars ($100,000) as security
for the faithful performance and execution of all court trusts
accepted by it, and money or securities having a market value of at
least one hundred thousand dollars ($100,000) as security for the
faithful performance and execution of all private trusts accepted by
it.
1571. Whenever any trust company receives trust funds or
property, other than real property, from court trusts accepted by it
to the amount of one million dollars ($1,000,000), it shall forthwith
give the commissioner written notice thereof, and within 30 days
thereafter shall make an additional deposit with the State Treasurer
of money or securities having a market value of fifty thousand
dollars ($50,000). For each additional five hundred thousand dollars
($500,000) of such trust funds thereafter received by any trust
company from court trusts a similar notification in writing shall
forthwith be given to the commissioner and a further deposit of money
or securities having a market value of twenty-five thousand dollars
($25,000) shall be made within 30 days thereafter by such trust
company with the State Treasurer until money or securities having a
market value of five hundred thousand dollars ($500,000) have been so
deposited.
1572. Security deposited with the Treasurer by trust companies
pursuant to Section 1570 or 1571 shall consist of the following:
(a) Bonds or other interest-bearing notes or obligations of the
United States or those for which the faith and credit of the United
States are pledged for the payment of principal and interest.
(b) Bonds of the State of California or those for which the faith
and credit of the State of California are pledged for the payment of
principal and interest or in registered warrants of the State of
California.
(c) Obligations and securities of the type described in
subdivisions (a) to (g), inclusive, of Section 1510.
(d) Obligations and assets of the type described in subdivisions
(a) to (c), inclusive, of Section 1511.
(e) Loans secured by a first lien on real property and otherwise
complying with the provisions of subdivision (a) of Section 1486.
(f) Obligations issued, assumed, or guaranteed by the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development Bank, the
International Finance Corporation, or the African Development Bank.
1573. Such money or securities shall be approved by the
commissioner and be deposited with the Treasurer upon the written
order of the commissioner. Upon receiving any such deposit the
Treasurer shall give his or her receipt therefor and thereafter
subject to the provisions of this chapter shall hold such deposits
for the sole benefit of the beneficiaries of the class of trust
business for the security and protection of which the same were
deposited. The state is responsible for the custody and safe return
of any money or securities so deposited. The Treasurer shall deposit
any such moneys under the provisions of Sections 16370 to 16375 of
the Government Code.
1574. Securities deposited pursuant to this article may be
exchanged from time to time, with the approval of the commissioner,
for other like securities of equal market value. Upon written request
to the commissioner, any trust company shall be entitled to withdraw
from the Treasurer, from time to time, any amount of its securities
so deposited in excess of the amount it is required to maintain on
deposit in order to conform with the requirements of this article.
Upon receiving a written request for such withdrawal or exchange, and
satisfactory proof of the facts warranting the same, the
commissioner shall forthwith deliver to the Treasurer a written order
directing the withdrawal or exchange of such securities so as to
conform with the provisions of this section. The Treasurer shall
comply with such written order. So long as the trust company so
depositing such securities shall continue solvent, it shall have the
right and shall be permitted by the Treasurer to receive the interest
and dividends on any securities deposited by it.
1575. Should any security deposited pursuant to this article so
depreciate in value as to reduce the deposit below the amount
required by this article, additional money or securities shall be
deposited promptly in amount sufficient to meet such requirements.
The commissioner may make an investigation of the value of any
security deposited pursuant to this article, at the time such
security is presented for deposit or at any time thereafter, whenever
in his judgment such investigation is necessary. The commissioner
may make such charge as may be reasonable and proper for such
investigation.
1576. When any revaluation of securities is made by the
commissioner pursuant to Section 1575, other than at the time such
securities are presented for deposit, United States Government
securities having a maturity date less than five years from the date
of such revaluation shall be valued at not less than par.
1577. The money and securities deposited pursuant to this article
shall be subject to sale and the same or the proceeds thereof shall
be subject to disposal by the State Treasurer only on the order of a
court of competent jurisdiction and for the benefit respectively of
the beneficiaries of that class of trust business for the security
and protection of which the securities were deposited.
1578. The commissioner may, pursuant to Section 329, levy a civil
penalty against any trust company that fails to comply with this
article.
Article 4. Investments
1580. A trust company may invest its contributed capital only in
the securities and properties in which a commercial bank is permitted
to invest its funds pursuant to Sections 800 to 819, inclusive, and
in loans on real property which commercial banks are permitted to
make pursuant to Article 3 (commencing with Section 1480) of Chapter
14.
1581. Trust funds received by any trust company in connection
with its trust business, if invested, shall be invested as provided
in Part 4 (commencing with Section 16000) of Division 9 of the
Probate Code.
1582. (a) As used in this section:
(1) "Fund" means any investment company registered under the
Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), as
amended from time to time.
(2) "Trust" means any court trust or private trust.
(3) "Trust Law" means Division 9 (commencing with Section 15000)
of the Probate Code.
(b) Within the standards established by trust law, including, but
not limited to, Division 9 (commencing with Section 15000) of the
Probate Code, a trust company acting in any capacity under a trust
may, in the exercise of its investment discretion unless the trust
instrument provides expressly to the contrary, invest and reinvest in
the securities of or other interests in any fund to which the trust
company or its affiliate is providing services including, but not
limited to, services as an investment adviser, sponsor, distributor,
custodian, agent, registrar, administrator, servicer, or manager, and
for which the trust company or its affiliate receives compensation.
(c) Before or within 30 days after the initial investment upon the
exercise of discretionary powers authorized by subdivision (b), the
trust company, acting in any capacity under a trust, shall furnish
written notice of the exercise of the discretionary powers and a copy
of the prospectus relating to the securities to all persons to whom
the trust company is required to render statements of account
pursuant to applicable provisions of the Trust Law or to whom the
trust company regularly provides a statement of account unless
specifically waived in writing.
(d) With respect to any trust so invested, the trust company shall
disclose to all persons identified in subdivision (c), at least
annually by prospectus, statement of account, or other written
notice, a brief description of the fees or rates charged by the trust
company and its affiliates for its services as investment adviser or
investment manager to the fund.
(e) In connection with an investment or reinvestment authorized by
subdivision (b), the portion of compensation a trust company
receives from the trust reasonably attributable to investment
advisory or investment management services to the trust shall be
reduced (but not below zero) by an amount equal to compensation that
is received by the trust company or its affiliates for providing
investment advisory or investment management services to the fund for
the portion of the trust invested in the fund.
1583. Any trust company or bank authorized to engage in the trust
business holding trust funds awaiting investment or distribution may
deposit or leave on deposit such funds with any state or national
bank. Such funds shall not, however, be deposited or left with the
same corporation or association depositing or leaving on deposit such
funds or with any corporation or association holding or owning a
majority of the capital stock of the trust company or bank making or
leaving such deposit, unless such corporation or association shall
first pledge, as security for such deposit, securities eligible for
investment by savings banks having a market value of not less than
the funds so deposited. No security shall be required with respect to
any part of such deposits which is insured under the provisions of
any law of the United States.
1584. Any trust company acting in any capacity under a court or
private trust or when acting in such capacity with one or more
persons as cofiduciary or cofiduciaries, unless the instrument
creating such trust contains a provision to the contrary, may, with
the consent of such cofiduciary or cofiduciaries cause any stock or
other securities held in any such capacity to be registered in the
name of a nominee or nominees of such trust company and any trust
company when acting as depositary or custodian for the trustee of any
other court or private trust, unless the instrument creating the
trust contains a provision to the contrary, may, with the consent of
the trustee of such other trust, cause any stock or other securities
held by it in such capacity to be registered in the name of a nominee
or nominees of such trust company. Any such trust company shall be
liable for any loss occasioned by the acts of any nominee of such
trust company with respect to such stock or other securities so
registered. The records of such trust company shall at all times show
the ownership of any such stock or other securities and of those
held in bearer form. Such stock or other securities and those held in
bearer form shall at all times be kept by such trust company
separate and apart from its other assets and may be kept by such
trust company:
(a) In a manner such that all certificates representing the stock
or other securities from time to time constituting the assets of a
particular estate, trust or other fiduciary account are held separate
from those of all other estates, trusts or accounts; or
(b) In a manner such that, without certification as to ownership
attached, certificates representing stock or other securities of the
same class of the same issuer and from time to time constituting
assets of particular estates, trusts or other fiduciary accounts are
held in bulk, including, to the extent feasible, the merging of
certificates of small denomination into one or more certificates of
large denomination, provided that a trust company, when operating
under the method of safekeeping security certificates described in
this subdivision, shall be subject to such rules and regulations as,
in the case of state chartered institutions, the commissioner and, in
the case of national bank associations, the Comptroller of the
Currency, may from time to time issue. Such trust company shall, on
demand by any party to an accounting by such trust company as
fiduciary or on demand by the attorney for such party, certify in
writing the stock or other securities held by such trust company as
such fiduciary for such party.
No domestic or foreign corporation or the registrar or transfer
agent of any such corporation shall be liable for registering or
causing to be registered on the books of such corporation any share
or shares or other securities in the name of any nominee of such
trust company or for transferring or causing to be transferred on the
books of any such corporation any share or shares or other
securities theretofore registered by such corporation in the name of
any nominee of such trust company as herein provided when the
transfer is made upon the authorization of such nominee.
1585. (a) For purposes of this section, two or more trust
companies shall be deemed to be affiliated if they are members of the
same affiliated group, within the meaning of Section 1504 of the
Internal Revenue Code.
(b) Any trust company may establish and administer common trust
funds composed of property permitted by law for the investment of
trust funds, for the purpose of furnishing investments to any one or
more of the following: (1) itself, as fiduciary; (2) itself and
others, as cofiduciaries; (3) any affiliated trust company including,
without limitation, any foreign (other state) affiliated trust
company, as fiduciary; and (4) any affiliated trust company
including, without limitation, any foreign (other state) affiliated
trust company and others, as cofiduciaries. Any trust company may as
such fiduciary or cofiduciary invest funds which it lawfully holds
for investment in interests in common trust funds administered by
itself or by any affiliated trust company including, without
limitation, any foreign (other state) affiliated trust company, if
such investment is not prohibited by the instrument, judgment,
decree, order, or statute creating or governing such fiduciary
relationship, and if, in the case of cofiduciaries, the trust company
procures the consent of its cofiduciaries to such investment.
(c) Each common trust fund established hereunder shall be treated
as an entity separate and distinct from the fiduciary relationships
participating therein. No fiduciary in administering a participating
fiduciary relationship shall be required to make any apportionment or
allocation between the principal and income of this relationship
different from that made for the common trust fund. No participating
fiduciary relationship, nor any person having an interest in that
relationship, shall have or be deemed to have any ownership in any
particular property of the common trust fund, but each participating
fiduciary relationship shall have a proportionate undivided interest
in the fund and its income, and the ownership of all property of the
common trust fund shall be in the trustee of the fund.
(d) This section shall apply to fiduciary relationships now in
existence or hereafter established, whether the same be revocable or
irrevocable. The commissioner, at his or her direction, may make an
examination of any common trust fund established hereunder at the
times and to the extent as he or she may deem advisable. The
provisions of the Corporate Securities Law shall not apply to the
creation, administration, or termination of common trust funds, nor
to participation therein.
1586. With regard to any participation certificates heretofore
issued by any trust company, secured by a trust deed or mortgage, the
full legal title in the deed or mortgage and debt (referred to in
this section as "security") shall be held by the trust company
issuing the certificates as trustee of an express trust, with all
powers necessary to extend, renew, enforce, collect, and liquidate
the same, acquire title to the property covered thereby either
through foreclosure or by voluntary conveyance; manage, lease, sell
(either for cash or upon deferred payments), exchange, or otherwise
realize upon the security or property and distribute the net proceeds
thereof. All sums so realized shall, as and when received by such
trustee, after payment of its compensation and all costs, charges,
and expenses, including brokers' commissions and advances for taxes
and assessments, incurred or made in connection with the protection,
administration, and liquidation of the security or property, be
distributed to the trusts or persons who are beneficiaries of the
trust, as their interests may appear therein. The rights and
interests therein of any such beneficiary failing to contribute on
demand its or his pro rata of sums advanced, expended, or required by
the trust company in the protection, administration, or liquidation
of the trust shall be subject to a lien for all sums, with legal
interest thereon advanced, expended, or required for any of such
purposes by the trustee or by any other beneficiary of the trust.
The trust in such security or property shall continue in the trust
company so long as any of the certificates are outstanding,
irrespective of any distribution of the certificates from the trust
in which the same are held.
The purpose of this section is to define and clarify the rights
and obligations of trust companies and of all persons and trusts
interested in participation certificates issued under any authority
of law.
Article 5. Miscellaneous
1600. A trust company has the following powers:
(a) It may act, or may be appointed by any court to act, in like
manner as an individual, as executor, administrator, guardian or
conservator of estates, assignee, receiver, depositary, trustee,
custodian, or in any other fiduciary or representative capacity for
any purpose permitted by law, may act as transfer agent or registrar
of corporate stocks and bonds, may buy and sell securities for the
account of customers, and may accept and execute any trust business
permitted by any law of this or any other state or of the United
States to be taken, accepted, or executed by an individual; and
(b) A trust company, upon becoming a member of the Federal Reserve
System, shall continue to have such powers as may then or thereafter
be conferred upon it by the laws of this state, subject to such
federal rules, regulations, and laws as may govern state banks
exercising trust powers or trust companies which become members of
the Federal Reserve System.
1601. For the purposes of this chapter, all trusts and other
business permitted to be accepted or executed by a trust company are
hereby classified and defined as either court trusts or private
trusts.
A "court trust" is one in which a trust company acts under
appointment, order, or decree of any court, as executor,
administrator, guardian, conservator, assignee, receiver, depositary,
or trustee, or in which it receives on deposit money or property
from a public administrator, under any provision of this code, or
from any executor, administrator, guardian, assignee, receiver,
depositary, or trustee, under any order or decree of any court.
A "private trust" is every other trust, agency, fiduciary
relationship, or representative capacity.
1602. A trust company, its officers and employees, shall not
disclose any information to any person concerning the existence,
condition, management, and administration of any private trust
confided to it, except:
(a) Where such disclosure is specifically authorized by the terms
of the trust.
(b) Where such disclosure is determined by an officer of the trust
company to be necessary in the administration of such trust.
(c) Where such disclosure is required by a court of
competent jurisdiction or by a subpoena issued by an attorney
pursuant to Section 1985 of the Code of Civil Procedure.
(d) Where such disclosure is made to, or upon the instructions of,
any party executing the trust instrument.
(e) Where such disclosure refers to an irrevocable trust, to, or
upon the instructions of, any beneficiary thereunder whether or not
presently entitled to receive benefits therefrom.
(f) Where such disclosure is made to the commissioner in the
course of an examination.
1603. The commissioner shall examine the court trust business of
a trust company at least once every 24 months and shall examine the
private trust business at such times and to such extent as he or she
may deem necessary or advisable.
1604. In making the reports to the commissioner required by this
division, every trust company shall report, in addition to the other
facts called for, separately, the amount of real property and the
amount of personal property held by such trust company in both its
court trusts and in its private trusts.
1605. Any court having jurisdiction of any executor,
administrator, guardian, conservator, assignee, receiver, depositary,
or trustee, upon the application of any such officer or trustee or
upon the application of any person having an interest in the estate
or property administered by such officer or trustee, after such
notice to the other parties in interest as the court may direct, or
without notice if all parties in interest consent thereto, and after
a hearing upon such application, may authorize or direct such officer
or trustee, whether such person has duly qualified or not, to
deposit any moneys then in his hands or which may come into his hands
thereafter, and such portion or all of the personal assets of such
estate as the court shall deem proper for safekeeping, with any such
trust company. Upon such deposit being made the court shall by an
order of record reduce the bond to be given, or theretofore given, by
such officer or trustee so as to cover only the estate remaining in
the hands of such officer or trustee. The money and property so
deposited shall thereupon and thereafter be held by such trust
company under the order and direction of the court.
Such trust company shall not be required to give any bond or
security, except as provided in this division, in case of any deposit
of moneys or other personal assets with it under this section. Its
responsibility for the safekeeping of personal assets so deposited
with it shall be that of a bailee for hire.
1606. Securities held by a trust company by direction of any
court order issued pursuant to Section 1605 may be deposited in a
securities depository, as defined in Section 30004, which is licensed
under Section 30200 or exempted from licensing thereunder by Section
30005 or 30006.
1607. Whenever an executor, administrator, guardian or
conservator of estates, assignee, receiver, depositary, or trustee is
required to qualify by taking and subscribing an oath or to make an
affidavit, any trust company acting in any such capacity may satisfy
such requirement by the oath or affidavit of its president, vice
president, secretary, assistant secretary, manager, trust officer, or
assistant trust officer. Any such trust company shall be liable for
its failure to perform any of the duties required by law to be
performed by an individual acting in like capacity and shall be
subject to the same penalties for such failure as would be applicable
to an individual.
1608. Whenever any corporation desires to withdraw from and
discontinue doing a trust business, it shall furnish to the
commissioner satisfactory evidence of its release and discharge from
all the obligations and trusts which it has assumed or which have
been imposed on it by law. Thereupon the commissioner shall revoke
his or her certificate of authority to do a trust business, and the
State Treasurer shall return to it all of the securities deposited by
it. Thereafter such corporation shall not be permitted to use and
shall not use the word "trust" in its corporate name, or in
connection with its business.
1609. The validity or legality of any act or proceeding done or
taken by any trust company, relating to or in connection with the
administration of its court and private trusts, shall not be affected
or impaired by the neglect or failure of such trust company, or of
any officer or employee thereof, to comply with any of the provisions
of this division. All such acts and proceedings done or taken prior
to the revocation of its certificate of authority to do a trust
business by the commissioner, under the provisions of this division,
or the revocation by any court or judge thereof of the appointment,
order, or decree theretofore entered in such trust matter, shall be
as valid and effective for all purposes as if any such neglect or
failure had not occurred.
1610. Nothing in this chapter shall make it unlawful for any
person or corporation to engage in the business of receiving and
holding money in escrow or of acting as trustee under deeds of trust
given solely for the purpose of securing obligations for the
repayment of money other than corporate bonds.
1611. A bank or trust company shall not mingle trust funds
received by it with other assets of the corporation or association
and such funds shall not be used in the conduct of its business
except to the extent that such funds are deposited with the same
corporation or association in accordance with the provisions of this
division. Any officer of any bank or association who knowingly
violates or consents to the violation of this section is guilty of a
felony.
1612. Notwithstanding any other provision of law, any bank and
any trust company holding securities in a fiduciary capacity or while
engaged in a trust business, or while acting in any capacity under a
court or private trust, or while acting in that capacity with one or
more persons as cofiduciary or cofiduciaries, unless the instrument
creating the trust contains a provision to the contrary, is
authorized to deposit or arrange for the deposit of the securities in
a securities depository, as defined in Section 30004, which is
licensed under Section 30200 or exempted from licensing thereunder by
Section 30005 or 30006. When securities are so deposited, they may
be held in the custody of the securities depository in which they are
deposited or in the custody of any other securities depository so
licensed or exempted and in which the securities depository in which
the securities were deposited maintains an account, or in the custody
of any bank or trust company with authority to accept custody of the
securities, that accepts custody of the securities on behalf of a
securities depository. The securities may be held in the name of the
nominee of the securities depository in which they are deposited, or
in the name of the nominee of any other securities depository with
which the securities depository in which they are deposited maintains
an account. The custodian of securities so deposited may merge
certificates representing securities of the same class of the same
issuer and may hold those certificates in bulk with any other
securities deposited in any securities depository by any person
regardless of the ownership of the securities, and certificates of
small denomination may be merged into one or more certificates of
larger denomination. Any bank or trust company that deposits or
arranges for the deposit of the securities in a securities depository
shall maintain records that at all times show the ownership of the
deposited securities. A bank or trust company depositing securities
pursuant to this section shall be subject to such rules and
regulations as in the case of state chartered institutions, the
commissioner and, in the case of national banking associations, the
Comptroller of the Currency may from time to time issue. This section
shall apply to securities now held or hereafter held by a bank or
trust company in the above designated capacities. A bank or trust
company may, but shall not be required to, own capital stock of a
securities depository in which it deposits securities pursuant to
this section.
1613. Notwithstanding any other provision of law, any bank and
any trust company holding securities in a fiduciary capacity or while
engaged in a trust business, or while acting in any capacity under a
court or private trust, or while acting in that capacity with one or
more persons as cofiduciary or cofiduciaries, unless the instrument
creating the trust contains a provision to the contrary, is
authorized to deposit or arrange for the deposit with a federal
reserve bank of any such securities the principal and interest of
which the United States or any department, agency, or instrumentality
thereof has agreed to pay, or has guaranteed payment, to be credited
to one or more accounts on the books of the federal reserve bank in
the name of the bank or trust company, to be designated fiduciary or
safekeeping accounts, to which accounts other similar securities may
be credited. Any bank or trust company that deposits or arranges for
the deposit of securities pursuant to this section shall maintain
records that at all times show the ownership of the securities
deposited. A bank or trust company depositing securities pursuant to
this section shall be subject to such rules and regulations as in the
case of state-chartered institutions, the commissioner and, in the
case of national banking associations, the Comptroller of the
Currency, may from time to time issue. Ownership of, and other
interests in, the securities credited to such account may be
transferred by entries on the books of the federal reserve bank
without physical delivery of any securities. A bank or trust company
acting as custodian for a fiduciary shall, on demand by the
fiduciary, certify in writing to the fiduciary the securities
deposited by the bank or trust company pursuant to this section for
the account of the fiduciary. A fiduciary shall, on demand by any
party to its accounting, certify in writing to that party the
securities deposited for its account as a fiduciary pursuant to this
section. This section shall apply to all fiduciaries and custodians
for fiduciaries, acting on the effective date of this section or who
thereafter may act regardless of the state of the instrument or court
order by which they are appointed.
CHAPTER 17. SAFE DEPOSIT
Article 1. General Provisions
1620. Notice to a bank operating a safety deposit department or
to a company conducting a safety deposit business of an adverse claim
(the person making the adverse claim being hereinafter in this
section called "adverse claimant") to any personal property in a
safety deposit box maintained by a bank or company and rented to any
person, or to any personal property held by the bank or company in
safekeeping or storage for any person shall be disregarded, and the
bank or company, notwithstanding such notice, shall permit access to
the box to the person to whom it is rented or shall deliver the
contents thereof to or on the order of the person or shall deliver
the property held in storage or safekeeping to or on the order of the
person for whom it is held, without any liability on the part of the
bank or company; subject, however, to the exceptions provided in
subdivisions (a) and (b) of this section:
(a) If an adverse claimant delivers to the bank at the office at
which the safety deposit is maintained or the property is held his
affidavit stating that of his own knowledge the person in whose name
the box stands or for whom the property is held is a fiduciary for
the adverse claimant and that he has reason to believe such fiduciary
is about to misappropriate the contents of the box or the property,
and stating the facts upon which such claim of fiduciary relationship
and such belief are founded, the bank or company shall refuse access
to the safety deposit box or refuse to deliver the personal property
for a period of not more than three (3) court days (including the
day of delivery) from the date that the bank or company received the
adverse claimant's affidavit, without liability on its part and
without liability for the sufficiency or truth of the facts alleged
in the affidavit.
(b) If at any time, either before, after, or in the absence of the
filing of an affidavit by the adverse claimant, the adverse claimant
procures and serves upon the bank or company at the office at which
the safety deposit box is maintained or the property is held a
restraining order, injunction, or other appropriate order against the
bank or company from a court of competent jurisdiction in an action
in which the adverse claimant and all persons in whose names said box
stands or for whom the property is held are parties, the bank or
company shall comply with such order or injunction, without liability
on its part.
(c) The provisions of this section shall be applicable even though
the name of the person appearing on the bank's or company's books as
the renter of the box or as the depositor of the property held in
storage or safekeeping is modified by a qualifying or descriptive
term such as "agent," "trustee," or other word or phrase indicating
that the person may not be the owner in his own right of the contents
of the box or of the property held in storage or safekeeping.
Before giving access to any safe-deposit box, the bank or company
may demand payment to it of all costs and expenses of opening the
safe-deposit box and all costs and expenses of repairing any damage
to the safe-deposit box caused by the opening thereof.
Article 2. Remedies for Nonpayment of Rent
1630. Every bank conducting a safe-deposit business shall be
entitled to the special remedies set forth in this article in
enforcing the liabilities of safe-deposit box renters and of
safekeeping and storage depositors.
1631. If the rental of any safe-deposit box is not paid within
six months from the day it is due, the bank, or at any time
thereafter and while such rental remains unpaid, may mail a notice to
the person in whose name such box stands on its records stating that
if the amount due for such rental is not paid on or before a
specified day, which must be at least 30 days after the date of
mailing such notice, the bank will cause such box to be forced open.
1632. At any time after the date specified in such notice, if the
rental for such safe-deposit box to the date of payment and the cost
of giving such notice have not been paid, the bank, in the presence
of two of its employees, one of whom shall be an officer of the bank,
may cause such box to be opened and the contents thereof to be
removed and inventoried. The inventory shall be signed by such
persons.
1633. The following persons, and no others, are entitled to
receive from the bank a copy of the inventory:
(a) An executor of the decedent's will.
(b) The administrator of the decedent's estate.
(c) The attorney for the executor or administrator.
(d) A tenant of the safe-deposit box.
(e) Any heir of the decedent or beneficiary under the decedent's
will.
(f) Any person whom the superior court having jurisdiction by
order directs should be allowed to obtain a copy of the inventory.
1634. All contents removed from a safe-deposit box pursuant to
Section 1632 shall be retained by the bank for at least two years
unless sooner delivered to or on the order of the person in whose
name such box stood on the records of the bank. The bank shall
deliver the contents of such box to or on the order of the person in
whose name such box stood on its records, upon payment to it before
such contents are sold or destroyed, of all rental due at the time of
opening the box, the cost of giving notice, the charges for opening
the box and for custody of the contents, and any other proper
charges. The bank may deliver such contents on the order of the
person in whose name such box stood on its records, irrespective of
any information disclosed by the contents indicating ownership
thereof by any other person.
1635. At any time after two years from the day when a
safe-deposit box has been opened pursuant to this article, the bank
may mail a notice to the person in whose name such box stood on its
records, stating that unless the amounts due to the bank for rental,
for the cost of mailing and publishing notice of sale, and for its
charges for opening the box and for custody of its contents, and any
other proper charges, giving the total amount thereof, are paid, the
bank will offer for sale the contents thereof at a time and place
named in such notice, which time shall be at least 30 days after the
mailing thereof. If the amounts specified in such notice are not paid
before the time of sale designated therein, the bank may sell all or
any portion of the contents of such box, other than contents of the
character described in Section 1668 and other than bonds and other
securities which at the time of sale are listed on an established
stock exchange in the United States, at public sale at the time and
place given in such notice. Notice of the time and place of sale
shall be published in a newspaper of general circulation in the
county in which the sale is to be held once at least five days before
the date of sale, or if no such newspaper is published in the county
such notice shall be posted in three public places in the county at
least five days before the date of sale. Such notice need describe
the property only in general terms and as the unclaimed contents of a
safe-deposit box. Such sale may be postponed from time to time by
public pronouncement at the time and place of sale.
1636. Notwithstanding any of the provisions of this article, no
stocks, bonds, or other securities which, at the time of sale
pursuant to Section 1635, are listed on any established stock
exchange in the United States may be sold at public sale but may be
sold at any time thereafter through an established stock exchange.
1637. Upon the making of a sale of any securities, an officer of
the bank shall execute and attach to the securities so sold an
affidavit reciting facts showing that such securities were sold
pursuant to this article and that the provisions of this article
governing such sale have been complied with. The affidavit shall be
and constitute sufficient authority to any corporation whose stock is
so sold or to any registrar or transfer agent of such corporation to
cancel the certificates of stock so sold and to issue a new
certificate or certificates representing such stock to the purchaser
thereof, and to any registrar, trustee, or transfer agent of
registered bonds or other securities, to register any such bonds or
other securities in the name of the purchaser thereof.
1638. From the proceeds of any sale the bank shall deduct the
amount set forth in such notice and any further charges which may
have accrued since the mailing of the notice and shall record the
balance of the proceeds, if any, on its books as a liability payable
to the person in whose name the safe-deposit box was rented.
1639. Any documents, letters, or other articles found in a
safe-deposit box opened pursuant to Section 1632, which in the
judgment of at least two officers of the bank have no intrinsic or
marketable value, need not be offered for sale. Any documents,
letters, and articles and any other contents which have been offered
for sale and for which no purchaser has been found, shall be retained
by the bank for not less than one year from the date when the box
was opened. At any time thereafter, unless sooner delivered to or on
the order of the person in whose name the box stood on the records of
the bank, the documents, letters, and articles and also those
contents which have been offered for sale and for which no purchaser
has been found, may be destroyed in the presence of an officer of the
bank, but if no notice of intended sale of the contents of the box
has been given pursuant to Section 1635, the bank shall mail a notice
of its intention to destroy the documents, letters, and articles at
least 30 days before the destruction of the same to the person in
whose name the box stood on the records of the bank.
1640. If, before the effective date of this section, a bank or
its predecessor in interest, has caused a safe-deposit box to be
opened for nonpayment of rental, and the contents of such box or any
part thereof remain in its custody, it shall be entitled to the
special remedies in enforcing the liability of the former renter of
such box as set forth in Sections 1634 to 1639, inclusive, whether or
not such box was rented prior to October 1, 1949.
1641. Whenever a bank receives personal property for safekeeping
or storage as bailee and issues a receipt therefor, the bank may
enforce its lien as warehouseman in accordance with the provisions of
the Uniform Commercial Code or at its option in the manner provided
in Sections 1671 to 1673, inclusive, of this article.
1642. If the amount charged by a bank for the safekeeping or
storage of personal property is not paid within six months from the
day it is due, the bank, at any time thereafter and while such
charges remain unpaid, may mail a notice to the person in whose name
the receipt was issued, giving the amount then due for such
safekeeping or storage and stating that unless such amount and any
other charges accruing to the date of payment are paid, the bank will
sell such personal property at a time and place named therein, which
time shall be at least 30 days after the mailing of such notice. If
the amount specified in such notice and all other charges of the bank
and expenses of mailing and publishing notice of sale accruing to
time of payment are not paid, the bank may sell all or any portion of
such personal property at public sale at the time and place given in
such notice. Notice of the time and place of sale shall be published
once at least five days before the date of sale in a newspaper of
general circulation published in the county in which the sale is to
be held, or if no such newspaper is published in the county such
notice shall be posted in three public places in the county at least
five days before the date of sale. Such sale may be postponed from
time to time by public pronouncement at the time and place of sale.
The bank may include in the notice required to be mailed a statement
to the effect that if the amount due at that time is not paid at
least 10 days before the date set for the sale, it may cause any
container in which any of such personal property may be, to be opened
and the contents thereof to be sold at the time and place fixed for
the sale with or without such container, or the container may be sold
without the contents. If such statement is included in the notice,
the bank, at any time within 10 days before the date fixed for the
sale, may open any such container and remove the contents in the
presence of two employees of the bank, one of whom shall be an
officer thereof, both of whom shall make and sign an inventory of the
contents. Thereafter, on the day fixed for the sale, the contents
may be sold as a whole or separately and with or without the
container, or the container may be sold without the contents.
1643. From the proceeds of the sale, the bank shall deduct all
charges as stated in the final notice, together with any further
charges that have accrued since the mailing thereof, and reasonable
expenses for notices, advertising, and sale, and shall credit the
balance of the proceeds, if any, to an account in the name of the
person in whose name the receipt for such personal property was
issued.
1644. Any documents, letters, or other articles which, in the
judgment of an officer of the bank, have no apparent intrinsic or
marketable value, need not be offered for sale. The documents,
letters, and articles and any other articles which have been offered
for sale and for which no purchaser has been found, shall be retained
by the bank for not less than one year from the date when notice of
sale was mailed. At any time thereafter, unless sooner delivered to
or on the order of the person in whose name the receipt was issued,
the documents, letters and articles may be destroyed in the presence
of an officer of the bank and of a notary public.
1645. The power conferred on a bank to sell the contents of a
safe-deposit box or personal property received for safekeeping or
storage for nonpayment of rental or other charges, includes power to
sell any bonds, stock certificates, promissory notes, choses in
action, or other securities, and any other tangible or intangible
property found in such box or in the container in which such personal
property was received for safekeeping or storage, regardless of
whether it appears from such securities or property that the person
in whose name the box stood or to whom the safekeeping or storage
receipt was issued, possesses title to any interest in such
securities or other property or power to transfer such title or
interest.
1646. A bank holding a safe-deposit box originally rented from,
or personal property against which a safekeeping or storage receipt
was issued by, a predecessor in interest, or a bank holding the
contents of such box, shall be entitled to the remedies as to such
box or the contents thereof or as to the safekeeping or storage of
such property in like manner and to the same extent as if such box
had been rented from or such safekeeping or storage of personal
property had been received by such bank in the first instance.
1647. The provisions of this article do not preclude any other
remedy by action or otherwise now or hereafter existing for the
enforcement of the claims of a bank against the person in whose name
the safe-deposit box stood or stands, or in whose name the
safekeeping or storage receipt was issued, nor bar the right of a
bank to so recover, at its option, either the entire amount of the
debt due to it without recourse to sale of the property, if any, or
so much of the debt due to it as shall not have been paid by the
proceeds of the sale of all or any portion of the property deposited
with it.
1648. If the principal of, or interest or dividends on, any
securities that have come into the possession of any bank by reason
of action taken pursuant to this article, is due and payable at the
time such securities come into the bank's possession, or thereafter
while such securities remain in the possession of the bank, shall
become due and payable, the bank at its election may collect such
principal, interest, or dividends and from the proceeds thereof may
deduct all sums then due to it from the person to whom such
safe-deposit box was rented
or to whom such safekeeping or storage receipt was issued. The
remainder of the money so collected, if any, shall be credited by the
bank to the account of the delinquent boxholder or of the person in
whose name the safekeeping or storage receipt was issued.
1649. (a) Whenever this article requires that notice be sent to a
person, and the box stood or stands on the records of the bank or
the safekeeping or storage receipt was issued in the names of two or
more persons, notice addressed to either or to any one of the two or
more persons shall be binding upon and effective as to the remaining
person or all remaining persons, and notice addressed to the name of
any deceased individual shall be binding upon his or her legal
representatives and on his or her heirs and legatees.
(b) Whenever this article requires that notice be published prior
to a sale, the notice shall include the name and address of the
person in whose name the safe-deposit box stood on the records of the
bank or the safekeeping or storage receipt was issued. The names and
addresses of all persons whose property is to be sold at the same
time and place may be included in a single published notice.
(c) Whenever this article requires that an amount be credited to
the account of a person in whose name a safe-deposit box stood on the
records of the bank or a safekeeping or storage receipt was issued,
and the box stood or the receipt was issued in two or more names, the
account shall be in both or all the names, subject to withdrawal by
or upon the written order of any one or more of those persons, or by
their successors or legal representatives.
(d) Whenever this article requires that a notice shall be mailed
to the person in whose name the safe-deposit box stood on the records
of the bank or a safekeeping or storage receipt was issued, the
notice shall be deemed to have been so mailed if it is enclosed in a
sealed envelope addressed to the person in whose name the
safe-deposit box stood in the office of the bank at which the records
of the safe-deposit box rentals are kept, or to the person in whose
name the receipt was issued, as the case may be, addressed to the
person at the address or place appearing on the safe-deposit or
storage records of the office, and the envelope with postage prepaid
has been deposited by at least first-class mail in the United States
mail.
1650. Whenever an amount of safe-deposit rental, custody,
safekeeping, or other charge is to be paid or deducted pursuant to
this article, there shall be added to and paid or deducted with said
amount, the amount of any tax imposed by laws and regulations.
1651. Any bank or trust company may receive bonds issued by the
United States Government for safekeeping, collection, or storage, and
shall receipt therefor to the depositor and shall maintain adequate
records of all transactions therewith. In every case of such deposit
the depositary bank shall have the right to return to the depositor
either the identical bonds deposited by him or other bonds of the
same issue, par value, and character.
CHAPTER 18. INTERSTATE ACQUISITIONS
1660. This chapter does not apply to any of the following
transactions:
(a) An acquisition of control of a California state bank that
requires the approval of the commissioner under Chapter 7 (commencing
with Section 1250).
(b) A sale or merger that requires the approval of the
commissioner under Division 1.6 (commencing with Section 4800).
1661. Each application filed with the commissioner for an
approval under this chapter shall be in the form, shall contain the
information, shall be signed in the manner, and shall, if the
commissioner requires by regulation or order, be verified in the
manner that the commissioner may by regulation or order require.
1662. The fee for filing with the commissioner an application for
an approval under this chapter is two thousand five hundred dollars
($2,500).
1663. (a) The definitions that are set forth in or are applicable
to Section 3(d) of the Bank Holding Company Act of 1956 (12 U.S.C.
Sec. 1842(d)) apply to this section.
(b) The commissioner may approve an acquisition by a bank holding
company that is subject to Section 3(d)(2)(B) and (D)(ii) of the Bank
Holding Company Act of 1956 (12 U.S.C. Sec. 1842(d)(2)(B) and (D)
(ii)) if the commissioner finds that the acquisition is consistent
with the public convenience and advantage in this state.
1664. (a) The definitions that are set forth in or are applicable
to Section 44 of the Federal Deposit Insurance Act (12 U.S.C. Sec.
1831u) apply to this section.
(b) This section does not apply if each bank involved in an
interstate merger transaction (including each insured depository
institution that is an affiliate of the surviving, resulting, or
purchasing bank) that is organized under the laws of this state or
that maintains a branch office in this state, is an industrial loan
company (as defined in Section 4805.10).
(c) The commissioner may approve an interstate merger transaction
that is subject to Section 44(b)(2)(B) and (D)(ii) of the Federal
Deposit Insurance Act (12 U.S.C. Sec. 1831u(b)(2)(B) and (D)(ii)) if
the commissioner finds that the transaction is consistent with the
public convenience and advantage in this state.
CHAPTER 19. FOREIGN (OTHER STATE) BANKS
Article 1. General Provisions
1670. In this chapter, unless the context otherwise requires:
(a) "Branch business unit" has the meaning set forth in
subdivision (a) of Section 4840.
(b) "Core banking business" means the business of receiving
deposits, paying checks, making loans, and other activities that the
commissioner may specify by order or regulation. "Core banking
business," when used to describe the trust business, includes
receiving fiduciary assets and administering fiduciary accounts.
(c) "Facility," when used with respect to a foreign (other state)
bank, means an office in this state at which the bank engages in
noncore banking business but at which it does not engage in core
banking business.
(d) "Noncore banking business" means all activities permissible
for commercial banks, industrial banks, or trust companies, except
core banking business, and except those activities prohibited by law
or determined by the commissioner by regulation or order not to be
noncore banking business.
(e) "Whole business unit" has the meaning set forth in subdivision
(g) of Section 4840.
1671. Each application filed with the commissioner under this
chapter or under any regulation or order issued under this chapter
shall be in the form, shall contain the information, shall be signed
in the manner, and shall (if the commissioner requires by regulation
or order) be verified in the manner that the commissioner may by
regulation or order require.
1672. (a) Each foreign (other state) bank that maintains a
facility or a California branch office shall file with the
commissioner such reports as and when the commissioner may by
regulation or order require.
(b) Each report filed with the commissioner under this chapter or
under any regulation or order issued under this chapter shall be in
the form, shall contain the information, shall be signed in the
manner, and shall (if the commissioner requires by regulation or
order) be verified in the manner that the commissioner may by
regulation or order require.
1673. Each foreign (other state) bank that maintains a facility
(other than a foreign (other state) national bank that maintains a
California branch office) and each foreign (other state) state bank
that maintains a California branch office shall make, keep, and
preserve at the facility or branch office or at another place that
the commissioner may by regulation or order approve, the books,
accounts, and other records relating to the business of the office,
in the form, in the manner, and for the time that the commissioner
may by regulation or order provide.
1674. Fees shall be paid to and collected by the commissioner as
follows:
(a) The fee for filing with the commissioner an application by an
uninsured foreign (other state) bank for approval to establish a
facility is two hundred fifty dollars ($250).
(b) The fee for filing with the commissioner an application by an
uninsured foreign (other state) bank that is licensed pursuant to
Article 4 (commencing with Section 1710) to maintain a facility for
approval to relocate or to close the facility is one hundred dollars
($100).
(c) The fee for issuing a license pursuant to Article 4
(commencing with Section 3860) is twenty-five dollars ($25).
(d) Each foreign (other state) state bank that on June 1 of any
year maintains one or more California branch offices shall pay, on or
before the following July 1, a fee of one thousand dollars ($1,000)
per California branch office. However, the minimum fee paid by a
foreign (other state) state bank under this subdivision shall be not
less than three thousand dollars ($3,000) and the maximum fee shall
be not more than fifty thousand dollars ($50,000).
(e) Each foreign (other state) bank that on June 1 of any year
maintains a facility but no California branch office shall pay, on or
before the following July 1, a fee of two hundred fifty dollars
($250) for each facility.
(f) If the commissioner makes an examination in connection with a
pending application, as described in subdivision (a) or (b), the
applicant shall pay a fee for the examination of seventy-five dollars
($75) per hour for each examiner engaged in the examination plus, if
in the opinion of the commissioner it is necessary for any examiner
engaged in the examination to travel outside this state, the travel
expenses of the examiner.
(g) If the commissioner makes an examination of a foreign (other
state) state bank that maintains a California branch office, the bank
shall pay a fee for the examination of seventy-five dollars ($75)
per hour for each examiner engaged in the examination plus, if in the
opinion of the commissioner it is necessary for any examiner engaged
in the examination to travel outside this state, the travel expenses
of the examiner.
(h) If the commissioner makes an examination of a facility of an
uninsured foreign (other state) bank licensed under Article 4
(commencing with Section 1710), the bank shall pay a fee for the
examination of seventy-five dollars ($75) per hour for each examiner
engaged in the examination plus, if in the opinion of the
commissioner it is necessary for any examiner engaged in the
examination to travel outside this state, the travel expenses of the
examiner.
(i) If the commissioner makes an examination of a facility of an
insured foreign (other state) bank that does not maintain a
California branch office, the bank shall pay a fee for the
examination of seventy-five dollars ($75) per hour for each examiner
engaged in the examination plus, if in the opinion of the
commissioner it is necessary for any examiner engaged in the
examination to travel outside this state, the travel expenses of the
examiner.
1675. (a) Any foreign (other state) state bank is exempted from
the restrictions of Section 1 of Article XV of the California
Constitution relating to rates of interest upon the loan or
forbearance of any money, goods, or things in action or on accounts
after demand.
(b) This section does not exempt a foreign (other state) state
bank or any subsidiary from complying with all other laws and
regulations governing the business in which the bank or subsidiary is
engaged.
(c) This section creates and authorizes an exempt class of persons
pursuant to Section 1 of Article XV of the California Constitution.
1676. (a) In this section, "subject bank" means a bank organized
under the laws of any territory of the United States, Puerto Rico,
Guam, American Samoa, the Trust Territory of the Pacific Islands, the
Virgin Islands, or the Northern Mariana Islands.
(b) Nothing in this chapter, except subdivision (c), applies to a
subject bank that, as a foreign (other nation) bank, maintains an
office in this state licensed under Chapter 20 (commencing with
Section 1750) or a federal agency (as defined in Section 1750) or
federal branch (as defined in Section 1750) in this state.
(c) No subject bank may at the same time maintain (1) as a foreign
(other state) state bank, an office in this state and (2) as a
foreign (other nation) bank, an office in this state licensed under
Chapter 20 (commencing with Section 1750) or a federal agency (as
defined in Section 1750) or federal branch (as defined in Section
1750) in this state.
Article 2. California Branch Offices
1680. No foreign (other state) state bank may transact core
banking business in this state except at a branch office established
in accordance with federal law and the law of the domicile of the
bank.
1681. Section 1680 does not prohibit:
(a) Any foreign (other state) state bank that does not maintain a
California branch office from carrying on the activities described in
subdivision (d) of Section 191 of the Corporations Code.
(b) Any foreign (other state) state bank that does not maintain a
California branch office from making, in this state, loans secured by
liens on real property located in this state.
(c) Any foreign (other state) state bank from having a California
state bank as its agent pursuant to Chapter 6.5 (commencing with
Section 800).
1682. No foreign (other state) bank may establish or maintain a
California branch office unless it is qualified to transact
intrastate business in this state under Chapter 21 (commencing with
Section 2100) of Division 1 of Title 1 of the Corporations Code.
1683. No foreign (other state) bank may establish or maintain a
California branch office unless the bank is insured.
1684. (a) (1) No foreign (other state) bank may merge as the
surviving corporation with a California bank, except that an insured
foreign (other state) bank may do so in accordance with federal law,
the law of the domicile of the foreign (other state) bank, this
chapter, and Division 1.6 (commencing with Section 4800).
(2) No foreign (other state) bank may purchase the whole business
unit of a California bank, except that an insured foreign (other
state) bank may do so in accordance with federal law, the law of the
domicile of the foreign (other state) bank, this chapter, and
Division 1.6 (commencing with Section 4800).
(3) No foreign (other state) bank that does not already maintain a
California branch office may establish or maintain a California
branch office except in the manner described in paragraph (1) or (2)
and in accordance with federal law, the law of the domicile of the
foreign (other state) bank, and this chapter.
(b) This section constitutes:
(1) An election to permit early interstate merger transactions
pursuant to Section 44(a)(3) of the Federal Deposit Insurance Act (12
U.S.C. Sec. 1831u(a)(3)).
(2) An express prohibition against interstate branching through
the acquisition of a branch business unit located in this state of a
California bank (without acquisition of the whole business unit of
the California bank) pursuant to Section 44(a)(4) of the Federal
Deposit Insurance Act (12 U.S.C. Sec. 1831u(a)(4)).
1685. (a) No foreign (other state) bank that does not already
maintain a California branch office may:
(1) Merge as the surviving bank with a California bank pursuant to
paragraph (1) of subdivision (a) of Section 1684, unless the
California bank has been in existence for at least five years.
(2) Purchase the whole business unit of a California bank pursuant
to paragraph (2) of subdivision (a) of Section 1684 unless the
California bank has been in existence for at least five years.
(b) For purposes of this section, a California bank that is
established solely for the purpose of, and does not open for business
prior to, acquiring the whole business unit of a second California
bank through a merger or purchase is deemed to have been in existence
for the same period of time as the second California bank.
1686. The minimum age requirement set forth in Section 1685 does
not apply in any case in which the factor set forth in subdivision
(a) and any of the factors set forth in subdivision (b) apply.
(a) The foreign (other state) bank, by itself or in concurrent
transactions with other depository corporations (as defined in
Section 4805.06), acquires the whole business unit of the California
bank or, if the California bank has been closed or placed in
conservatorship, all or substantially all of the insured deposits of
the California bank.
(b) (1) If the California bank is a national bank, one of the
following:
(A) The bank is in default or in danger of default, as defined in
Section 3(x) of the Federal Deposit Insurance Act (12 U.S.C. Sec.
1813(x)).
(B) The purchase or merger is one with respect to which the
Federal Deposit Insurance Corporation provides assistance under
Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. Sec.
1823(c)).
(2) If the California bank is a state bank, one of the following:
(A) The commissioner has taken possession of the property and
business of the bank pursuant to Section 592.
(B) The purchase or merger is one with respect to which the
Federal Deposit Insurance Corporation provides assistance under
Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. Sec.
1823(c)).
(C) The commissioner finds that one or more of the factors listed
in Section 592 exists and that imposing the minimum age requirement
of Section 3825 is not in the public interest.
1687. (a) In case a foreign (other state) state bank that
maintains a California branch office is a commercial bank, in
addition to other provisions of this division and Division 1
(commencing with Section 99) that are otherwise applicable to the
bank, the following provisions of this division apply to the bank
with respect to its business in this state as if the bank were a
California state commercial bank:
(1) Chapter 10 (commencing with Section 1320).
(2) Chapter 12 (commencing with Section 1400).
(3) Chapter 13 (commencing with Section 1450).
(4) Sections 1487, 1488, 1514, 1520, and 1522.
(5) Chapter 17 (commencing with Section 1620).
(b) In case a foreign (other state) state bank that maintains a
California branch office is an industrial bank, in addition to other
provisions of this division and Division 1 (commencing with Section
99) that are otherwise applicable to the bank, the provisions cited
in paragraphs (1) to (7), inclusive, of subdivision (a) and the
provisions of Chapter 15 (commencing with Section 1530) apply to the
industrial bank with respect to its business in this state as if the
bank were a California state industrial bank.
(c) In case a foreign (other state) state bank that maintains a
California branch office is authorized pursuant to the law of its
domicile to transact trust business, in addition to other provisions
of this division and Division 1 (commencing with Section 99) that are
otherwise applicable to the bank, the following provisions of
Chapter 16 (commencing with Section 1550) apply to the bank with
respect to its business in this state as if the bank were a
California state bank authorized to transact trust business:
(1) Article 3 (commencing with Section 1570). For purposes of
Article 3 (commencing with Section 1570), the bank's principal place
of business is deemed to be situated in the city in which its
California branch office is located or, if it maintains California
branch offices in two or more cities, in the city with the largest
population.
(2) Article 4 (commencing with Section 1580), except Section 1580.
(3) Article 5 (commencing with Section 1600), except Sections
1583, 1584, 1585, 1588, and 1590.
(d) Subject to the provisions of subdivision (d), in case a
foreign (other state) state bank that maintains a California branch
office is authorized pursuant to the law of its domicile to transact
trust business, the bank may engage in and conduct trust business in
this state and may be appointed by any court to act in any fiduciary
capacity in which a California state trust company is authorized to
act.
(e) No foreign (other state) state bank that maintains a
California branch office may transact at the branch office any
business that it is not authorized to transact or is prohibited from
transacting under the law of its domicile or that banks organized
under the laws of this state are not authorized to transact or are
prohibited from transacting.
(f) Whenever any provision of this chapter or of any regulation or
order issued under this chapter that is applicable to or with
respect to a foreign (other state) state bank that maintains a
California branch office is inconsistent with any provision of any
other chapter of this division, the former provision applies, and the
latter provision does not apply.
1688. Notwithstanding Section 1684, a foreign (other state) bank
that does not maintain offices in California may merge with or
purchase the whole business unit of a foreign (other state) bank that
already maintains one or more offices in California in accordance
with Section 1684 pursuant to federal law and the law of the domicile
of the surviving or purchasing bank. The surviving or purchasing
bank may retain the offices established in this state by the
disappearing or selling bank. Thereafter, the surviving or purchasing
bank may establish and maintain additional offices as if it were the
disappearing or selling bank.
Article 3. Facilities of Insured Foreign (Other State) Banks
1700. No provision of this article applies to an insured foreign
(other state) bank that maintains a California branch office.
1701. (a) No insured foreign (other state) bank may establish or
maintain an office in this state at which it engages in noncore
banking business unless the bank complies with this article and
applicable provisions of Article 1 (commencing with Section 1670).
(b) (1) No person may establish or maintain an office in this
state as representative of an insured foreign (other state) bank
unless the bank complies with this article and applicable provisions
of Article 1 (commencing with Section 1670).
(2) For purposes of this article, if any person establishes or
maintains an office in this state as representative of an insured
foreign (other state) bank, the insured foreign (other state) bank is
deemed to establish and maintain the office as a facility.
1702. Not less than 30 days before an insured foreign (other
state) bank establishes a facility, it shall file with the
commissioner a report and the appointment called for in Section 3843.
1703. (a) Not less than 30 days before establishing a facility,
an insured foreign (other state) bank shall file with the
commissioner, in the form that the commissioner may by regulation or
order require, an appointment irrevocably appointing the commissioner
and the commissioner's successor from time to time in office to be
the bank's attorney to receive service of any lawful process in any
noncriminal judicial or administrative proceeding against the bank or
any of its successors that arises out of the activities in this
state of the facility after the appointment has been filed, with the
same force and validity as if served personally on the bank or its
successors, as the case may be.
(b) Any insured foreign (other state) bank that maintains a
facility and that has not filed with the commissioner an appointment
pursuant to subdivision (a) is deemed by the maintenance of the
facility to have appointed the commissioner as its attorney to
receive service of any lawful process in any noncriminal judicial or
administrative proceeding against the bank or any of its successors
that arises out of the activities in this state of the facility, with
the same force and validity as if served personally on the bank or
its successor, as the case may be.
(c) Service may be made on an uninsured foreign (other state) bank
that has appointed or is deemed to have appointed the commissioner
as its attorney for service of process by leaving a copy of the
process at any office of the commissioner. However, the service is
not effective unless (1) the party making the service, who may be the
commissioner, forthwith sends notice of the service and a copy of
the process by registered or certified mail to the bank served at the
last address on file with the commissioner for any of the bank's
offices in this state or at its head office, and (2) an affidavit of
compliance with this subdivision by the party making the service is
filed in the case on or before the return date, if any, or within any
further time that the court, in the case of a judicial proceeding,
or the administrative agency, in the case of an administrative
proceeding, allows.
1704. Not less than 30 days before an insured foreign (other
state) bank relocates a facility, it shall file a report with the
commissioner.
1705. Not less than 30 days before an insured foreign (other
state) bank closes a facility, it shall file a report with the
commissioner.
Article 4. Facilities of Uninsured Foreign (Other State) Banks
1710. In this article, unless the context otherwise requires:
(a) "Controlling person," when used with respect to an uninsured
foreign (other state) bank, means any person who directly or
indirectly controls the bank. For purposes of this subdivision,
"control" has the meaning set forth in subdivision (b) of Section
1250, and "person" has the meaning set forth in subdivision (d) of
Section 1250.
(b) "Executive officer," when used with respect to an uninsured
foreign (other state) bank or a controlling person of an uninsured
foreign (other state) bank, means the chief executive officer, the
chief operating officer, the chief financial officer, and any other
person who participates or has authority to participate in major
policymaking functions of the bank or controlling person.
(c) (1) "License" means a license issued under this article,
authorizing an uninsured foreign (other state) bank to maintain a
facility.
(2) "Licensed" means to be issued or to hold a license.
1711. (a) In this section, "act" includes (without limitation)
omission.
(b) For purposes of making findings on an application by an
uninsured foreign (other state) bank for approval to establish a
facility:
(1) The commissioner may, in the absence of credible evidence to
the contrary, presume that the directors, executive officers, and any
controlling person of the bank, the directors and executive officers
of any controlling person of the bank, and the members of the
proposed management of
the facility are each of good character and sound financial
standing.
(2) The commissioner may find that the bank, a director, executive
officer, or controlling person of the bank, a director or executive
officer of a controlling person of the bank, or any member of the
proposed management of the facility is not of good character if the
person has done any of the following:
(A) Has been convicted of, or has pleaded nolo contendere to, any
crime involving an act of fraud or dishonesty.
(B) Has consented to or suffered a judgment in any civil action
based upon conduct involving an act of fraud or dishonesty.
(C) Has consented to or suffered the suspension or revocation of
any professional, occupational, or vocational license based upon
conduct involving an act of fraud or dishonesty.
(D) Has willfully made or caused to be made in any application or
report filed with the commissioner or in any proceeding before the
commissioner any statement that was at the time and in the light of
the circumstances under which it was made false or misleading with
respect to any material fact, or has willfully omitted to state in
any such application or report any material fact that was required to
be stated in the application or report.
(E) Has willfully committed any violation of, or has willfully
aided, abetted, counseled, commanded, induced, or procured the
violation by any other person of, any provision of this division or
of any regulation or order issued under this division.
(c) Paragraph (2) of subdivision (b) is not an exclusive list of
the grounds upon which the commissioner may find, for purposes of
making findings on an application by an uninsured foreign (other
state) bank for approval to establish a facility, that the bank, a
director, executive officer, or controlling person of the bank, a
director or executive officer of a controlling person of the bank, or
any member of the proposed management of the facility is not of good
character.
1712. (a) No uninsured foreign (other state) bank may establish
or maintain an office in this state at which it engages in noncore
banking business unless the uninsured foreign (other state) bank is
licensed to maintain the office as a facility.
(b) (1) No person may establish or maintain an office in this
state as representative of an uninsured foreign (other state) bank
unless the uninsured foreign (other state) bank is licensed to
maintain the office as a facility.
(2) For purposes of this article, if any person establishes or
maintains an office in this state as representative of an uninsured
foreign (other state) bank, the uninsured foreign (other state) bank
is deemed to establish and maintain the office as a facility.
1713. (a) No uninsured foreign (other state) bank may establish
or maintain a facility unless the commissioner has first approved the
establishment of the office and issued a license authorizing the
bank to maintain the office.
(b) If the commissioner finds all the following with respect to an
application by an uninsured foreign (other state) bank for approval
to establish a facility, the commissioner shall approve the
application:
(1) The bank, any controlling person of the bank, the directors
and executive officers of the bank or of any controlling person of
the bank, and the proposed management of the office are each of good
character and sound financial standing.
(2) The financial history and condition of the bank are
satisfactory.
(3) The management of the bank and the proposed management of the
office are adequate.
(4) It is reasonable to believe that, if licensed to maintain the
office, the bank will operate the office in compliance with all
applicable laws, regulations, and orders.
(5) The bank's establishment and maintenance of the office will
promote the public convenience and advantage.
(6) The activities in which the bank proposes to engage at the
office are noncore banking business and do not constitute core
banking business.
If the commissioner finds otherwise, the commissioner shall deny
the application.
(c) Whenever an application by an uninsured foreign (other state)
bank for approval to establish a facility has been approved and all
conditions precedent to the issuance of a license authorizing the
bank to maintain the office have been fulfilled, the commissioner
shall issue the license.
1714. (a) No uninsured foreign (other state) bank that is
licensed to maintain a facility may relocate the office unless the
commissioner has first approved the relocation and issued a license
authorizing the bank to maintain the office at the new site.
(b) If the commissioner finds the following with respect to an
application by an uninsured foreign (other state) bank for approval
to relocate a facility, the commissioner shall approve the
application:
(1) In case the new site of the office is in the same vicinity as
the old site, that the relocation of the office will not be
substantially detrimental to the public convenience.
(2) In case the new site of the office is not in the same vicinity
as the old site, both of the following:
(A) The relocation of the office from the old site will not be
substantially detrimental to the public convenience and advantage in
the area that is primarily served by the office at the old site.
(B) The relocation of the office to the new site will promote the
public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny
the application.
(c) Whenever an application by an uninsured foreign (other state)
bank for approval to relocate a facility has been approved and all
conditions precedent to the issuance of a license authorizing the
bank to maintain the office at the new site have been fulfilled, the
commissioner shall issue the license.
(d) Promptly after an uninsured foreign (other state) bank that is
licensed to maintain a facility relocates the office, the bank shall
surrender to the commissioner the license that authorized it to
maintain the office at the old site.
1715. An uninsured foreign (other state) bank that is licensed to
maintain a facility may, subject to any regulations that the
commissioner may prescribe, engage in any noncore banking business at
the office but may not solicit deposits, receive deposits, pay
checks, make loans, or otherwise conduct core banking business at the
office.
1716. (a) (1) No uninsured foreign (other state) bank that is
licensed to maintain a facility may close the office unless the
commissioner has first approved the closing.
(2) Paragraph (1) does not prohibit an uninsured foreign (other
state) bank that is licensed to maintain a facility from closing the
office in accordance with Section 1717.
(b) If the commissioner finds, with respect to an application by
an uninsured foreign (other state) bank for approval to close a
facility, that the closing of the office will not be substantially
detrimental to the public convenience and advantage, the commissioner
shall approve the application. If the commissioner finds otherwise,
the commissioner shall deny the application.
(c) Whenever an application by an uninsured foreign (other state)
bank for approval to close a facility has been approved and all
conditions precedent to the closing have been fulfilled, the bank may
close the office and shall promptly thereafter surrender to the
commissioner the license that authorized it to maintain the office.
1717. (a) Any uninsured foreign (other state) bank that holds a
license to maintain a facility may voluntarily surrender the license
by filing the license and a report with the commissioner. However,
any uninsured foreign (other state) bank that holds licenses to
maintain two or more facilities may not voluntarily surrender fewer
than all of the licenses.
(b) (1) Except as provided in paragraph (2), a voluntary surrender
of a license is effective on the 30th day after the license and the
report called for in subdivision (a) are filed with the commissioner,
or on any earlier date that the commissioner may by order specify.
(2) If a proceeding to revoke or suspend a license is pending when
the license and the report called for in subdivision (a) are filed
with the commissioner, or if a proceeding to revoke or suspend a
license or to impose conditions upon the surrender of a license is
instituted before the 30th day after the license and the report
called for in subdivision (a) are filed with the commissioner, the
voluntary surrender of the license is effective at the time and upon
the conditions that the commissioner may by order specify.
1718. (a) (1) No uninsured foreign (other state) bank may be
issued a license to maintain a facility unless it has first filed
with the commissioner, in the form that the commissioner may by
regulation or order require, an appointment irrevocably appointing
the commissioner and the commissioner's successor from time to time
in office as the bank's attorney to receive service of process in any
noncriminal judicial or administrative proceeding against the bank
or any of its successors that arises out of the activities in this
state of the facility after the appointment has been filed, with the
same force and validity as if served personally on the bank or its
successors, as the case may be.
(2) Any uninsured foreign (other state) bank that maintains a
facility and that has not filed with the commissioner an appointment
pursuant to paragraph (1) is deemed by the maintenance of the
facility to have appointed the commissioner and the commissioner's
successor from time to time in office as its attorney to receive
service of any lawful process in a noncriminal judicial or
administrative proceeding against the bank or any of its successors
that arises out of the activities in this state of the facility with
the same force and validity as if served personally on the bank or
its successors, as the case may be.
(b) Service may be made on an uninsured foreign (other state) bank
that has appointed or is deemed to have appointed the commissioner
as its attorney for service of process by leaving a copy of the
process at an office of the commissioner. However, the service is not
effective unless (1) the party making the service, who may be the
commissioner, forthwith sends notice of the service and a copy of the
process by registered or certified mail to the bank served at the
last address on file with the commissioner for any of its offices in
this state or at its head office, and (2) an affidavit of compliance
with this subdivision by the party making the service is filed in the
case on or before the return date, if any, or within any further
time that the court, in the case of a judicial proceeding, or the
administrative agency, in the case of an administrative proceeding,
allows.
1719. Each uninsured foreign (other state) bank that is licensed
to maintain a facility shall assign to the office a popular name that
includes the term "facility" and that consists of a specific
designation by name or number. The bank shall post the popular name
and the name of the bank in a conspicuous place at the office.
1720. Each uninsured foreign (other state) bank that is licensed
to maintain a facility shall post its license in a conspicuous place
at the office.
1721. No license is transferable or assignable.
CHAPTER 20. FOREIGN (OTHER NATION) BANKS
Article 1. General Provisions
1750. In this chapter, unless the context otherwise requires:
(a) "Agency" means a depositary agency or a nondepositary agency.
(b) "Branch office" means a limited branch office, a retail branch
office, or a wholesale branch office.
(c) "Business in this state," when used with respect to a foreign
(other nation) bank which is licensed to maintain one or more
agencies or branch offices, includes (without limitation) the
aggregate business of all the offices.
(d) "Controlling person," when used with respect to a foreign
(other nation) bank, means any person who, directly or indirectly,
controls the bank. For purposes of this subdivision, "control" has
the meaning set forth in subdivision (b) of Section 1250, and "person"
has the meaning set forth in subdivision (d) of Section 1250.
(e) "Depositary agency," when used with respect to a foreign
(other nation) bank, means a place in this state at which the bank
transacts commercial banking business but at which it does not
transact the business of receiving deposits, except as permitted
under paragraph (2) of subdivision (a) of Section 1805.
(f) "Executive officer," when used with respect to a foreign
(other nation) bank or a controlling person of a foreign (other
nation) bank, means the chief executive officer, the chief operating
officer, the chief financial officer, and any other person who
participates or has authority to participate in major policymaking
functions of the bank or controlling person. "Executive officer,"
when used with respect to a foreign (other nation) bank, includes the
head of the international division (or, if there is no such
division, the closest equivalent division or unit) of such bank.
(g) "Federal agency" has the meaning set forth in Section 1(b) of
the International Banking Act of 1978.
(h) "Federal branch" has the meaning set forth in Section 1(b) of
the International Banking Act of 1978.
(i) (1) "License" means a license issued under this chapter,
authorizing a foreign bank to maintain an office.
(2) To be "licensed" means to be issued or to hold a license.
(3) To be "licensed to transact business in this state," when used
with respect to a foreign (other nation) bank, means that the bank
is licensed to maintain an agency or branch office.
(j) "Limited branch office," when used with respect to a foreign
(other nation) bank, means a place in this state at which the bank
transacts commercial banking business but at which it does not
transact the business of receiving deposits except as permitted under
paragraph (3) of subdivision (a) of Section 1805.
(k) "Nondepositary agency," when used with respect to a foreign
(other nation) bank, means a place in this state at which the bank
transacts commercial banking business, except the business of
receiving deposits.
( l ) "Office," when used with respect to a foreign
(other nation) bank, means any agency, branch office, or
representative office of the bank.
(m) "Primary office," when used with respect to a foreign (other
nation) bank that is licensed to maintain a single agency or branch
office, means the agency or branch office and, when used with respect
to a foreign (other nation) bank that is licensed to maintain two or
more agencies or branch offices, means that one of the offices which
the bank has designated as its primary office in accordance with
Section 1766.
(n) "Representative office," when used with respect to a foreign
(other nation) bank, means an office in this state at which the bank
engages in representational functions but at which it does not
transact commercial banking business.
(o) "Retail branch office," when used with respect to a foreign
(other nation) bank, means a place in this state at which the bank
transacts commercial banking business, including (without limitation)
the business of receiving deposits.
(p) "Wholesale branch office," when used with respect to a foreign
(other nation) bank, means a place in this state at which the bank
transacts commercial banking business but at which it does not
transact the business of receiving deposits except as permitted under
paragraph (4) of subdivision (a) of Section 1805.
1751. Nothing in this chapter, except Section 1760, applies to a
federal agency or branch in this state.
1752. (a) In this section, "subject bank" means a bank organized
under the laws of any territory of the United States, Puerto Rico,
Guam, American Samoa, the Trust Territory of the Pacific Islands, the
Virgin Islands, or the Northern Mariana Islands.
(b) Nothing in this chapter, except subdivision (c), shall apply
to a subject bank that maintains a branch office in this state as a
foreign (other state) state bank pursuant to Chapter 19 (commencing
with Section 1670), Section 13(f), 13(k), 18(d), or 44 of the Federal
Deposit Insurance Act (12 U.S.C. Sec. 1823(f), 1823(k), 1828(d), or
1831u), or Section 9 of the Federal Reserve Act (12 U.S.C. Sec. 321).
(c) No subject bank shall at the same time maintain (1) as a
foreign (other nation) bank, an office in this state licensed under
this chapter and (2) as a foreign (other state) state bank, a branch
office in this state pursuant to Chapter 19 (commencing with Section
1670), Section 13(f), 13(k), 18(d), or 44 of the Federal Deposit
Insurance Act (12 U.S.C. Sec. 1823(f), 1823(k), 1828(d), or 1831u),
or Section 9 of the Federal Reserve Act (12 U.S.C. Sec. 321).
1753. For purposes of this chapter, offices of foreign (other
nation) banks are divided into classes and ranked in ascending order,
as follows:
(a) Representative office.
(b) Nondepositary agency.
(c) Depositary agency.
(d) Limited branch office.
(e) Wholesale branch office.
(f) Retail branch office.
1754. (a) For purposes of this chapter:
(1) Changing a lower class office into a higher class office shall
be treated as establishing the higher class office, but not as
closing the lower class office.
(2) Changing a higher class office into a lower class office shall
be treated as closing the higher class office, but not as
establishing the lower class office.
(b) In the case of changing a higher class office into a lower
class office, when the application for approval to close the higher
class office has been approved and all conditions precedent to the
closing have been fulfilled, the foreign (other nation) bank may
change the higher class office into the lower class office, and the
commissioner shall issue a license authorizing the bank to maintain
the lower class office.
1755. Fees shall be paid to, and collected by, the commissioner,
as follows:
(a) The fee for filing with the commissioner an application by a
foreign (other nation) bank that is not licensed to transact business
in this state for approval to establish a branch office shall be two
thousand dollars ($2,000).
(b) The fee for filing with the commissioner an application by a
foreign (other nation) bank that is not licensed to transact business
in this state for approval to establish an agency shall be one
thousand five hundred dollars ($1,500).
(c) The fee for filing with the commissioner an application by a
foreign (other nation) bank that is licensed to transact business in
this state for approval to establish a branch office shall be one
thousand dollars ($1,000).
(d) The fee for filing with the commissioner an application by a
foreign (other nation) bank that is licensed to transact business in
this state for approval to establish an agency shall be seven hundred
fifty dollars ($750).
(e) The fee for filing with the commissioner an application by a
foreign (other nation) bank for approval to establish a
representative office shall be two hundred fifty dollars ($250).
(f) The fee for filing with the commissioner an application by a
foreign (other nation) bank that is licensed to maintain an agency or
branch office for approval to relocate or to close the office shall
be two hundred fifty dollars ($250).
(g) The fee for filing with the commissioner an application by a
foreign (other nation) bank that is licensed to maintain a
representative office for approval to relocate or to close the
representative office shall be one hundred dollars ($100).
(h) The fee for issuing a license shall be twenty-five dollars
($25).
(i) Each foreign (other nation) bank that on June 1st of any year
is licensed to maintain a representative office but is not licensed
to transact business in this state shall pay, on or before the
following July 1st, a fee of two hundred fifty dollars ($250) for
each such representative office.
1756. Each application filed with the commissioner under this
chapter or under any regulation or order issued under this chapter
shall be in such form, shall contain such information, shall be
signed in such manner, and shall (if the commissioner so requires by
regulation or order) be verified in such manner, as the commissioner
may by regulation or order require.
1757. (a) In this section, "act" includes (without limitation)
omission.
(b) For purposes of making findings on an application by a foreign
(other nation) bank for approval to establish an office:
(1) The commissioner may, in the absence of credible evidence to
the contrary, presume that the directors, executive officers, and any
controlling person of the bank and the directors and executive
officers of any controlling person of the bank are each of good
character and sound financial standing.
(2) The commissioner may find that the bank, a director, executive
officer, or a controlling person of the bank, or a director or
executive officer of a controlling person of the bank is not of good
character if that person has done any of the following:
(A) Has been convicted of, or has pleaded nolo contendere to, any
crime involving an act of fraud or dishonesty.
(B) Has consented to or suffered a judgment in any civil action
based upon conduct involving an act of fraud or dishonesty.
(C) Has consented to or suffered the suspension or revocation of
any professional, occupational, or vocational license based upon
conduct involving an act of fraud or dishonesty.
(D) Has willfully made or caused to be made in any application or
report filed with the commissioner or in any proceeding before the
commissioner, any statement that was at the time and in the light of
the circumstances under which it was made false or misleading with
respect to any material fact, or has willfully omitted to state in
any application or report filed with the commissioner or in any
proceeding before the commissioner, any material fact that was
required to be stated therein.
(E) Has willfully committed any violation of, or has willfully
aided, abetted, counseled, commanded, induced, or procured the
violation by any other person of, any provision of this division or
of any regulation or order issued under this division.
(c) Paragraph (2) of subdivision (b) shall not be deemed to be an
exclusive list of the grounds upon which the commissioner may find,
for purposes of making findings on an application by a foreign (other
nation) bank for approval to establish an office, that the bank, a
director, executive officer, or controlling person of the bank, or a
director or executive officer of a controlling person of the bank is
not of good character.
1758. (a) Each foreign (other nation) bank that is licensed to
maintain an office shall file with the commissioner reports as and
when the commissioner may, by regulation or order, require.
(b) Each report filed with the commissioner under this chapter or
under any regulation or order issued under this chapter shall be in
the form, shall contain the information, shall be signed in the
manner, and shall (if the commissioner so requires by regulation or
order) be verified in the manner, that the commissioner may, by
regulation or order, require.
1759. Each foreign (other nation) bank that is licensed to
maintain an office shall make, keep, and preserve at the office or at
another place that the commissioner may, by regulation or order,
approve, the books, accounts, and other records relating to the
business of the office, in the form, in the manner, and for the time
that the commissioner may, by regulation or order, provide.
1760. (a) No foreign (other nation) bank which is licensed to
maintain an agency or branch office shall concurrently maintain a
federal agency or federal branch in this state.
(b) No foreign (other nation) bank which maintains a federal
agency or federal branch in this state shall concurrently be licensed
to maintain an agency or branch office in this state.
1761. (a) No foreign (other nation) bank shall concurrently be
licensed to maintain offices of different classes.
(b) Subdivision (a) does not prohibit a foreign (other nation)
bank that is licensed to maintain a representative office from being
concurrently licensed to maintain an office of a different class or
to prohibit a foreign (other nation) bank that is licensed to
maintain an office other than a representative office from being
concurrently licensed to maintain a representative office.
1762. (a) (1) No foreign (other nation) bank (other than a bank
that is licensed to maintain an agency or branch office) shall be
issued a license to maintain a representative office unless it shall
have first filed with the commissioner, in the form that the
commissioner may by regulation or order require, an appointment
irrevocably appointing the commissioner and the commissioner's
successor from time to time in office to be the bank's attorney to
receive service of any lawful process in any noncriminal judicial or
administrative proceeding against the bank or any of its successors
that arises out of the activities in this state of the representative
office after the appointment has been filed, with the same force and
validity as if served personally on the bank or its successor, as
the case may be.
(2) Any foreign (other nation) bank (other than a bank that is
licensed to maintain an agency or branch office or that maintains a
federal agency or federal branch in this state) that maintains a
representative office and that has not filed with the commissioner an
appointment pursuant to paragraph (1) shall be deemed by the
maintenance of that office to have appointed the commissioner as its
attorney to receive service of any lawful process in any noncriminal
judicial or administrative proceeding against the bank or any of its
successors that arises out of the activities in this state of the
representative office with the same force and validity as if served
personally on the bank or its successor, as the case may be.
(b) (1) No foreign (other nation) bank shall be issued a license
to maintain an agency or branch office unless it shall have first
filed with the commissioner, in the form that the commissioner may by
regulation or order require, an appointment irrevocably appointing
the commissioner and the commissioner's successor from time to time
in office to be the bank's attorney to receive service of any lawful
process in any noncriminal judicial or administrative proceeding
against the bank or any of its successors that arises after the
appointment has been filed, with the same force and validity as if
served personally on the bank
or its successor, as the case may be.
(2) Any foreign (other nation) bank that maintains an agency or
branch office (other than a federal agency or federal branch) and
that has not filed with the commissioner an appointment pursuant to
paragraph (1) shall be deemed by the maintenance of that office to
have appointed the commissioner as its attorney to receive service of
any lawful process in any noncriminal judicial or administrative
proceeding against the bank or any of its successors with the same
force and validity as if served personally on the bank or its
successor, as the case may be.
(c) Service may be made on a foreign (other nation) bank that has
appointed or is deemed to have appointed the commissioner as its
attorney for service of process by leaving a copy of the process at
any office of the commissioner. However, the service is not effective
unless (1) the party making the service, who may be the
commissioner, forthwith sends notice of the service and a copy of the
process by registered or certified mail to the bank served at its
last address on file with the commissioner at any of its offices in
this state or at its head office, and (2) an affidavit of compliance
with this subdivision by the party making service is filed in the
case on or before the return date, if any, or within any further time
that the court, in the case of a judicial proceeding, or the
administrative agency, in the case of an administrative proceeding,
allows.
1763. No license shall be transferable or assignable.
1764. Each foreign (other nation) bank that is licensed to
maintain an office shall post its license in a conspicuous place at
the office.
1765. (a) Each foreign (other nation) bank that is licensed to
maintain an office shall assign to the office a popular name that
consists of a specific designation by name or number and shall post
the popular name and the name of the bank in a conspicuous place at
the office.
(b) The popular name that a foreign (other nation) bank assigns to
a representative office that it is licensed to maintain shall
include the term "representative office."
(c) The popular name that a foreign (other nation) bank assigns to
an agency that it is licensed to maintain shall not include the term
"branch" unless the term is modified by the word "foreign" or
"overseas" or by a similar word.
1766. Whenever a foreign (other nation) bank is licensed to
maintain two or more agencies or branch offices, it shall designate
one of such offices as its primary office.
1767. Each foreign (other nation) bank that is licensed to
maintain an office shall conduct all of the business of the office in
a single building or in adjoining buildings. However, for good cause
and with the approval of the commissioner, the bank may conduct part
of the business of the office elsewhere in the same vicinity.
1768. Any foreign (other nation) bank that, at the time it makes
a loan or forbearance or executes a contract therefor, has assets
equal to at least one hundred million dollars ($100,000,000), is
licensed to maintain an office in California, is licensed or
otherwise authorized by another state of the United States to
maintain an agency or branch office in that state, or maintains a
federal agency or federal branch in any state of the United States is
exempted from the restrictions of Section 1 of Article XV of the
Constitution relating to rates of interest upon the loan or
forbearance of any money, goods, or things in action or on accounts
after demand.
This section does not exempt a foreign (other nation) bank or a
subsidiary thereof from complying with all other laws and regulations
governing the business in which such a bank or subsidiary is
engaged.
This section creates and authorizes an exempt class of persons
pursuant to Section 1 of Article XV of the Constitution.
Article 2. Representative Offices
1780. (a) No foreign (other nation) bank shall establish or
maintain an office in this state at which it engages in
representational functions unless it is licensed to maintain a
representative office, agency, or branch office at that place.
(b) (1) No person shall establish or maintain an office in this
state as representative of a foreign (other nation) bank unless the
bank is licensed to maintain the office as a representative office.
(2) For purposes of this chapter, if any person establishes or
maintains an office in this state as representative of a foreign
(other nation) bank, the bank shall be deemed to establish and
maintain the office as a representative office.
(c) Neither subdivision (a) nor subdivision (b) shall be deemed to
prohibit a foreign (other nation) bank that maintains a federal
agency or federal branch in this state from establishing or
maintaining one or more representative offices in this state.
1781. (a) (1) No foreign (other nation) bank shall establish or
maintain a representative office unless the commissioner shall have
first approved the establishment of the office and issued a license
authorizing the bank to maintain the office.
(2) Paragraph (1) shall not be deemed to prohibit a foreign (other
nation) bank that maintains a federal agency or federal branch in
this state from establishing or maintaining one or more
representative offices in this state.
(b) If the commissioner finds the following with respect to an
application by a foreign (other nation) bank for approval to
establish a representative office, the commissioner shall approve the
application:
(1) That the bank, any controlling person of the bank, the
directors and executive officers of the bank or of any controlling
person of the bank, and the proposed management of the office are
each of good character and sound financial standing.
(2) That the financial history and condition of the bank are
satisfactory.
(3) That the management of the bank and the proposed management of
the office are adequate.
(4) That it is reasonable to believe that, if licensed to maintain
the office, the bank will operate the office in compliance with all
applicable laws, regulations, and orders.
If the commissioner finds otherwise, the commissioner shall deny
the application.
(c) Whenever an application by a foreign (other nation) bank for
approval to establish a representative office has been approved and
all conditions precedent to the issuance of a license authorizing the
bank to maintain the office have been fulfilled, the commissioner
shall issue the license.
1782. (a) No foreign (other nation) bank that is licensed to
maintain a representative office shall relocate the office unless the
commissioner shall have first approved the relocation and issued a
license authorizing the bank to maintain the office at the new site.
(b) If the commissioner finds the following with respect to an
application by a foreign (other nation) bank for approval to relocate
a representative office, the commissioner shall approve the
application:
(1) In case the new site of the office is in the same vicinity as
the old site, that the relocation of the office will not be
substantially detrimental to the public convenience and advantage; or
(2) In case the new site of the office is not in the same vicinity
as the old site:
(A) That the relocation of the office from the old site will not
be substantially detrimental to the public convenience and advantage
in the area that is primarily served by the office at the old site;
and
(B) That the relocation of the office to the new site will promote
the public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny
the application.
(c) Whenever an application by a foreign (other nation) bank for
approval to relocate a representative office has been approved and
all conditions precedent to the issuance of a license authorizing the
bank to maintain the office at the new site have been fulfilled, the
commissioner shall issue the license.
(d) Promptly after a foreign (other nation) bank that is licensed
to maintain a representative office relocates the office, the bank
shall surrender to the commissioner the license that authorized it to
maintain the office at the old site.
1783. A foreign (other nation) bank that is licensed to maintain
a representative office may, subject to any regulations that the
commissioner may prescribe, engage in representational functions at
the office but shall not solicit or accept deposits or otherwise
transact business at the office.
1784. (a) (1) No foreign (other nation) bank that is licensed to
maintain a representative office shall close the office unless the
commissioner shall have first approved the closing.
(2) Paragraph (1) shall not be deemed to prohibit a foreign (other
nation) bank that is licensed to maintain a representative office
from closing the office in accordance with Article 4 (commencing with
Section 1825).
(b) If the commissioner finds, with respect to an application by a
foreign (other nation) bank for approval to close a representative
office, that the closing of the office will not be substantially
detrimental to the public convenience and advantage, the commissioner
shall approve the application. If the commissioner finds otherwise,
the commissioner shall deny the application.
(c) Whenever an application by a foreign (other nation) bank for
approval to close a representative office has been approved and all
conditions precedent to the closing have been fulfilled, the bank may
close the office and shall promptly thereafter surrender to the
commissioner the license that authorized it to maintain the office.
Article 3. Agencies and Branch Offices
1800. (a) No foreign (other nation) bank shall transact business
in this state except at an agency or branch office that it is
licensed to maintain and at which it is permitted by this chapter to
transact the business transacted.
(b) Subdivision (a) shall not be deemed to prohibit:
(1) Any foreign (other nation) bank that maintains a federal
agency or federal branch in this state from transacting at the
federal agency or federal branch any business that it may be
authorized to transact under applicable federal laws and regulations;
(2) Any foreign (other nation) bank from carrying on the
activities described in subdivision (d) of Section 191 of the
Corporations Code;
(3) Any foreign (other nation) bank that does not maintain an
agency or branch office from making in this state loans secured by
liens on real property located in this state; or
(4) Any foreign (other nation) bank that does not maintain an
agency or branch office from transacting trust business as permitted
under Section 1555.
(c) For purposes of subdivision (a), no foreign (other nation)
bank shall be deemed to be transacting business in this state merely
because a majority-owned subsidiary transacts business in this state.
1801. No foreign (other nation) bank shall be licensed to
maintain any agency or branch office unless it is qualified to
transact intrastate business in this state under Chapter 21
(commencing with Section 2100) of Division 1 of Title 1 of the
Corporations Code.
1802. No foreign (other nation) bank shall be licensed to
maintain a retail branch office unless the deposits in such office
are insured by the Federal Deposit Insurance Corporation in
accordance with the provisions of the Federal Deposit Insurance Act.
1803. (a) (1) No foreign (other nation) bank shall establish or
maintain an agency or branch office unless the commissioner shall
have first approved the establishment of that office and issued a
license authorizing the bank to maintain the office.
(2) Paragraph (1) shall not be deemed to prohibit a foreign (other
nation) bank from establishing or maintaining a federal agency or
federal branch in this state.
(b) If the commissioner finds the following with respect to an
application by a foreign (other nation) bank for approval to
establish an agency or branch office, the commissioner shall approve
the application:
(1) That the bank, any controlling person of the bank, the
directors and executive officers of the bank or of any controlling
person of the bank, and the proposed management of the office are
each of good character and sound financial standing.
(2) That the financial history and condition of the bank are
satisfactory.
(3) That the management of the bank and the proposed management of
the office are adequate.
(4) That it is reasonable to believe that, if licensed to maintain
the office, the bank will operate the office in a safe and sound
manner and in compliance with all applicable laws, regulations, and
orders.
(5) That the bank's plan to establish and to maintain the office
affords reasonable promise of successful operation.
(6) That the bank's establishment and maintenance of the office
will promote the public convenience and advantage.
(7) In case the office is to be a branch office, that the foreign
nation where the bank is domiciled permits banks organized under the
laws of this state and national banks headquartered in this state to
establish and maintain in those foreign nation offices substantially
equivalent to agencies, offices substantially equivalent to branch
offices, or wholly (except for directors' qualifying shares) owned
banks organized under the laws of the foreign nation.
If the commissioner finds otherwise, the commissioner shall deny
the application.
(c) Whenever an application by a foreign (other nation) bank for
approval to establish an agency or branch office has been approved
and all conditions precedent to the issuance of a license authorizing
the bank to maintain the office have been fulfilled, the
commissioner shall issue the license.
1804. (a) No foreign (other nation) bank which is licensed to
maintain an agency or branch office shall relocate such office unless
the commissioner shall have first approved such relocation and
issued a license authorizing such bank to maintain the office at the
new site.
(b) If the commissioner finds the following with respect to an
application by a foreign (other nation) bank for approval to relocate
any agency or branch office, the commissioner shall approve such
application:
(1) In case the new site of the office is in the same vicinity as
the old site:
(A) That it will not be unsafe or unsound for the bank to relocate
the office; and
(B) That the relocation of the office will not be substantially
detrimental to the public convenience and advantage, or that the
relocation is necessary in the interests of the safety and soundness
of the bank; or
(2) In case the new site of the office is not in the same vicinity
as the old site:
(A) That the bank's plan to relocate the office and to maintain
the office at the new site affords reasonable promise of successful
operation;
(B) That the relocation of the office from the old site will not
be substantially detrimental to the public convenience and advantage
in the area which is primarily served by the office at the old site,
or that the relocation is necessary in the interests of the safety
and soundness of the bank; and
(C) That the relocation of the office to the new site will promote
the public convenience and advantage.
If the commissioner finds otherwise, the commissioner shall deny
the application.
(c) Whenever an application by a foreign (other nation) bank for
approval to relocate an agency or branch office has been approved and
all conditions precedent to the issuance of a license authorizing
such bank to maintain such office at the new site have been
fulfilled, the commissioner shall issue such license.
(d) Promptly after a foreign (other nation) bank which is licensed
to maintain an agency or branch office relocates such office, such
bank shall surrender to the commissioner the license which authorized
it to maintain such office at the old site.
1805. (a) A foreign (other nation) bank that is licensed to
maintain an agency or branch office may transact commercial banking
business at the office, subject to the following:
(1) In case the office is a nondepositary agency, the bank shall
not transact the business of accepting deposits.
(2) In case the office is a depositary agency, the bank shall not
transact the business of accepting any deposits other than deposits
of (A) a foreign nation, (B) an agency or instrumentality of a
foreign nation, or (C) a person which resides, is domiciled, and
maintains its principal place of business in a foreign nation. For
purposes of this paragraph, "person" means any individual,
proprietorship, joint venture, partnership, trust, business trust,
syndicate, association, joint stock company, corporation, limited
liability company, or any other organization or any branch or
division thereof.
(3) In case the office is a limited branch office, the bank shall
not transact the business of accepting any deposits other than (A)
deposits of the kind described in paragraph (2), or (B) deposits that
a corporation organized under Section 25A of the Federal Reserve Act
is permitted to accept.
(4) In case the office is a wholesale branch office, the bank
shall not transact the business of accepting any deposits other than
(A) deposits of the kind described in paragraph (2), (B) deposits of
one hundred thousand dollars ($100,000) or more, or (C) deposits the
acceptance of which the commissioner determines by regulation or
order do not constitute engaging in domestic retail deposit
activities requiring deposit insurance protection.
(5) In case the office is an agency, limited branch office, or
wholesale branch office, the bank may, subject to any regulations
that the commissioner may prescribe, maintain credit balances.
(6) In any case, the bank shall not transact any business that it
is not authorized to transact or is prohibited from transacting under
the law of its domicile or that commercial banks organized under the
laws of this state are not authorized to transact or are prohibited
from transacting.
(b) No foreign (other nation) bank that is licensed to maintain an
agency or branch office shall transact any trust business at the
office except as permitted under Section 1503.
1806. (a) In addition to other provisions of this division and
Division 1 (commencing with Section 99) that are otherwise applicable
to or with respect to foreign (other nation) banks licensed to
maintain nondepositary agencies, the following provisions of this
division shall apply to or with respect to each foreign (other
nation) bank licensed to maintain a nondepositary agency with respect
to its business in this state as if the bank were a commercial bank
organized under the laws of this state:
(1) Article 6 (commencing with Section 405) of Chapter 3 of
Division 1.
(2) Chapter 6 (commencing with Section 550) of Division 1.
(3) Chapter 7 (commencing with Section 600) of Division 1.
(4) Chapter 4.5 (commencing with Section 1090).
(5) Chapter 17 (commencing with Section 1620).
(6) Chapter 19 (commencing with Section 1620).
(b) In addition to other provisions of this division and Division
1 (commencing with Section 99) which are otherwise applicable to or
with respect to foreign (other nation) banks licensed to maintain
depositary agencies or branch offices, the following provisions of
this division and Division 1 (commencing with Section 99) shall apply
to or with respect to each foreign (other nation) bank licensed to
maintain a depositary agency or branch office with respect to its
business in this state as if the bank were a commercial bank
organized under the laws of this state:
(1) Article 6 (commencing with Section 405) of Chapter 3 of
Division 1.
(2) Chapter 6 (commencing with Section 550) of Division 1.
(3) Chapter 7 (commencing with Section 600) of Division 1.
(4) Chapter 4.5 (commencing with Section 1090).
(5) Chapter 10 (commencing with Section 1320).
(6) Chapter 12 (commencing with Section 1400).
(7) Chapter 13 (commencing with Section 1450).
(8) Chapter 14 (commencing with Section 1460).
(9) Chapter 17 (commencing with Section 1630).
(10) Chapter 19 (commencing with Section 1670).
(11) Section 1864 and Article 2 (commencing with Section 1900),
Article 3 (commencing with Section 1905), and Article 4 (commencing
with Section 1910) of Chapter 21.
(c) Whenever any provision of this chapter or of any regulation or
order issued under this chapter that is applicable to or with
respect to foreign (other nation) banks licensed to transact business
in this state is inconsistent with any provision of any other
chapter of this division and Division 1 (commencing with Section 99)
that is applicable to or with respect to foreign (other nation) banks
licensed to transact business in this state, the former provision
shall apply, and the latter provision shall not apply.
(d) (1) Whenever any provision of this division (other than the
provisions of this chapter) and Division 1 (commencing with Section
99) is applicable to or with respect to foreign (other nation) banks
licensed to transact business in this state, the provision shall be
applied with any changes in points of detail as may be necessary or
appropriate.
(2) Without limiting the provisions of paragraph (1), for purposes
of any provision of this division (other than the provisions of this
chapter) and Division 1 (commencing with Section 99) that is
applicable to or with respect to a foreign (other nation) bank
licensed to transact business in this state:
(A) "Approved by (or approval of) the board" means approved or
ratified by the board of the bank, by a committee of the board
authorized to exercise the powers of the board with respect to the
particular matter, or by an officer of the bank who is assigned to
the head office of the bank and who has authority over the bank's
business in this state, including authority to approve or ratify the
particular matter.
(B) "Head office" means the primary office of the bank.
(C) "Shareholders' equity" means the shareholders' equity of the
bank or, if the bank has no shareholders' equity, the closest
equivalent account or accounts.
(e) Whenever any provision of this division (other than the
provisions of this chapter) and Division 1 (commencing with Section
99) that is applicable to or with respect to a foreign (other nation)
bank licensed to transact business in this state limits the amount
of any assets or liabilities of the bank (including, by way of
example, the amount of borrowings of, obligations to, or investments
of the bank), for purposes of calculating the amount of the assets or
liabilities, only the assets or liabilities of the agencies or
branch offices of the bank shall be included, and the assets and
liabilities of offices of the bank outside this state shall be
excluded.
1807. (a) Whenever the commissioner calls for a report under
Section 453 from commercial banks organized under the laws of this
state, the commissioner shall call for a report from each foreign
(other nation) bank that is licensed to transact business in this
state.
(b) (1) A foreign (other nation) bank that is licensed to transact
business in this state shall prominently display in the lobby of
each agency and branch office, except an automated teller machine
branch office (as defined in Section 1330), a notice that any person
may obtain a financial report from the bank. The notice shall include
the address and telephone number of the person or office to be
contacted for a financial report. The bank shall, promptly after
receiving a request for a financial report, mail or otherwise furnish
the financial report to the requester. The first financial report
shall be provided without charge.
(2) The financial report called for in this subdivision shall
contain either (A) the information that the commissioner may require
by regulation or (B) in the absence of a regulation, the last balance
sheet and income statement, each without any schedules, that the
bank filed with the commissioner pursuant to Section 453.
1808. Each foreign (other nation) bank which is licensed to
maintain a depositary agency, limited branch office, or wholesale
branch office shall, in accordance with such regulations as the
commissioner may prescribe, give notice that deposits in such office
are not insured by the Federal Deposit Insurance Corporation.
1809. (a) In case a foreign (other nation) bank is licensed to
maintain a depositary agency or branch office and such office is not
subject to the regulations of the Depository Institutions
Deregulation Committee, Regulation Q of the Board of Governors of the
Federal Reserve System, or Part 329 of the regulations of the
Federal Deposit Insurance Corporation, such bank shall, with respect
to deposits accepted at the office, comply with such regulations
regarding maximum interest rates on deposits, prepayment of time
deposits, and related matters as the commissioner may prescribe as
being necessary and appropriate to maintain competitive equality
between foreign (other nation) banks and banks organized under the
laws of this state which are subject to the regulations of the
Depository Institutions Deregulation Committee, Regulation Q of the
Board of Governors of the Federal Reserve System, or Part 329 of the
regulations of the Federal Deposit Insurance Corporation.
(b) For purposes of, and notwithstanding any contrary provisions
of, Chapter 3.5 (commencing with Section 11340), Part 1 of Division 3
of Title 2 of the Government Code, whenever the commissioner adopts
a regulation or order of repeal of a regulation under subdivision
(a), the commissioner may, without describing specific facts showing
the need for immediate action, find that adoption of such regulation
or order of repeal is necessary for the immediate preservation of the
public peace, health and safety, or general welfare, and such
regulation or order of repeal shall be deemed to be necessary for the
immediate preservation of the public peace, health and safety, or
general welfare.
1810. (a) Each foreign (other nation) bank which is licensed to
transact business in this state shall keep the assets of such
business separate and apart from the assets of its business outside
this state.
(b) The creditors of the business in this state of a foreign
(other nation) bank which is licensed to transact business in this
state shall be entitled to priority over other creditors with respect
to the assets of such bank's business in this state.
1811. (a) In this section:
(1) "Adjusted liabilities," when used with respect to a foreign
(other nation) bank, means the liabilities of such bank's business in
this state, excluding (A)
accrued expenses, (B) any liability to an office (whether in or
outside of this state) or majority-owned subsidiary of the bank, and
(C) such other liabilities as the commissioner may by regulation or
order exclude.
(2) "Applicable minimum," when used with respect to eligible
assets deposited or to be deposited with an approved depository by a
foreign (other nation) bank, means such amount as the commissioner
may from time to time by regulation or order determine to be
necessary for the maintenance of sound financial condition, for the
protection of the interests of creditors of the bank's business in
this state, or for the protection of the public interest. However, in
the case of a foreign (other nation) bank which is licensed to
maintain a branch office, the applicable minimum shall in no event be
less than 1 percent of the adjusted liabilities of such bank.
(3) "Approved depository," when used with respect to a foreign
(other nation) bank, means a bank organized under the laws of this
state or a national bank headquartered in this state which has been
selected by such foreign (other nation) bank and approved by the
commissioner for the purpose of acting as the approved depository of
the foreign (other nation) bank and which has filed with the
commissioner, in such form as the commissioner may by regulation or
order prescribe, an agreement to comply with all applicable
provisions of this section and of any regulation or order issued
under this section.
(4) "Eligible assets" when used with respect to a foreign (other
nation) bank, means any of the following:
(A) Cash.
(B) Any security of the type described in Section 1572.
(C) Any negotiable certificate of deposit which (i) has a maturity
of not more than one year, (ii) is payable in the United States, and
(iii) is issued by a bank organized under the laws of a state of the
United States, by a national bank, or by a branch office of a
foreign (other nation) bank which is located in the United States.
(D) Any commercial paper which is payable in the United States and
which is rated P-1 or its equivalent by a nationally recognized
rating service; provided, however, that any conflict in rating shall
be resolved in favor of the lower rating.
(E) Any banker's acceptance which is payable in the United States
and which is eligible for discount with a Federal Reserve bank.
(F) Any other asset which the commissioner by regulation or order
determines to be eligible.
Notwithstanding the foregoing provisions of this paragraph,
"eligible asset," when used with respect to a foreign (other nation)
bank, does not include any instrument the issuer of which (i) is, or
is affiliated with, such foreign (other nation) bank, (ii) is
domiciled in, or controlled by a bank or other person domiciled in,
the same foreign nation as the foreign (other nation) bank, or (iii)
is, or is controlled by, such foreign nation. For purposes of the
foregoing provision, to be "affiliated" means to control, to be
controlled by, or to be under common control with; and to "control"
has the meaning set forth in subdivision (b) of Section 1250.
(b) For purposes of this section:
(1) The amount of adjusted liabilities of a foreign (other nation)
bank's business in this state shall be computed for such period, in
such manner, and on such basis as the commissioner may by regulation
or order prescribe.
(2) Any eligible asset shall be valued at the lesser of market or
par.
(c) (1) Before any foreign (other nation) bank is licensed to
transact business in this state, such bank shall deposit, and each
foreign (other nation) bank which is licensed to transact business in
this state shall maintain on deposit, with an approved depository
eligible assets having a value in an amount not less than the
applicable minimum.
(2) Whenever a foreign (other nation) bank which is licensed to
transact business in this state ceases to be so licensed, such bank
shall thereafter maintain on deposit with an approved depository
eligible assets having a value in an amount not less than the
applicable minimum for such period of time as the commissioner may
determine to be necessary for the protection of creditors of the bank'
s business in this state or for the protection of the public
interest.
(d) (1) No foreign (other nation) bank which maintains eligible
assets on deposit with an approved depository pursuant to this
section shall withdraw any such eligible assets except with the prior
approval of the commissioner.
(2) No approved depository which holds eligible assets on deposit
from a foreign (other nation) bank pursuant to this section shall
release any such eligible assets except with the prior approval of
the commissioner or as otherwise provided in subdivision (h).
(e) Any foreign (other nation) bank which maintains eligible
assets on deposit with an approved depository pursuant to this
section shall, unless the commissioner shall have suspended or
revoked its license to transact business in this state or taken
possession of its property and business in this state, be entitled to
receive any income paid on such eligible assets.
(f) (1) Whenever a foreign (other nation) bank deposits eligible
assets with, or withdraws eligible assets from, an approved
depository pursuant to this section, such bank shall do so in
accordance with such procedures and requirements as the commissioner
may by regulation or order prescribe.
(2) Whenever an approved depository receives, holds, or releases
eligible assets pursuant to this section, such approved depository
shall do so in accordance with such procedures and requirements as
the commissioner may by regulation or order prescribe and shall file
with the commissioner such reports as and when the commissioner may
by regulation or order require.
(g) Whenever a foreign (other nation) bank maintains eligible
assets on deposit with an approved depository pursuant to this
section:
(1) The eligible assets shall be deemed to be pledged to the
commissioner for the benefit of the creditors of the bank's business
in this state; and, notwithstanding any provision of the Uniform
Commercial Code to the contrary, the commissioner, for the benefit of
such creditors, shall be deemed to have a security interest in such
eligible assets.
(2) The eligible assets shall be free from any lien, charge, right
of setoff, credit, or preference in connection with any claim of the
approved depository against the bank.
(h) (1) In case the commissioner takes possession of the property
and business of a foreign (other nation) bank which maintains
eligible assets on deposit with an approved depository pursuant to
this section, such approved depository shall, upon order of the
commissioner, release such eligible assets to the commissioner, as
liquidator of the property and business of such bank.
(2) In case a foreign (other nation) bank which maintains eligible
assets on deposit with an approved depository pursuant to this
section fails to pay any judgment creditor of its business in this
state and the commissioner has not taken possession of the property
and business of such bank, such approved depository shall release
such eligible assets to the commissioner, and the commissioner shall
make such disposition of the eligible assets, as a court of competent
jurisdiction of this state or of the United States may order for the
benefit of such judgment creditor. For purposes of this paragraph,
"judgment creditor of its business in this state" means a person to
whom the bank is required to pay money under a judgment which (A)
arose out of the bank's business in this state, (B) has been entered
by a court of this state or of the United States, (C) has become
final, in that all possibility of direct attack on such judgment by
way of appeal, motion for new trial, motion to vacate, or petition
for extraordinary writ has been exhausted, and (D) has remained
unpaid for a period of not less than 60 days after becoming final.
1812. (a) In this section:
(1) "Adjusted liabilities," when used with respect to a foreign
(other nation) bank which is licensed to maintain a branch office in
this state, means the liabilities of such bank's business in this
state, excluding (A) accrued expenses, (B) any liability to an office
(whether in or outside of this state) or majority-owned subsidiary
of the bank, and (C) such other liabilities as the commissioner may
by regulation or order exclude.
(2) "Eligible assets" means any asset which the commissioner by
regulation or order determines to be eligible for purposes of this
section. However, "eligible asset," when used with respect to a
foreign (other nation) bank which is licensed to maintain a branch
office, includes (A) any asset which such bank maintains on deposit
pursuant to Section 1811 and (B) any reserves which the bank
maintains with respect to its business in this state in accordance
with requirements prescribed by the Board of Governors of the Federal
Reserve System.
(b) For purposes of this section, the amount of eligible assets
and the amount of adjusted liabilities of a foreign (other nation)
bank which is licensed to maintain a branch office in this state
shall each be computed for such period, in such manner, and on such
basis as the commissioner may by regulation or order prescribe.
(c) A foreign (other nation) bank licensed to maintain a branch
office in this state shall hold at its branch offices in this state
or at such other places as the commissioner may approve, eligible
assets in such amount, if any, as the commissioner may from time to
time by regulation or order determine to be necessary for the
maintenance of sound financial condition, for the protection of the
interests of creditors of the bank's business in this state, or for
the protection of the public interest. However, in no event shall
such amount exceed 108 percent of the adjusted liabilities of the
bank's business in this state.
(d) If the commissioner finds, with respect to a foreign (other
nation) bank licensed to maintain a branch office in this state, that
such action is necessary for the maintenance of sound financial
condition, for the protection of the interests of creditors of such
bank's business in this state, or for the protection of the public
interest, the commissioner may order the bank to place all or part of
the eligible assets which the bank is required to hold under
subdivision (c) in the custody of such bank organized under the laws
of this state or such national bank headquartered in this state as
the commissioner may designate.
1813. (a) (1) No foreign (other nation) bank which is licensed to
maintain an agency or branch office shall close such office unless
the commissioner shall have first approved such closing.
(2) Paragraph (1) shall not be deemed to prohibit a foreign (other
nation) bank which is licensed to maintain an agency or branch
office from closing such office in accordance with Article 4
(commencing with Section 1825).
(b) If the commissioner finds the following with respect to an
application by a foreign (other nation) bank for approval to close an
agency or branch office, the commissioner shall approve such
application:
(1) That it will not be unsafe or unsound for the bank to close
the office; and
(2) That the closing of the office will not be substantially
detrimental to the public convenience and advantage or that the
closing of the office is necessary in the interests of the safety and
soundness of the bank.
If the commissioner finds otherwise, the commissioner shall deny
the application.
(c) Whenever an application by a foreign (other nation) bank for
approval to close an agency or branch office has been approved and
all conditions precedent to such closing have been fulfilled, such
bank may close such office and shall promptly thereafter surrender to
the commissioner the license which authorized it to maintain the
office.
Article 4. Voluntary Surrender of License
1825. (a) Any foreign (other nation) bank that holds a license to
maintain an office may voluntarily surrender the license by filing
the license and a report with the commissioner. However, any foreign
(other nation) bank that holds licenses to maintain two or more
offices may not voluntarily surrender less than all of the licenses.
(b) (1) Except as otherwise provided in paragraph (2), a voluntary
surrender of a license shall be effective on the 30th day after the
license and the report called for in subdivision (a) are filed with
the commissioner or on an earlier date as the commissioner may by
order specify.
(2) If a proceeding to revoke or suspend a license is pending at
the time when the license and the report called for in subdivision
(a) are filed with the commissioner or if a proceeding to revoke or
suspend a license or to impose conditions upon the surrender of a
license is instituted before the 30th day after the license and the
report called for in subdivision (a) are filed with the commissioner,
the voluntary surrender of the license shall become effective at the
time and upon the conditions that the commissioner may by order
specify.
Article 5. Enforcement
1830. If the commissioner finds that any person has violated any
provision of this chapter or of any regulation or order issued under
this chapter, the commissioner may order the person to pay to the
commissioner a civil penalty imposed pursuant to Section 329.
1831. If, after notice and a hearing, the commissioner finds any
of the following with respect to a foreign (other nation) bank that
is licensed to maintain an office, the commissioner may issue an
order suspending or revoking the license of the bank:
(a) That the bank has violated any provision of this division or
of any regulation or order issued under this division or any
provision of any other applicable law, regulation, or order;
(b) That the bank, in case it is licensed to transact business in
this state, is transacting the business in an unsafe or unsound
manner or, in any case, is transacting business elsewhere in an
unsafe or unsound manner;
(c) That the bank is in unsafe or unsound condition;
(d) That the bank has ceased to operate its office;
(e) That the bank is insolvent in that it has ceased to pay its
debts in the ordinary course of business, it cannot pay its debts as
they become due, or its liabilities exceed its assets;
(f) That the bank has suspended payment of its obligations, has
made an assignment for the benefit of its creditors, or has admitted
in writing its inability to pay its debts as they become due;
(g) That the bank is the subject of an order for relief in
bankruptcy or has sought other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or that any person has
applied for any such relief under any such law against the bank and
the bank has by any affirmative act approved of or consented to the
action or the relief has been granted;
(h) That a receiver, liquidator, or conservator has been appointed
for the bank or that any proceeding for such an appointment or any
similar proceeding has been initiated in the place where the bank is
domiciled;
(i) That the existence of the bank or the authority of the bank to
transact banking business under the laws of the place where the bank
is domiciled has been suspended or terminated; or
(j) That any fact or condition exists that, if it had existed at
the time when the bank applied for its license to transact business
in this state, would have been grounds for denying the application.
1832. (a) If the commissioner finds that any of the factors set
forth in Section 1831 is true with respect to any foreign (other
nation) bank that is licensed to maintain an office and that it is
necessary, in case the bank is licensed to transact business in this
state, for the protection of the interests of creditors of the bank's
business in this state or, in any case, for the protection of the
public interest that the commissioner immediately suspend or revoke
the license of the bank, the commissioner may issue an order
suspending or revoking the license of the bank.
(b) (1) Within 30 days after an order is issued pursuant to
subdivision (a), the foreign (other nation) bank to which the order
is issued may file with the commissioner an application for a hearing
on the order. If the commissioner fails to commence the hearing
within 15 business days after the application is filed with the
commissioner (or within any longer period to which the bank
consents), the order shall be deemed rescinded. Within 30 days after
the hearing, the commissioner shall affirm, modify, or rescind the
order; otherwise, the order shall be deemed rescinded.
(2) The right of any foreign (other nation) bank to which an order
is issued under subdivision (a) to petition for judicial review of
the order shall not be affected by the failure of the bank to apply
to the commissioner for a hearing on the order pursuant to paragraph
(1).
1833. Any foreign (other nation) bank whose license to maintain
an office is suspended or revoked shall immediately surrender the
license to the commissioner.
1834. (a) Any foreign (other nation) bank to which an order is
issued under Section 1831 or 1832 may apply to the commissioner to
modify or rescind such order. The commissioner shall not grant the
application unless he or she finds that it is in the public interest
to do so and that it is reasonable to believe that the bank will, if
and when it is again licensed to maintain an office, comply with all
applicable provisions of this division and of any regulation or order
issued under this division.
(b) The right of any foreign (other nation) bank to which an order
is issued under Section 1831 or 1832 to petition for judicial review
of the order shall not be affected by the failure of the bank to
apply to the commissioner pursuant to subdivision (a) to modify or
rescind the order.
1835. (a) If the commissioner finds that any of the factors set
forth in Section 1781 is true with respect to any foreign (other
nation) bank which is licensed to transact business in this state and
that it is necessary for the protection of the interests of the
creditors of such bank's business in this state or for the protection
of the public interest that he or she take immediate possession of
the property and business of the bank, the commissioner may by order
forthwith take possession of the property and business of the bank
and retain possession until the bank resumes business in this state
or is finally liquidated. The bank may, with the consent of the
commissioner, resume business in this state upon such conditions as
the commissioner may prescribe.
(b) (1) Whenever the commissioner takes possession of the property
and business of a foreign (other nation) bank pursuant to
subdivision (a), such bank may, within 10 days, apply to the superior
court in the county in which the primary office of the bank is
located to enjoin further proceedings. The court may, after citing
the commissioner to show cause why further proceedings should not be
enjoined and after a hearing, dismiss such application or enjoin the
commissioner from further proceedings and order him or her to
surrender the property and business of the bank to the bank or make
such further order as may be just.
(2) The judgment of the court may be appealed by the commissioner
or by the bank in the manner provided by law for appeals from the
judgment of a superior court to the court of appeal. In case the
commissioner appeals the judgment of the court, such appeal shall
operate as a stay of the judgment, and the commissioner shall not be
required to post any bond.
(c) Whenever the commissioner takes possession of the property and
business of a foreign (other nation) bank pursuant to subdivision
(a), the commissioner shall conserve or liquidate the property and
business of such bank pursuant Chapter 6 (commencing with Section
550) and Chapter 7 (commencing with Section 600) of Division 1, and
the provisions of such chapters (except Sections 592, 593, and 690)
shall apply as if the bank were a bank organized under the laws of
this state.
(d) When the commissioner has completed the liquidation of the
property and business of a foreign (other nation) bank, the
commissioner shall transfer any remaining assets to such bank in
accordance with such orders as the court may issue. However, in case
the bank has an office in another state of the United States which is
in liquidation and the assets of such office appear to be
insufficient to pay in full the creditors of the office, the court
shall order the commissioner to transfer to the liquidator of the
office such amount of any such remaining assets as appears to be
necessary to cover such insufficiency; if there are two or more such
offices and the amount of remaining assets is less than the aggregate
amount of insufficiencies with respect to the offices, the court
shall order the commissioner to distribute the remaining assets among
the liquidators of such offices in such manner as the court finds
equitable.
CHAPTER 21. INTERNATIONAL AND FOREIGN BANKING AND FINANCING
Article 1. International and Foreign Banking and Financing
Corporations
1850. As used in this article, unless the context otherwise
requires, "corporation" means a corporation organized under the laws
of this state for the purpose of transacting business pursuant to
this article.
1851. The provisions of Chapter 1 (commencing with Section 99) of
Division 1 applicable to, or with respect to, banks shall apply to,
or with respect to, as the case may be, corporations.
1852. When authorized by the previous written consent of the
commissioner as provided by Chapter 3 (commencing with Section 1040)
one or more persons may organize a corporation.
1853. The articles of a corporation shall provide that the
purpose of the corporation is to engage in the business of
international and foreign banking and other international and foreign
financial operations, the business of banking and other financial
operations in any dependency or insular possession of the United
States, and any other lawful activities which are not, by applicable
laws or regulations, prohibited to a corporation transacting business
under this article.
1854. The articles of incorporation shall be submitted to the
commissioner for his or her approval before they are filed with the
Secretary of State pursuant to the Corporations Code. After the
articles have been filed with the Secretary of State the corporation
shall file with the commissioner a copy thereof, certified by the
Secretary of State, and, after the organization meeting of the
directors, a copy of its bylaws certified by its secretary.
1855. Each corporation shall have power, under such rules and
regulations as the commissioner may prescribe:
(a) To purchase, sell, discount, and negotiate, with or without
its endorsement or guaranty, notes, drafts, checks, bills of
exchange, acceptances, including bankers' acceptances, cable
transfers, and other evidences of indebtedness; to purchase and sell,
with or without its endorsement or guaranty, securities, including
the obligations of the United States or of any state thereof but not
including shares of stock in any corporation except as herein
provided; to accept bills or drafts drawn upon it subject to such
limitations and restrictions as the commissioner may impose; to issue
letters of credit; to purchase and sell coin, bullion, and exchange;
to borrow and to lend money; to issue debentures, bonds, and
promissory notes under such general conditions as to security and
such limitations as the commissioner may prescribe; to receive
deposits outside of the United States and to receive only such
deposits in this state or in any other state of the United States as
may be incidental to or for the purpose of carrying out transactions
in foreign countries or dependencies or insular possessions of the
United States.
(b) Generally, to exercise such powers as are incidental to the
powers conferred by this article or as may be usual, in the
determination of the commissioner, in connection with the transaction
of the business of banking or other financial operations in the
countries, colonies, dependencies, or possessions in which it shall
transact business and not inconsistent with the power specifically
granted herein. Nothing contained in this article shall be construed
to prohibit the commissioner, under his or her power to prescribe
rules and regulations, from limiting the aggregate amount of
liabilities of any or all classes incurred by the corporation and
outstanding at any one time.
(c) To establish and maintain for the transaction of its business
branches or agencies in foreign countries, their dependencies or
colonies, and in any state of the United States, and in the
dependencies or insular possessions of the United States, at such
places as may be approved by the commissioner and under such rules
and regulations as he or she may prescribe, including any state of
the United States, or countries or dependencies not specified in the
original organization certificate.
(d) With the consent of the commissioner to purchase and hold
stock or other certificates of ownership in any other corporation
organized under the laws of this state for the purpose of transacting
business pursuant to this article, or under the laws of the United
States, or under the laws of any foreign country or a colony of
dependency thereof, or under the laws of any state, dependency or
insular possession of the United States but not engaged in the
general business of buying or selling goods, wares, merchandise, or
commodities in the United States, and not transacting any business in
the United States except such as in the judgment of the commissioner
may be incidental to its international or foreign business.
1856. Except with the approval of the commissioner, no
corporation shall invest in any one corporation an amount in excess
of 10 percent of its own shareholders' equity, except in a
corporation engaged in the business of banking, when 15 percent of
its shareholders' equity may be so invested.
1857. No corporation shall purchase, own, or hold stock or
certificates of ownership in any other corporation organized under
this article or under the laws of any state which is in substantial
competition therewith, or which holds stock or certificates of
ownership in corporations which are in substantial competition with
the purchasing corporation.
1858. Nothing contained in this article shall prevent
corporations from purchasing and holding stock in any corporation
where such purchase shall be necessary
to prevent a loss upon a debt previously contracted in
good faith; and stock so purchased or acquired in corporations shall
within six months from such purchase be sold or disposed of at public
or private sale unless the time to so dispose of same is extended by
the commissioner as provided by Section 1511.
1859. No corporation shall carry on any part of its business in
the United States except such as, in the judgment of the
commissioner, shall be incidental to its international or foreign
business. Except such as is incidental and preliminary to its
organization no corporation shall exercise any of the powers
conferred by this article until it has been duly authorized by the
commissioner to commence business under the provisions of this
article.
1860. No corporation shall engage in commerce or trade in
commodities except as specifically provided in this article, nor
shall it either directly or indirectly control or fix or attempt to
control or fix the price of any such commodities. The license of any
corporation violating this section shall be subject to forfeiture as
provided in this article.
1861. It shall be unlawful for any director, officer, agent, or
employee of any corporation to use or to conspire to use the credit,
the funds, or the power of the corporation to fix or control the
price of any commodities, and any person violating this section shall
be punished by a fine of not less than two thousand dollars ($2,000)
nor more than ten thousand dollars ($10,000), imprisonment in a
county jail for not more than one year, imprisonment in the state
prison, or by both that fine and imprisonment, in the discretion of
the court.
1862. No corporation shall be organized without adequate
shareholders' equity.
1863. The provisions of Chapter 5 (commencing with Section 1100)
(except the provisions of Section 1121) applicable to, or with
respect to, banks shall apply to, or with respect to, as the case may
be, corporations.
1864. Any bank may invest in the shares of any corporation
organized under the provisions of this article, but the aggregate
amount of stock held in all corporations engaged in business of the
kind described in this chapter shall not exceed 10 percent of the
subscribing bank's shareholders' equity.
1865. (a) In this section, "foreign bank" means any company
organized under the laws of a foreign country, a territory of the
United States, Puerto Rico, Guam, American Samoa, or the Virgin
Islands, which engages in the business of banking, or any subsidiary
or affiliate, organized under such laws, of any such company.
"Foreign bank" includes, without limitation, foreign commercial
banks, foreign merchant banks, and other foreign institutions that
engage in banking activities usual in connection with the business of
banking in the countries where such foreign institutions are
organized or operating.
(b) Except as otherwise provided in subdivision (c), a majority of
the shares of the capital stock of any corporation shall at all
times be held and owned by citizens of the United States, by
corporations the controlling interest in which is owned by citizens
of the United States, chartered under the laws of the United States
or of a state of the United States, or by firms or companies, the
controlling interest in which is owned by citizens of the United
States.
(c) Notwithstanding the provisions of subdivision (b), one or more
foreign banks, institutions organized under the laws of foreign
countries which own or control foreign banks, or banks organized
under the laws of the United States, the states of the United States,
or the District of Columbia, the controlling interests in which are
owned by any such foreign banks or institutions, may, with the
approval of the commissioner and upon such terms and conditions and
subject to such rules and regulations as the commissioner may
prescribe, own and hold 50 percent or more of the shares of the
capital stock of any corporation.
1866. Whenever it shall appear to the commissioner that any
corporation has violated the provisions of its articles of
incorporation or any law of this state, or is conducting its business
in an unsafe or unauthorized manner, or if the contributed capital
of any such corporation is impaired, or if the corporation shall
refuse to submit its books, papers and concerns to the inspection of
any examiner of the department or if any officer thereof shall refuse
to be examined upon oath touching the concerns of the corporation or
if the corporation shall suspend payment of its obligations, or if
from any examination or report provided for by this article the
commissioner shall have reason to conclude that the corporation is in
an unsound or unsafe condition to transact the business for which it
is organized, or that it is unsafe and inexpedient for it to
continue business, or if any corporation shall neglect or refuse to
observe any order of the commissioner specified in Section 580 or
581, the commissioner may forthwith take possession of the property
and business of such corporation and retain such possession until
such corporation shall resume business, or its affairs be finally
liquidated as provided by this code for the liquidation of banks.
1867. No corporation shall deposit any of its funds with any
other moneyed corporation unless the other corporation has been
nominated and designated as a depositary for the funds of the
depositing corporation by the vote of a majority of the directors of
the depositing corporation and has been approved by the commissioner
as a depositary. The commissioner may in his or her discretion revoke
his or her approval of any such depositary. This limitation shall
not apply to the deposit of funds by a corporation with another
moneyed corporation, that owns all or a majority of the capital stock
of the corporation.
1868. No corporation shall be the holder of any shares of its own
capital stock unless such stock shall have been taken to prevent
loss upon a debt previously contracted in good faith, and stock so
acquired shall, within six months from the time of its acquisition,
be sold or disposed of at public or private sale.
1869. No corporation shall, either directly or indirectly, make
any discount to any person for the purpose of enabling him to pay for
or hold shares of its stock either subscribed for or purchased by
him. Any corporation making any such discount shall forfeit to the
people of the state twice the amount of such discount.
1870. No corporation shall by any system of accounting or any
device of bookkeeping, directly or indirectly enter any of its assets
upon its books in the name of any other person, or under any title
or designation that is not truly descriptive thereof.
1871. Every corporation shall conform its methods of keeping its
books and records to such orders in respect thereto as have been made
and promulgated by the commissioner. Any corporation that refuses or
neglects to obey such order shall be subject to a penalty of one
hundred dollars ($100) for each day it so refuses or neglects.
1872. Each official communication directed by the commissioner to
a corporation or to any officer thereof, relating to an examination
or investigation conducted by the department or containing
suggestions or recommendations as to the conduct of the business of
such corporation, shall be submitted, by the officer receiving it, to
the board at the next meeting of such board, and duly noted in the
minutes of the meetings of such board.
1873. On or before the first day of February in each year, each
corporation and every foreign corporation licensed by the
commissioner to transact the business of such a corporation in this
state, shall make a written report to the commissioner which shall
contain a statement of its condition on the morning of the first day
of January in that year and shall be in the form and contain the
matters prescribed by the commissioner. The commissioner may,
however, in his or her discretion, accept from a corporation, which
has branches in a foreign country or countries, a report containing a
statement of its condition as of a date not later than the first day
of January and not earlier than the first day of November in the
preceding year. Every report shall be verified by the oaths of the
two principal officers in charge of the affairs of the corporation or
foreign corporation at the time of the verification, which shall
state that the report is true and correct in all respects to the best
of the knowledge and belief of the persons verifying it, and that
the usual business of the corporation or foreign corporation has been
transacted at the location required by this article and not
elsewhere.
1874. Every corporation and foreign corporation shall also make
such other special reports to the commissioner as he or she may from
time to time require, which shall be in such form and filed at such
date as may be prescribed by the commissioner and shall, if required
by the commissioner, be verified in such manner as he or she may
prescribe.
1875. If any corporation or foreign corporation shall fail to
make any report required by this article on or before the day
designated for the making thereof, or shall fail to include therein
any matter required by the commissioner, it shall forfeit to the
people of the state the sum of one hundred dollars ($100) for every
day that such report shall be delayed or withheld, and for every day
that it shall fail to report any such omitted matter, unless the time
therefor shall have been extended by the commissioner.
1876. Every corporation shall hold a meeting of its stockholders
annually upon a date fixed in its bylaws at its main office, or if
its main office is to be located outside of this state, at its branch
or other office in this state.
1877. Every corporation shall keep at its main office, or if its
main office is to be located outside of this state, at its branch or
other office in this state, books containing the names of all
stockholders thereof, and the names and addresses of the members of
its board of directors, together with copies of all reports made by
it to the commissioner.
1878. Every corporation shall make reports to the commissioner at
such times and in such form as the commissioner may require and is
subject to examination by examiners appointed by the commissioner, to
the extent and whenever and as often as the commissioner shall deem
it advisable, but in no case less than once every two calendar years.
The cost of such examinations shall be fixed by the commissioner and
be paid by the corporation examined.
1879. No officer, director, clerk or other employee of any
corporation, and no person in any way interested or concerned in the
management of its affairs, shall as individuals discount, or directly
or indirectly, make any loan upon any note or other evidence of
debt, which he shall know to have been offered for discount to such
corporation, and to have been refused. Every person violating the
provisions of this section, shall, for each offense, forfeit to the
people of the state twice the amount of the loan which he shall have
made.
1880. Every officer, director, clerk, employee, or agent of any
corporation who embezzles, abstracts, or willfully misapplies any of
the moneys, funds, credits, securities, evidence of indebtedness or
assets of any character of such corporation, or who, without
authority from the directors, issues or puts forth any certificate of
deposit, draws any order or bill of exchange, makes any acceptance,
assigns any note, bond, debenture, draft, bill of exchange, mortgage,
judgment, or decree, or who makes any false entry in any book,
report, or statement of such corporation with intent, in either case,
to injure or defraud such corporation or any other company, body
politic or corporate, or any individual person, or to deceive any
officer of such corporation, the commissioner, or any agent or
examiner appointed to examine the affairs of any such corporation;
and every receiver of any corporation and every clerk or employee of
such receiver who shall embezzle, abstract, or willfully misapply or
wrongfully convert to his or her own use any moneys, funds, credits,
or assets of any character which may come into his or her possession
or under his or her control in the execution of his or her trust or
the performance of the duties of his or her employment; and every
such receiver or clerk or employee of such receiver who shall, with
intent to injure or defraud any person, body politic or corporate, or
to deceive or mislead the commissioner or any agent or examiner
appointed to examine the affairs of such receiver, shall make any
false entry in any book, report, or record of any matter connected
with the duties of such receiver; and every person who with like
intent aids or abets any officer, director, clerk, employee, or agent
of any corporation, or receiver or clerk or employee of such
receiver as aforesaid in any violation of this article shall upon
conviction thereof be imprisoned for two, three, or four years, and
may also be fined not more than five thousand dollars ($5,000), in
the discretion of the court.
1881. Whoever being connected in any capacity with any
corporation represents in any way that the State of California is
liable for the payment of any bond or other obligation, or the
interest thereon, issued or incurred by any corporation, or that the
State of California incurs any liability in respect of any act or
omission of the corporation, shall be punished by a fine of not more
than ten thousand dollars ($10,000) and by imprisonment in the state
prison.
1882. No person shall act in this state as the representative of
any foreign corporation in transacting the business described in this
article as the business of a corporation unless such corporation
shall have complied with the provisions of this article relating to
such corporations.
1883. Every foreign corporation before being licensed by the
commissioner to transact in this state the business of a corporation,
or any part thereof, shall subscribe and acknowledge and submit to
the commissioner at his or her office, an application certificate in
duplicate, which shall specifically state:
(a) The name of such foreign corporation.
(b) The place where its business is to be transacted in this
state.
(c) The amount of its capital stock actually paid in cash and the
amount subscribed for and unpaid.
(d) A complete and detailed statement of its financial condition
as of a date within 60 days prior to the date of such application
certificate.
1884. At the time the application certificate is first submitted
to the commissioner, such corporation shall also submit a duly
authenticated copy of its charter, or articles, and its bylaws.
1885. No foreign corporation shall transact in this state the
business defined in this article or any part thereof, unless such
corporation shall have:
(a) Been authorized by its charter to carry on such business and
shall have complied with the laws of the state or country under which
it is incorporated.
(b) Made the deposit with the State Treasurer required by this
article.
(c) Designated the commissioner, by an instrument in writing duly
executed, its true and lawful attorney upon whom all process in any
action or proceeding by any resident of this state against it may be
served with the same effect as if it were a domestic corporation and
had been lawfully served with process within this state.
(d) Received a license duly issued to it by the commissioner.
1886. When the commissioner shall have issued a license to any
foreign corporation, it may engage in the business of a corporation
of the kind authorized by this article at the location specified in
the license.
1887. Every foreign corporation, before receiving a license to
transact business in this state, shall deposit with the State
Treasurer of the State of California upon authorization of the
commissioner, in trust as security for the depositors with and
creditors of such corporation in this state, lawful money of the
United States or securities of the kind and character described in
Article 3 (commencing at Section 1570) of Chapter 16, of the value of
one hundred thousand dollars ($100,000). Such foreign corporation so
long as it shall continue solvent and comply with the laws of this
state, may be permitted by the commissioner to collect the interest
on the securities so deposited and from time to time to exchange such
securities for others, and examine and compare such securities, as
provided by said article.
1888. The foreign corporation shall pay a license fee of five
hundred dollars ($500).
1889. Every foreign corporation, duly licensed by the
commissioner to transact in this state the business defined and
authorized in this article, or any part thereof, shall within 30 days
after the date of such license, submit to the commissioner a
statement verified by two of its principal officers, which shall
contain the full name and business address of every individual,
partnership or unincorporated association, who is acting or whom it
proposes to have act as its agent or representative in this state.
Whenever any such corporation shall engage any person to act for it
in this state and the name and address of such person is not
contained in such verified statement submitted to the commissioner,
such foreign corporation shall forthwith submit to the commissioner
an amended statement verified in the same manner as the original. A
violation of this provision shall subject such foreign corporation to
a forfeiture of one thousand dollars ($1,000) for each offense.
1890. Whenever the commissioner shall have revoked the license of
any such foreign corporation and shall have taken the action to make
such revocation effective, all the rights and privileges of the
foreign corporation to transact business in this state shall
forthwith cease and determine.
1891. Nothing in this division restricts the right of a state
international or foreign banking or financing corporation to convert
into an international or foreign banking or financing corporation
organized under the laws of the United States upon compliance with
such laws.
1892. An international or foreign banking or financing
corporation organized under the laws of the United States may convert
into a state international or foreign banking or financing
corporation with the approval of the commissioner which he or she
shall not grant unless he or she is satisfied that such international
or foreign banking or financing corporation organized under the laws
of the United States meets all of the requirements set forth in this
article for the establishment of a state international or foreign
banking or financing corporation.
1893. Nothing in this division restricts the right of any one or
more state international or foreign banking or financing corporations
to merge into or consolidate with one or more international or
foreign banking or financing corporations organized under the laws of
the United States.
1894. Nothing in this division restricts one or more
international or foreign banking or financing corporations organized
under the laws of the United States from merging into one or more
state, international or foreign banking or financing corporations.
For the purpose of effecting any such merger any such international
or foreign banking or financing corporation shall be deemed a
"foreign corporation" as that term is used in Section 1108 of the
Corporations Code and the laws of Congress shall be deemed the "laws
of the state" in which such international or foreign banking or
financing corporation is formed.
1895. Whenever a state international or foreign banking or
financing corporation survives the merger of one or more
international or foreign banking or financing corporations and the
agreement for merger has been filed with the Secretary of State with
the approval of the commissioner endorsed thereon, a copy thereof,
certified by the Secretary of State, shall immediately be filed with
the commissioner and upon, but not until, such filing the merger
shall be and become effective for all purposes.
1896. Whenever one or more state international or foreign banking
or financing corporations and one or more international or foreign
banking or financing corporations organized under the laws of the
United States have been merged or consolidated, the surviving or
resulting international or foreign banking or financing corporation
succeeds without other transfer to all the rights and property of
each constituent international or foreign banking or financing
corporation and is subject to all the debts and liabilities of each
such constituent corporation in the same manner as if the surviving
or resulting international or foreign banking or financing
corporation had incurred them.
All rights of creditors of each constituent international or
foreign banking or financing corporation are preserved unimpaired,
limited in lien to the property affected by such liens immediately
prior to the time of the consolidation or merger.
Any action or proceeding pending by or against any one of the
constituent international or foreign banking or financing
corporations may be prosecuted through judgment, which binds the
resulting or surviving international or foreign banking or financing
corporation; or such consolidated or surviving corporation may be
proceeded against or substituted in the place of any such constituent
corporation.
1897. Whenever an international or foreign banking or financing
corporation organized under the laws of the United States converts
into a state international or foreign banking or financing
corporation, or whenever such state corporation converts into such
corporation organized under the laws of the United States, or if any
such state corporation merges or consolidates with any such
corporation organized under the laws of the United States, the
surviving or resulting corporation shall be deemed to be the same
corporate entity as the converting or constituent corporation and any
reference to the converting corporation or to any constituent
corporation, whether executed or taking effect before or after the
conversion, merger or consolidation, shall be deemed a reference to
the surviving or resulting corporation.
Article 2. Bank Investments in International or Foreign
Banking or Financing Companies Organized Under the Laws of the United
States
1900. Any bank may, with the consent of the commissioner, upon
such conditions and under such regulations as the commissioner may
prescribe, invest in the stock of one or more corporations organized
under the laws of the United States for the purpose of engaging in
international or foreign banking or other international or foreign
financial operations, or in banking or other financial operations in
a dependency or insular possession of the United States, either
directly or through the agency, ownership or control of local
institutions in foreign countries, or in dependencies or insular
possessions of the United States and to act when required by the
Secretary of the Treasury of the United States as fiscal agents of
the United States; provided, however, that the aggregate amount of
stock held in all corporations engaged in business of the kind
described in this chapter shall not exceed 10 percent of the
subscribing bank's shareholders' equity.
1901. Every bank investing in the capital stock of any
corporation described in Section 1900 shall be required to furnish
information concerning the condition of such corporation to the
commissioner upon demand, and the commissioner may order special
examinations of said corporation at such time or times as he or she
may deem appropriate. The cost of such special examinations shall be
paid by said corporation.
1902. Before any bank shall be permitted to purchase stock in any
corporation described in Section 1900 the said corporation shall
enter into an agreement or undertaking with the commissioner to
restrict its operations or conduct of its business in such manner or
under such limitations and restrictions as the said commissioner may
prescribe for the place or places wherein such business is to be
conducted. If at any time the commissioner shall ascertain that the
regulations prescribed by him or her are not being complied with,
said commissioner is hereby authorized and shall have power to
institute an investigation of the matter and to send for persons and
papers, subpoena witnesses and administer oaths in order to satisfy
himself or herself as to the actual nature of the transactions
referred to. Should such investigation result in establishing the
failure of the corporation in question, or any bank which may be a
stockholder therein, to comply with the regulations laid down by the
said commissioner, said bank may be required to dispose of its
stockholding in the said corporation upon reasonable notice.
Article 3. Bank Investments in International or Foreign
Banking or Financing Corporations Organized Under the Laws of any
State of the United States
1905. Any bank may, with the consent of the commissioner, upon
such conditions and under such regulations as the commissioner may
prescribe, invest in the stock of one or more corporations organized
under the laws of any state of the United States (other than a
corporation organized under the laws of this state for the purposes
of transacting business under the provisions of Article 1 (commencing
with Section 1850) and principally engaged in international or
foreign banking, or banking in a dependency or insular possession of
the United States either directly or through the agency, ownership,
or control of local institutions in foreign countries, or in
dependencies or insular possessions of the United States; provided,
however, that the stock at the time of the acquisition would
constitute a permissible investment for a national bank; and
provided, further, that the aggregate amount of stock held in all
corporations engaged in business of the kind described in this
chapter shall not exceed 10 percent of the subscribing bank's
shareholders' equity. Nothing in this section shall be construed in
any way to limit the powers conferred by Section 1864.
Article 4. Bank Investments in Foreign Banks
1910. Any bank may, with the consent of the commissioner, upon
such conditions and under such regulations as the commissioner may
prescribe, acquire and hold, directly or indirectly, the stock or
other evidences of ownership in one or more banks organized under the
laws of a foreign country or a dependency or insular possession of
the United States and not engaged, directly or
indirectly, in any activity in the United
States except as, in the judgment of the commissioner, shall be
incidental to the international or foreign business of the bank. An
application for consent shall be in such form and contain such
information as the commissioner may require, and be accompanied by a
fee of five hundred dollars ($500). The aggregate amount invested by
any bank in the stock or other evidences of ownership shall not in
any way be subject to, or included in, the limitations prescribed in
Sections 1864, 1900, and 1905, but the aggregate amount invested
directly or indirectly (other than through a corporation organized
under the laws of this state for the purpose of transacting business
under Article 1 (commencing with Section 1850) or operating under
Article 2 (commencing with Section 1900) or Article 3 (commencing
with Section 1905) in the stock or other evidences of ownership of
all foreign banks, taken together with investments by the subscribing
bank in the shares of corporations organized under the laws of this
state for the purpose of transacting business under Article 1
(commencing with Section 1850) or operating under Article 2
(commencing with Section 1900) or Article 3 (commencing with Section
1905), shall not at any one time exceed 25 percent of the subscribing
bank's shareholders' equity.
SEC. 4. Division 1.2 (commencing with Section 2000) is added to
the Financial Code, to read:
DIVISION 1.2. MONEY TRANSMISSION ACT
CHAPTER 1. GENERAL PROVISIONS
2000. This chapter shall be known and may be cited as the Money
Transmission Act.
2001. The Legislature finds and declares all of the following:
(a) Money transmission businesses conduct a significant amount of
business in this state and technological advances are occurring in
the provision of money transmission services.
(b) Persons who use money transmission businesses in this state
use those businesses for, among other purposes, paying for the
necessities of life and transmitting money to family members.
(c) The failure of money transmission businesses to fulfill their
obligations would cause loss to consumers, disrupt the payments
mechanism in this state, undermine public confidence in financial
institutions doing business in this state, and adversely affect the
health, safety, and general welfare of persons in this state.
(d) To protect the interests of consumers of money transmission
businesses in this state, to maintain public confidence in financial
institutions doing business in this state, and to preserve the
health, safety, and general welfare of the people of this state, it
is necessary to regulate money transmission businesses in this state.
2002. It is the intent of the Legislature that the provisions of
this act accomplish all of the following:
(a) Protect the interests of persons in this state who use money
transmission services.
(b) Provide for the safe and sound conduct of the business of
licensees.
(c) Maintain public confidence in licensees.
2003. For purposes of this chapter, the following definitions
shall apply:
(a) "Affiliate," when used with respect to a specified person,
means any person controlling, controlled by, or under common control
with, that specified person, directly or indirectly through one or
more intermediaries. For purposes of subdivisions (q) and (v), a
specified person is affiliated with another person if that person
controls, is controlled by, or under common control through the
ownership directly or indirectly of shares or equity securities
possessing more than 50 percent of the voting power of that specified
person.
(b) "Agent" means a person that provides money transmission in
California on behalf of the licensee, provided that the licensee
becomes liable for the money transmission from the time money or
monetary value is received by that person. However, "agent" does not
include any officer or employee of the licensee when acting as such
at an office of a licensee.
(c) "Applicant" means a person that files an application for a
license or for acquisition of control of a licensee under this
chapter.
(d) "Average daily outstanding" means the amount of outstanding
money transmission obligations in California at the end of each day
in a given period of time, added together, and divided by the total
number of days in that period of time.
(e) "Branch office" means any office in this state of a licensee
or agent at which the licensee receives money or monetary value to
provide money transmission, either directly or through an agent.
(f) "Business day" means one of the following:
(1) When used with respect to any act to be performed in this
state, any day other than Saturday, Sunday, or any other day that is
provided for as a holiday in the Government Code.
(2) When used with respect to any act to be performed in any
jurisdiction other than this state, any day other than a day that is
a legal holiday under the laws of that jurisdiction.
(g) "Commissioner" means the Commissioner of Financial
Institutions.
(h) "Control" has the meaning set forth in Section 1250.
(i) "Day" means calendar day.
(j) "In California" or "in this state" means physically located in
California, or with, to, or from persons located in California.
(k) "Issue" and "issuer" mean, with regard to a payment
instrument, the entity that is the maker or drawer of the instrument
in accordance with the California Commercial Code and is liable for
payment. With regard to stored value, "issue" and "issuer" mean the
entity that is liable to the holder of stored value and has
undertaken or is obligated to pay the stored value. Only a licensee
may issue stored value or payment instruments.
(l) "Licensee" means a corporation or limited liability company
licensed under this chapter.
(m) "Monetary value" means a medium of exchange, whether or not
redeemable in money.
(n) "Money" means a medium of exchange that is authorized or
adopted by the United States or a foreign government. The term
includes a monetary unit of account established by an
intergovernmental organization or by agreement between two or more
governments.
(o) "Money transmission" means any of the following:
(1) Selling or issuing payment instruments.
(2) Selling or issuing stored value.
(3) Receiving money for transmission.
(p) "Outstanding," with respect to payment instruments and stored
value, means issued or sold by the licensee in the United States and
not yet paid or refunded by the licensee, or issued or sold on behalf
of the licensee in the United States by its agent and reported as
sold, but not yet paid or refunded by the licensee. "Outstanding,"
with respect to receiving money for transmission means all money or
monetary value received in the United States for transmission by the
licensee or its agents but not yet paid to the beneficiaries or
refunded to the person from whom the money or monetary value was
received. All outstanding money transmission of a licensee is and
shall remain a liability of the licensee until it is no longer
outstanding.
(q) "Payment instrument" means a check, draft, money order,
traveler's check, or other instrument for the transmission or payment
of money or monetary value, whether or not negotiable. The term does
not include a credit card voucher, letter of credit, or any
instrument that is redeemable by the issuer for goods or services
provided by the issuer or its affiliate.
(r) "Person" means an individual, corporation, business trust,
estate, trust, partnership, proprietorship, syndicate, limited
liability company, association, joint venture, government,
governmental subdivision, agency or instrumentality, public
corporation or joint stock company, or any other organization or
legal or commercial entity, provided, however, that "person," when
used with respect to acquiring control of or controlling a specified
person, includes any combination of two or more persons acting in
concert.
(s) "Receiving money for transmission" or "money received for
transmission" means receiving money or monetary value in the United
States for transmission within or outside the United States by
electronic or other means. The term does not include sale or issuance
of payment instruments and stored value.
(t) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
(u) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
(v) "Stored value" means monetary value representing a claim
against the issuer that is stored on an electronic or digital medium
and evidenced by an electronic or digital record, and that is
intended and accepted for use as a means of redemption for money or
monetary value or payment for goods or services. The term does not
include a credit card voucher, letter of credit, or any stored value
that is only redeemable by the issuer for goods or services provided
by the issuer or its affiliate, except to the extent required by
applicable law to be redeemable in cash for its cash value.
(w) "Traveler's check" means an instrument that meets all of the
following:
(1) Is designated on its face by the term "traveler's check" or by
any substantially similar term or is commonly known and marketed as
a traveler's check.
(2) Contains a provision for a specimen signature of the purchaser
to be completed at the time of purchase.
(3) Contains a provision for a countersignature of the purchaser
to be completed at the time of negotiation.
CHAPTER 2. EXEMPTIONS
2010. This chapter 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 listed under subdivision (d) is exempted from all the
provisions of this chapter, except Sections 2062 and 2063.
2011. The commissioner may, by regulation or order, either
unconditionally or upon specified terms and conditions or for
specified periods, exempt from this chapter any person or transaction
or class of persons or transactions, if the commissioner finds such
action to be in the public interest and that the regulation of such
persons or transactions is not necessary for the purposes of this
chapter.
CHAPTER 3. LICENSES
2030. (a) A person shall not engage in the business of money
transmission in this state, or advertise, solicit, or hold itself out
as providing money transmission in this state, unless the person is
licensed or exempt from licensure under this chapter or is an agent
of a person licensed or exempt from licensure under this chapter.
(b) A license under this chapter is not transferable or
assignable.
2031. (a) No person other than a corporation or limited liability
company may apply for or be issued a license.
(b) No person other than the following may be issued a license:
(1) A corporation or limited liability company organized under the
laws of this state.
(2) A corporation, other than a corporation organized under the
laws of this state, that is qualified to transact intrastate business
in this state under Chapter 21 (commencing with Section 2100) of
Division 1 of Title 1 of the Corporations Code.
(3) A limited liability company, other than a limited liability
company organized under the laws of this state, that is qualified to
transact intrastate business in this state under Chapter 10
(commencing with Section 17450) of Title 2.5 of the Corporations
Code, except that a limited liability company that is organized
outside the United States shall not be issued a license.
2032. (a) In this section, "material litigation" means litigation
that according to United States generally accepted accounting
principles is significant to an applicant's or a licensee's financial
health and would be required to be disclosed in the applicant's or
licensee's annual audited financial statements, report to
shareholders, or similar records.
(b) An applicant for licensure under this chapter shall pay to the
commissioner a nonrefundable fee of five thousand dollars ($5,000).
(c) An applicant for a license under this chapter shall do so in a
form and in a medium prescribed by the commissioner by order or
regulation. The application shall state or contain all of the
following:
(1) The legal name and residential business address of the
applicant and any fictitious or trade name used by the applicant in
conducting its business.
(2) A list of any criminal convictions of the applicant and any
material litigation in which the applicant has been involved in the
10-year period next preceding the submission of the application.
(3) A description of any money transmission services previously
provided by the applicant and the money transmission services that
the applicant seeks to provide in this state.
(4) A list of the applicant's proposed agents and the locations in
this state where the applicant and its agents propose to engage in
money transmission.
(5) A list of other states in which the applicant is licensed to
engage in money transmission and any license revocations,
suspensions, or other disciplinary action taken against the applicant
in another state.
(6) Information concerning any bankruptcy or receivership
proceedings affecting the licensee.
(7) A sample form of payment instrument or instrument upon which
stored value is recorded, if applicable.
(8) A sample form of receipt for transactions that involve money
received for transmission.
(9) The name and address of any bank through which the applicant's
payment instruments and stored value will be paid.
(10) A description of the source of money and credit to be used by
the applicant to provide money transmission services.
(11) The date of the applicant's incorporation or formation and
the state or country of incorporation or formation.
(12) A certificate of good standing from the state or country in
which the applicant is incorporated or formed.
(13) A description of the structure or organization of the
applicant, including any parent or subsidiary of the applicant, and
whether any parent or subsidiary is publicly traded.
(14) The legal name, any fictitious or trade name, all business
and residential addresses, and the employment, in the 10-year period
next preceding the submission of the application, of each executive
officer, manager, director, or person that has control, of the
applicant, and the education background for each such person.
(15) A list of any criminal convictions and material litigation in
which any executive officer, manager, director, or person in
control, of the applicant has been involved in the 10-year period
next preceding the submission of the application.
(16) A copy of the applicant's audited financial statements for
the most recent fiscal year and, if available, for the two-year
period next preceding the submission of the application.
(17) A copy of the applicant's unconsolidated financial statements
for the current fiscal year, whether audited or not, and, if
available, for the two-year period next preceding the submission of
the application.
(18) If the applicant is publicly traded, a copy of the most
recent report filed with the United States Securities and Exchange
Commission under Section 13 of the federal Securities Exchange Act of
1934 (15 U.S.C. Sec. 78m).
(19) If the applicant is a wholly owned subsidiary of:
(A) A corporation publicly traded in the United States, a copy of
audited financial statements for the parent corporation for the most
recent fiscal year or a copy of the parent corporation's most recent
report filed under Section 13 of the federal Securities Exchange Act
of 1934 (15 U.S.C. Section 78m) and, if available, for the two-year
period next preceding the submission of the application.
(B) A corporation publicly traded outside the United States, a
copy of similar documentation filed with the regulator of the parent
corporation's domicile outside the United States.
(20) The name and address of the applicant's registered agent in
this state.
(21) The applicant's plan for engaging in money transmission
business, including without limitation three years of pro forma
financial statements.
(22) Any other information the commissioner requires with respect
to the applicant.
(d) The commissioner may waive any of the information required
under subdivision (c) or permit an applicant to submit other
information instead of the required information.
2033. (a) The commissioner may conduct an examination of the
applicant and the applicant shall pay the reasonable cost of the
examination.
(b) If the commissioner finds all of the following with respect to
an application for a license, the commissioner shall approve the
application:
(1) The applicant has adequate tangible shareholders' equity, as
specified in Section 2040 to engage in the business of money
transmission and the financial condition of the applicant is
otherwise such that it will be safe and sound for the applicant to
engage in the business of money transmission.
(2) The applicant, the directors and officers of the applicant,
any person that controls the applicant, and the directors and
officers of any person that controls the applicant are of good
character and sound financial standing.
(3) The applicant is competent to engage in the business of money
transmission.
(4) The applicant's plan for engaging in the business of money
transmission affords reasonable promise of successful operation.
(5) It is reasonable to believe that the applicant, if licensed,
will engage in the business of money transmission and will comply
with all applicable provisions of this chapter and of any regulation
or order issued under this chapter.
(c) The commissioner shall deny an application for a license if he
or she finds, after notice and a hearing, that the requirements of
subdivision (b) have not been satisfied.
2034. (a) Before any corporation or limited liability company is
issued a license, the corporation or limited liability company shall
file with the commissioner, in such form as the commissioner may by
regulation or order require, an appointment irrevocably appointing
the commissioner to be the corporation's or limited liability company'
s attorney to receive service of any lawful process in any
noncriminal judicial or administrative proceeding against the
corporation or limited liability company, or any of its successors,
that arises under this chapter or under any regulation or order
issued under this chapter after such appointment has been filed, with
the same force and validity as if served personally on the
corporation or limited liability company or its successor, as the
case may be.
(b) Service may be made by leaving a copy of the process at any
office of the commissioner, but that service is not effective unless
(1) the party making that service, who may be the commissioner, sends
notice of service and a copy of the process by registered or
certified mail to the party served at its last address on file with
the commissioner, and (2) an affidavit of compliance with this
section by the party making service is filed in the case on or before
the return date, if any, or within such further time as the court,
in the case of a judicial proceeding, or the administrative agency,
in the case of an administrative proceeding, allows.
(c) The provisions of this section are in addition to, and not in
limitation of, other provisions of law relating to service of
process.
2035. (a) No person shall, directly or indirectly, acquire
control of a licensee unless the commissioner has first approved, in
writing, the acquisition of control. An application to acquire
control of a licensee shall be in writing, under oath, and in a form
prescribed by the commissioner. The application shall contain that
information which the commissioner may require.
(b) The commissioner shall not approve the application unless the
commissioner finds all of the following:
(1) The applicant and all of the officers and directors of the
applicant are of good character and sound financial standing.
(2) The applicant is competent to engage in the business of money
transmission.
(3) It is reasonable to believe that, if the applicant acquires
control of the licensee, the applicant and the licensee will comply
with all applicable provisions of this chapter and any regulation or
order issued under this chapter.
(4) The applicant's plans, if any, to make any major change in the
business, corporate structure, or management of the licensee are not
detrimental to the safety and soundness of the licensee.
(c) For the purposes of subdivision (b), the commissioner may find
an applicant's plan to make major changes in the management of a
licensee is detrimental to the licensee if the plan provides for a
person who is not of good character to become a director or officer
of the licensee. The grounds specified in this subdivision shall not
be deemed to be the only grounds upon which the commissioner may
find, for the purposes of subdivision (b), that an applicant's plan
to make a major change in the management of a licensee is detrimental
to the licensee.
(d) If it appears to the commissioner that any person is violating
or failing to comply with this section, the commissioner may direct
the person to comply with this section by an order issued over the
commissioner's official seal.
(e) Whenever it appears to the commissioner that any person has
committed or is about to commit a violation of any provision of this
section or of any regulation or order of the commissioner issued
pursuant to this section, the commissioner may apply to the superior
court for an order enjoining the person from violating or continuing
to violate this section or that regulation or order, and for other
equitable relief as the nature of the case or interests of the
licensee, the controlling person, the creditors or shareholders of
the licensee or controlling person or the public may require.
(f) The commissioner may, for good cause, amend, alter, suspend,
or revoke any approval of a proposal to acquire control of a licensee
issued pursuant to this section.
(g) There shall be exempted from the provisions of this section
any transaction which the commissioner by regulation or order exempts
as not being comprehended within the purposes of this section and
the regulation of which he or she finds is not necessary or
appropriate in the public interest or for the protection of a
licensee or the customers of a licensee.
(h) The commissioner may conduct an examination of the applicant
and the applicant shall pay the reasonable cost of the examination.
2036. The commissioner may impose on any authorization, approval,
license, or order issued pursuant to this chapter any conditions
that he or she deems reasonable or necessary to the public interest.
2037. (a) As security, each licensee shall deposit and thereafter
maintain on deposit with the Treasurer cash in an amount not less
than, or securities having a market value not less than, such amount
as the commissioner may find and order from time to time as necessary
to secure the faithful performance of the obligations of the
licensee with respect to money transmission in California. These
securities shall be subject to the approval of the commissioner and
shall consist of interest-bearing bonds, notes, or other obligations
of the United States or any agency or instrumentality thereof, or of
the State of California, or of any city, county, or city and county,
political subdivision or district of the State of California, or that
are guaranteed by the United States or the State of California.
(b) So long as a licensee that maintains securities on deposit
with the Treasurer pursuant to this section is solvent, that licensee
shall be entitled to receive any interest paid on the securities.
(c) In lieu of the deposit of cash or securities pursuant to
subdivision (a), a licensee may deliver to the commissioner the bond
of a surety company, in form and written by a company
satisfactory to the
commissioner, in an amount not less than the amount of the deposit of
cash or securities required of the licensee, conditioned upon the
faithful performance of the obligations of the licensee with respect
to money transmission in California. The commissioner shall deposit
such bond with the Treasurer.
(d) A licensee that sells or issues payment instruments or stored
value shall maintain securities on deposit or a bond of a surety
company in an amount of no less than five hundred thousand dollars
($500,000) or 50 percent of the average daily outstanding payment
instrument and stored value obligations in California, whichever is
greater; provided that such amount shall not be more than two million
dollars ($2,000,000).
(e) A licensee that engages in receiving money for transmission
shall maintain securities on deposit or a bond of a surety company in
an amount greater than the average daily outstanding obligations for
money received for transmission in California, provided that such
amount shall not be less than two hundred fifty thousand dollars
($250,000) nor more than seven million dollars ($7,000,000).
(f) The amount of securities on deposit or a bond of a surety
company required to be maintained by subdivisions (d) and (e) are
cumulative.
(g) The money and securities deposited with the State Treasurer
pursuant to this section and the proceeds of any bond held by the
State Treasurer pursuant to this section shall constitute a trust
fund for the benefit of persons in California who purchased payment
instruments or stored value from the licensee or its agent, or
persons in California who delivered to any licensee or its agent
money or monetary value for money transmission. Suit to recover on
any bond may be brought by any party aggrieved in a court of
competent jurisdiction of any county in which the licensee has an
agent.
(h) Securities on deposit or a bond shall cover claims for so long
as the commissioner specifies, but for at least four years after the
licensee ceases to provide services under this chapter in this
state. However, the commissioner may permit the amount of the
security to be reduced or eliminated before the expiration of that
time to the extent the amount of the licensee's payment instruments
or stored value obligations outstanding, or outstanding money or
monetary value received for money transmission, is less than the
deposit or bond. The commissioner may permit a licensee to substitute
another form of security acceptable to the commissioner for the
security effective at the time the licensee ceases to provide money
transmissions in this state.
2038. Fees shall be paid to, and collected by, the commissioner,
as follows:
(a) The fee for filing an application for a license is five
thousand dollars ($5,000), as provided in subdivision (b) of Section
2032.
(b) The fee for filing an application for approval to acquire
control of a licensee is three thousand five hundred dollars
($3,500).
(c) A licensee shall pay annually on or before July 1, a licensee
fee of two thousand five hundred dollars ($2,500).
(d) A licensee shall pay annually on or before July 1, one hundred
twenty-five dollars ($125) for each licensee branch office in this
state.
(e) A licensee shall pay annually on or before July 1, twenty-five
dollars ($25) for each agent branch office in this state.
(f) Whenever the commissioner examines a licensee or any agent of
a licensee, the licensee shall pay, within 10 days after receipt of a
statement from the commissioner, a fee of seventy-five dollars ($75)
per hour for each examiner engaged in the examination plus, if it is
necessary for any examiner engaged in the examination to travel
outside this state, the travel expenses of the examiner.
(g) Whenever the commissioner examines an applicant, the applicant
shall pay, within 10 days after receipt of a statement from the
commissioner, a fee of seventy-five dollars ($75) per hour for each
examiner engaged in the examination plus, if it is necessary for any
examiner engaged in the examination to travel outside this state, the
travel expenses of the examiner.
(h) Each fee for filing an application shall be paid at the time
the application is filed with the commissioner. No fee for filing an
application shall be refundable, regardless of whether the
application is approved, denied, or withdrawn.
2039. (a) The commissioner may by order or regulation grant
exemptions from this section in cases where the commissioner finds
that the requirements of this section are not necessary or may be
duplicative.
(b) In addition to such other reports as may be required pursuant
to Sections 453, 454, and 455, each licensee shall, within 90 days
after the end of each fiscal year, or within such extended time as
the commissioner may prescribe, file with the commissioner an audit
report for the fiscal year that shall comply with all of the
following provisions:
(1) The audit report shall contain audited financial statements of
the licensee for or as of the end of the fiscal year prepared in
accordance with United States generally accepted accounting
principles and such other information as the commissioner may
require.
(2) The audit report shall be based upon an audit of the licensee
conducted in accordance with United States generally accepted
auditing standards and such other requirements as the commissioner
may prescribe.
(3) The audit report shall be prepared by an independent certified
public accountant or independent public accountant who is not
unsatisfactory to the commissioner.
(4) The audit report shall include or be accompanied by a
certificate of opinion of the independent certified public accountant
or independent public accountant that is satisfactory in form and
content to the commissioner. If the certificate or opinion is
qualified, the commissioner may order the licensee to take such
action as the commissioner may find necessary to enable the
independent or certified public accountant or independent public
accountant to remove the qualification.
(c) Each licensee shall, not more than 45 days after the end of
each calendar year quarter, or within a longer period as the
commissioner may by regulation or order specify, file with the
commissioner a report containing all of the following:
(1) Financial statements, including balance sheet, income
statement, statement of changes in shareholders' equity, and
statement of cashflows, for, or as of the end of, that calendar year
quarter, verified by two of the licensee's principal officers. The
verification shall state that each of the officers making the
verification has a personal knowledge of the matters in the report
and that each of them believes that each statement on the report is
true.
(2) For issuers and sellers of payment instruments and stored
value, a schedule of eligible securities owned by the licensee
pursuant to Section 2081.
(3) Other information as the commissioner may by regulation or
order require.
(d) Each licensee, not more than 45 days after the end of each
calendar year quarter, shall file with the commissioner a report
containing all of the following:
(1) The current address of each branch office of the licensee in
this state. If a branch office was opened or closed during the
calendar year quarter, the date it was opened or closed. If a branch
office was relocated during the calendar year quarter, the addresses
of the old and new locations and the date of relocation.
(2) The name of each person who acted as an agent in this state of
the licensee during the calendar year quarter and the address for
each agent branch office. If a person was appointed or terminated as
an agent during the calendar year quarter, the date of appointment or
termination. If an agent branch office relocated, the addresses for
the old and new locations and the date of relocation.
(3) The total volume of activities, number of transactions
conducted, and outstanding money transmission obligations in
California under this chapter and in the United States in the
calendar year quarter categorized by type of money transmission. For
money received for transmission, a report of the average daily
outstanding transmission liabilities in California, and, if
applicable, a schedule of each foreign country to which money was
sent, along with the total amount of money sent to that foreign
country in that calendar year quarter. For payment instruments and
stored value, a report of the average daily outstanding payment
instruments and stored value liabilities in California in that
calendar year quarter.
(4) Other information as the commissioner may by regulation or
order require.
(e) Each licensee shall file with the commissioner other reports
as and when the commissioner may by regulation or order require.
2040. (a) A licensee under this chapter 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.
(b) 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) 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.
2041. (a) A licensee shall conduct money transmission in
California under its true name unless it has complied with Chapter 5
(commencing with Section 17900) of Part 3 of Division 7 of the
Business and Professions Code.
(b) A licensee may only conduct money transmission in California
under its true name unless it has provided 30-day advance written
notice to the commissioner. A licensee may also use a trade name or
logo, so long as there is reasonable disclosure of its true name.
2042. (a) In addition to the fees provided in Section 2038, the
commissioner shall levy an assessment each fiscal year, on a pro rata
basis, on those licensees that at any time during the preceding
calendar year engaged in the business of money transmission in
California in an amount that is, in his or her judgment, sufficient
to meet the commissioner's expenses in administering the provisions
of this chapter and to provide a reasonable reserve for
contingencies.
(b) For licensees that sell or issue payment instruments or stored
value, the amount of the annual assessment on any licensee shall not
exceed the sum of the products determined by multiplying (1)
increments of the aggregate face amount of payment instruments and
stored value issued or sold in California by the licensee, directly
or indirectly through agents, in the calendar year next preceding the
date of such assessment, by (2) percentages of the base assessment
rate, according to the following table:
Aggregate face amount of Percentage
payment instruments and of base
stored value sold (in assessment
millions) rate
First $1...................... 100.0
Next $9....................... 25.0
Next $40...................... 12.5
Next $50...................... 6.0
Next $400..................... 3
Next $500..................... 2
Excess over $1,000............ 1
The base assessment rate shall be fixed from time to time by the
commissioner but shall not exceed one dollar ($1) per one thousand
dollars ($1,000) face amount of payment instruments and stored value
sold.
(c) For licensees receiving money for transmission, the basis of
the apportionment of the assessment among the licensees assessed
shall be the proportion that the total amount of money received for
transmission by the licensee in California bears in relation to the
total amount of money received for transmission by all licensees in
California, as shown by the reports of licensees to the commissioner
for the preceding calendar year. The assessment rate shall be fixed
from time to time by the commissioner but shall not exceed one dollar
($1) per one thousand dollars ($1,000) of money received for
transmission in California by the licensee.
(d) The commissioner shall notify each licensee by mail of the
amount levied against it. The licensee shall pay the amount levied
within 20 days. If payment is not made to the commissioner within
that time, the commissioner shall assess and collect, in addition to
the annual assessment, a penalty of 5 percent of the assessment for
each month or part thereof that the payment is delinquent.
CHAPTER 4. AGENTS
2060. (a) In this section, "remit" means to make direct payments
of money to a licensee or its representative authorized to receive
money or to deposit money in a bank in an account specified by the
licensee.
(b) No licensee shall appoint or continue any person as agent,
unless the licensee and the person have made a written contract. A
written contract between a licensee and an agent shall require the
agent to operate in full compliance with this chapter.
(c) The written contract shall contain each of the following
provisions:
(1) That the licensee appoints the person as its agent with
authority to conduct money transmission on behalf of the licensee.
(2) That the agent shall make and keep accounts, correspondence,
memoranda, papers, books, and other records as the commissioner by
regulation or order requires and preserve the records for the time
specified by the regulation or order.
(3) That all money or monetary value, less fees due agents
provided for and expressly set forth in the written agreement,
received by the agent for money transmission on behalf of the
licensee shall be trust funds owned by and belonging to the licensee
until the time when the money or an equivalent amount are remitted by
the agent to the licensee in accordance with this section.
(4) That the money must be remitted in accordance with the
provisions of this chapter.
(5) Any other provisions that the commissioner may by regulation
or order find to be necessary to carry out the provisions and
purposes of this chapter.
(d) An agent shall remit all money owing to the licensee in
accordance with the terms of the contract between the licensee and
the agent.
(e) An agent of a licensee shall remit any money, less fees,
received on behalf of the licensee for money transmission as follows:
(1) Within three business days of receipt.
(2) In case the aggregate face amount of the money, less fees,
does not in any calendar week exceed ten thousand dollars ($10,000),
within 10 business days of receipt.
(3) Within a period longer than three business days of receipt, if
the agent has previously deposited with, and during such period
maintains on deposit with, an office of an insured bank or of an
insured savings and loan association located in the United States in
an account that is in the sole and exclusive name of the licensee an
amount that, for each day by which such period exceeds three business
days, is not less than the aggregate face amount of money received
on behalf of the licensee for money transmission that the agent
usually sells per day.
(4) Within such shorter period as the licensee may provide.
(f) An agent may not provide money transmission outside the scope
of activity permissible under the contract between the agent and the
licensee. All money or monetary value, less fees, received by an
agent of a licensee shall, from the time when the money is received
by the agent until the time when the money or an equivalent amount is
remitted by the agent to the licensee, constitute trust funds owned
by and belonging to the licensee.
(g) An agent may not use a subagent to conduct money transmissions
on behalf of a licensee.
(h) Each licensee shall exercise reasonable supervision over its
agents to ensure compliance with applicable laws, rules, and
regulations with respect to money transmission.
(i) No agent of a licensee shall, nor shall any licensee cause or
knowingly permit any of its agents to, conduct money transmission on
behalf of the licensee without concurrently receiving money, monetary
value or its equivalent, credit card, or payment instrument, or a
combination of same believed to be valid in an amount not less than
the amount of the money transmission being provided. In the case of a
sale of payment instruments or stored value to an insured bank, an
insured savings and loan association, or an insured credit union, the
licensee or agents of the licensee may receive such amounts the next
business day after the sale.
(j) If any agent of a licensee shall commingle any money or
monetary value, less fees, received on behalf of the licensee for
money transmission with any other property owned or controlled by the
agent, all such property shall be impressed with a trust in favor of
the licensee in an amount equal to the aggregate amount of such
money so commingled. No money or monetary value, less fees, received
by any agent on behalf of the licensee for money transmission, while
held by such agent, nor any property impressed with a trust pursuant
to this subdivision, shall be subject to attachment, levy of
execution, or sequestration by order of any court, except for the
benefit of the licensee.
(k) Each licensee shall be liable as a principal for the money or
monetary value from the time when the money or monetary value is
received by the agent. Each licensee shall be liable as the maker or
drawer on each payment instrument issued or sold by such licensee.
2061. (a) No licensee shall appoint any person as an agent unless
it has conducted a review of the proposed agent's fitness to act as
an agent and has determined that the proposed agent and any persons
who control the proposed agent are of good character and sound
financial standing.
(b) A licensee shall maintain records of this review for each
agent while the agent is providing money transmission on behalf of
the licensee, and for three years after the relationship with the
agent has terminated.
2062. A person may not provide money transmissions on behalf of a
person not licensed or not exempt from licensure under this chapter.
A person that engages in that activity provides money transmissions
services to the same extent as if the person was a licensee, and
shall be jointly and severally liable with the unlicensed or
nonexempt person.
2063. (a) No agent of a licensee who has actual notice that the
commissioner has suspended or revoked the license of the licensee or
that the commissioner has issued an order taking possession of the
property and business of the licensee shall conduct money
transmission on behalf of the licensee.
(b) If any agent of a licensee, after first having actual notice
that the commissioner has suspended or revoked the license of the
licensee or that the commissioner has issued an order taking
possession of the property and business of the licensee, conducts
money transmission on behalf of the licensee, the agent shall be
jointly and severally liable with the licensee for payment of the
money transmission.
CHAPTER 5. ELIGIBLE SECURITIES
2081. (a) A licensee shall at all times own eligible securities
having an aggregate market value computed in accordance with United
States generally accepted accounting principles of not less than the
aggregate amount of all of its outstanding payment instruments and
stored value obligations issued or sold in the United States and all
outstanding money received for transmission in the United States.
(b) If the commissioner finds that the financial condition of a
licensee is impaired, or that the financial condition of a licensee
is such that its business is being conducted in an unsafe and unsound
manner, the commissioner, to protect the public interest, may issue
an order, subject to the procedures set forth in Section 2148, doing
one or both of the following:
(1) Increasing the amount of eligible securities that the licensee
must maintain.
(2) Requiring the licensee to obtain, as security for the payment
of outstanding money transmission obligations, additional security in
the form of financial guarantees.
(c) Eligible securities, even if commingled with other assets of
the licensee, are deemed to be held in trust for the benefit of the
purchasers and holders of the licensee's outstanding payment
instrument and stored value obligations, and all senders of
outstanding money received for transmission, in the event of
bankruptcy or receivership of the licensee, or in the event of an
action by a creditor against the licensee who is not a beneficiary of
this statutory trust. No eligible securities impressed with a trust
pursuant to this subdivision shall be subject to attachment, levy of
execution, or sequestration by order of any court, except for a
beneficiary of this statutory trust.
(d) All outstanding payment instruments and stored value issued or
sold by a licensee or its agent, and all outstanding money received
for transmission by a licensee or its agent, shall remain a liability
of the licensee from the time money or monetary value is received by
the licensee or its agent until the licensee receives confirmation
that such money or monetary value was received by the beneficiary, or
until the outstanding payment instrument or stored value obligation
has been paid, or until the money is refunded to the customer.
(e) A licensee shall maintain a record in the United States of
proof of receipt by the beneficiary or refund to the customer of
money received for transmission.
2082. (a) "Eligible security" means any United States currency
eligible security or foreign currency eligible security.
(b) For the purposes of this chapter, the following are United
States currency eligible securities:
(1) Cash.
(2) Any deposit in an insured bank or an insured savings and loan
association or insured credit union.
(3) Any bond, note, or other obligation that is issued or is
guaranteed by the United States or any agency of the United States.
(4) Any bond, note, or other obligation that is issued or
guaranteed by any state of the United States or by any governmental
agency of or within any state of the United States and that is
assigned an eligible rating by an eligible securities rating service.
(5) Any bankers acceptance that is eligible for discount by a
federal reserve bank.
(6) Any commercial paper that is assigned an eligible rating by an
eligible rating securities service.
(7) Any bond, note, or other obligation that is assigned an
eligible rating by an eligible securities rating service.
(8) Any share of an investment company that is an open-end
management company, that is registered under the Investment Company
Act of 1940 (15 U.S.C. Sec. 80a-1, et seq.), that holds itself out to
investors as a money market fund, and that operates in accordance
with all provisions of the Investment Company Act of 1940, and the
regulations of the Securities and Exchange Commission applicable to
money market funds, including Section 270.2a-7 of the regulations of
the Securities and Exchange Commission (17 C.F.R. Sec. 270.2a-7).
For purposes of this paragraph and paragraph (9), "investment
company," "management company," and "open-end" have the meanings set
forth in Sections 3, 4, and 5, respectively, of the Investment
Company Act of 1940 (15 U.S.C. Secs. 80a-4, and 80a-5, respectively).
(9) Any share of an investment company that is an open-end
management company, that is registered under the Investment Company
Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), and that invests
exclusively in securities that constitute eligible securities that
comply with valuation requirements of this chapter.
(10) Any account due to any licensee from any agent in the United
States on account of the receipt of money on behalf of the licensee
for money transmission by the agent, if the account is current and
not past due or otherwise doubtful of collection.
(11) Any other security or class of securities that the
commissioner has by regulation or order declared to be eligible
securities.
(c) "Foreign currency eligible security" means any of the
following that is denominated in a foreign currency:
(1) Cash.
(2) Any deposit in an office of a bank acceptable to the
commissioner that is located in a foreign country.
(3) Any other security or class of securities that the
commissioner has by regulation or order declared to be eligible
securities pursuant to Section 2086.
(d) For the purposes of this chapter, "value" means the following:
(1) When used with respect to an eligible security owned by a
licensee of the type described in paragraph (10) of subdivision (b),
net carrying value as determined in conformity with United States
generally accepted accounting principles. However, in computing the
value of the account, any amount that consists of money that has not
been remitted to the licensee or refunded within 45 business days of
receipt by the agent shall be excluded from the value of the account
and shall be excluded from the calculation of eligible securities.
(2) Market value when used with respect to any other eligible
security owned by a licensee.
2083. (a) In computing for purposes of Section 2082 the aggregate
value of eligible securities owned by a licensee, all of the
following shall be excluded:
(1) The value of any eligible security if and to the extent that
the value of the eligible security, when combined with the aggregate
value of all other eligible securities owned by the licensee that are
issued or guaranteed by the same person or by any affiliate of the
same person by whom the eligible security is issued or guaranteed,
exceeds 10 percent of the aggregate value of all eligible securities
owned by the licensee.
(2) The portion of the aggregate value of all eligible
securities of the type described in paragraph (10) of subdivision (b)
of Section 2082 that exceeds 25 percent of the aggregate value of
all eligible securities owned by the licensee; and that portion of
the aggregate value of agent receivables from any one person that
exceeds 10 percent of the aggregate value of all eligible securities
owned by the licensee, or any higher percentage that the commissioner
may approve for the licensee, up to a maximum of 20 percent.
(3) The portion of the aggregate value of all eligible securities
of the type described in paragraph (6) of subdivision (b) of Section
2082 that exceeds 20 percent of the aggregate value of all eligible
securities owned by the licensee.
(4) The portion of the aggregate value of all eligible securities
of the type described in paragraph (7) of subdivision (b) of Section
2082 that exceeds 20 percent of the aggregate value of all eligible
securities owned by the licensee.
(5) The portion of the aggregate value of all eligible securities
of the type described in paragraph (8) of subdivision (b) of Section
2082, except for a money market fund that invests exclusively in
obligations issued or guaranteed by the United States or any agency
of the United States, that exceeds 20 percent of the aggregate value
of all eligible securities owned by the licensee.
(6) The portion of the aggregate value of all eligible securities
of the type described in paragraphs (6), (7), and (8) of subdivision
(b) of Section 2082 that exceeds 50 percent of the aggregate value of
all eligible securities owned by the licensee.
(b) Subdivision (a) shall not be deemed to require the exclusion
of the value of any of the following eligible securities, and each of
the following eligible securities shall be exempted from the
limitations of subdivision (a):
(1) The following eligible securities:
(A) Cash.
(B) Any deposit in an insured bank, insured savings and loan
association, or insured credit union.
(C) Any bond, note, or other obligation for the payment of which
the full faith and credit of the United States are pledged.
(2) Any eligible security that the commissioner, in view of the
financial condition of the obligor or issuer and such other factors
as may in the opinion of the commissioner be relevant, finds to be of
such quality that exclusion of the value of such eligible security
pursuant to subdivision (a) is not necessary for the purposes of this
chapter and which the commissioner by regulation or order exempts,
in whole or in part, from the limitations of subdivision (a).
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.
2085. If the commissioner finds that any eligible security or
class of eligible securities is not of sufficient liquidity or
quality to be eligible securities, the commissioner may by regulation
or order declare the security or class of securities to be
ineligible.
2086. If the commissioner finds that any security or class of
securities that is not an eligible security is of sufficient
liquidity and quality to be an eligible security, the commissioner
may by regulation or order declare the security or class of
securities to be eligible securities.
2087. (a) If the commissioner finds that a rating assigned to a
class of securities by an eligible securities rating service
indicates that the class of securities is of sufficient quality to be
eligible securities, the commissioner may by regulation or order
declare the rating to be an eligible rating.
(b) With respect to this chapter "eligible rating" means any
rating assigned to such security or class of securities by such
eligible securities rating service which the commissioner has by
regulation or order declared to be an eligible rating.
2088. (a) The commissioner may by regulation or order declare a
securities rating service to be an eligible securities rating service
if the commissioner finds the following with respect to the
securities rating service:
(1) It has been continuously engaged in the business of rating
securities for a period of not less than three years.
(2) It is competent to rate securities and is nationally
recognized for rating securities in a competent manner.
(3) It publishes its ratings of securities on a nationwide basis.
(b) With respect to this chapter "eligible securities rating
service" means any securities rating service that the commissioner by
regulation or order declared to be an eligible securities ratings
service.
2089. A licensee shall maintain eligible securities that are
adequately diversified, predominantly of a duration commensurate with
the licensee's outstanding money transmission obligations, and of
sufficient liquidity and quality to promptly pay the outstanding
money transmission obligations of the licensee.
CHAPTER 6. CONSUMER DISCLOSURES
2100. (a) (1) Each licensee shall file with the commissioner a
certified copy of every receipt form used by it or by its agent for
receiving money for transmission prior to its first use. No licensee
or its agent shall use any receipt, a certified copy of which has not
been filed with the commissioner, or use a receipt that the
commissioner has deemed not to be in compliance pursuant to paragraph
(2).
(2) If the commissioner determines, within 30 business days of the
filing date of a receipt, that the receipt does not comply with the
requirements of this section or Sections 2102 and 2103, the
commissioner shall notify the licensee in writing that the receipt is
not in compliance with those requirements.
(b) Notwithstanding subdivision (a), before a new licensee issues
its first receipt to a customer, it shall file with the commissioner
a certified copy of the receipt forms to be used by it or its agents
for receiving money for transmission. The new licensee shall not use
the receipt forms until approved by the commissioner. For purposes of
this subdivision, a new licensee is a licensee that has not been
previously licensed by the commissioner as a money transmitter or has
not previously received money for transmission in California.
(c) If a receipt is required by this chapter to be in English and
another language, the English version of the receipt shall govern any
dispute concerning the terms of the receipt. However, any
discrepancies between the English version and any other version due
to the translation of the receipt from English to another language
including errors or ambiguities shall be construed against the
licensee or its agent and the licensee or its agent shall be liable
for any damages caused by these discrepancies.
(d) Any licensee violating the requirements of this section shall
be subject to a fine of fifty dollars ($50) for each violation. This
provision is in addition to any other enforcement provisions that may
apply to such a violation.
(e) If any licensee or its agent uses a receipt form, a certified
copy of which has not been filed with the commissioner, the licensee
shall be liable for the acts of its agent whether or not the licensee
authorized the agent to use that form.
(f) The receipt form shall comply with the requirements of
Sections 2102 and 2103.
2101. Every licensee or its agent shall forward all money
received for transmission or give instructions committing equivalent
money to the person designated by the customer within 10 days after
receiving that money, unless otherwise ordered by his or her
customer.
2102. (a) Every licensee or its agent shall refund to the
customer within 10 days of receipt of the customer's written request
for a refund any and all money received for transmission unless any
of the following occurs:
(1) The money has been forwarded within 10 days of the date of
receipt.
(2) Instructions have been given committing an equivalent amount
of money to the person designated by the customer within 10 days of
the date of the receipt of the money from the customer.
(3) The customer instructs the licensee to transmit the money at a
time beyond 10 days. If the customer gives instructions as to when
the money shall be forwarded or transmitted and the moneys have not
yet been forwarded or transmitted, the licensee or its agent shall
refund the customer's money within 10 days of receipt of the customer'
s written request for a refund.
(4) Refund would violate law.
(b) In the case of money received for transmission, a receipt
shall be provided by a licensee or its agent to all customers which
shall be made available to the customer in English and in the
language principally used by that licensee or that agent to
advertise, solicit, or negotiate, either orally or in writing, at
that branch office if other than English. The receipt shall either
include or have attached a conspicuous statement in English and in
the language principally used by the licensee or that agent to
advertise, solicit, or negotiate, either orally or in writing at that
branch office if other than English in a size equal to at least 10
point bold type, as follows:
RIGHT TO REFUND
""You, the customer, are entitled to a refund
of the money to be transmitted as the result of
this agreement if _____ (name of licensee) does
not forward the money received from you within
10 days of the date of its receipt, or does not
give instructions committing an equivalent
amount of money to the person designated by you
within 10 days of the date of the receipt of
the funds from you unless otherwise instructed
by you.
If your instructions as to when the moneys
shall be forwarded or transmitted are not
complied with and the money has not yet been
forwarded or transmitted, you have a right to a
refund of your money.
If you want a refund, you must mail or deliver
your written request to _____ (name of
licensee) at _____ (mailing address of
licensee). If you do not receive your refund,
you may be entitled to your money back plus a
penalty of up to $1,000 and attorney's fees
pursuant to Section 2102 of the California
Financial Code.''
(c) A cause of action under this section may be brought in small
claims court if it does not exceed the jurisdiction of that court, or
in any other appropriate court. The customer shall be entitled to
recover each of the following:
(1) Any and all money received for transmission, plus any fees and
charges paid by the customer.
(2) A penalty in an amount not to exceed one thousand dollars
($1,000). The court shall award the prevailing party costs and
attorney's fees.
2103. (a) The receipt presented to each customer for money
received for transmission pursuant to subdivision (b) of Section 2102
shall clearly state the rate of exchange for the particular
transaction, if any, the amount of commission or fees, and the net
exchange after all fees and commissions have been deducted. The
receipt shall also state the total amount of money presented by the
customer and the total amount to be delivered to the beneficiary
designated by the customer. These disclosures shall be in English and
in the same language as that principally used by the licensee or any
agent of the licensee to advertise, solicit, or negotiate, either
orally or in writing, at that branch office if other than English.
(b) If window and exterior signs concerning the rates of exchange
for money received for transmission are used, they shall clearly
state in English and in the same language principally used by the
licensee or any agent of the licensee to advertise, solicit, or
negotiate, either orally or in writing, at that branch office if
other than English, the rate of exchange for exchanging the currency
of the United States for foreign currency. If an interior sign or any
advertising is used that quotes exchange rates, it shall, in
addition to clearly stating the rates of exchange for exchanging the
currency of the United States for foreign currency, also state all
commissions and fees charged on all such transactions.
(c) At each branch office, there shall be disclosed the exchange
rates, fees, and commissions charged in English and in the same
language principally used by the licensee or any agent of the
licensee to advertise, solicit, or negotiate, either orally or in
writing, with respect to money received for transmission at that
branch office. At each branch office, there shall be signage clearly
identifying the name of the licensee as well as any trade names used
by the licensee at that branch office.
(d) If the customer does not specify at the time the money is
presented to the licensee or its agent the country to which the money
is to be transmitted, the rate of exchange for the transaction is
not required to be set forth on the receipt. If the customer does
specify at the time the money is presented to the licensee or its
agent the country to which the money is to be transmitted but the
specified country's laws require the rate of exchange for the
transaction to be determined at the time the transaction is paid out
to the intended recipient, the rate of exchange for the transaction
is not required to be set forth on the receipt.
2104. Each licensee or agent shall prominently post on the
premises of each branch office that issues or sells payment
instruments, and at machines located in this state and operated by
the licensee or agent that issues or sells payment instruments, a
notice clearly stating that payment instruments are not insured by
the federal government, the state government, or any other public or
private entity. This notice shall be printed in English and in the
same language principally used by the licensee or any agent of the
licensee to advertise, solicit, or negotiate, either orally or in
writing, with respect to the purchase of payment instruments. The
information required in this notice shall be clear, legible, and in
letters not less than one-half inch in height. The notice shall be
posted in a conspicuous location in the unobstructed view of the
public within the premises. The licensee shall provide to each of its
agents the notice required by this section. In those locations
operated by an agent, the agent, not the licensee, shall be
responsible for the failure to properly post the required notice.
2105. (a) Each licensee or agent shall prominently post on the
premises of each branch office that conducts money transmission a
notice stating that:
""If you have complaints with respect to any
aspect of the money transmission activities
conducted at this location, you may contact the
California Department of Financial Institutions
at its toll-free telephone number, 1-800-622-
0620, by e-mail at
consumer.complaint@dfi.ca.gov, or by mail at
Department of Financial Institutions, Consumer
Services, 1810 13th Street, Sacramento, CA
95811.''
(b) The commissioner may by order or regulation modify the content
of the notice required by this section. This notice shall be printed
in English and in the same language principally used by the licensee
or any agent of the licensee to advertise, solicit, or negotiate
either orally or in writing, with respect to money transmission at
that branch office. The information required in this notice shall be
clear, legible, and in letters not less than one-half inch in height.
The notice shall be posted in a conspicuous location in the
unobstructed view of the public within the premises. The licensee
shall provide to each of its agents the notice required by this
section. In those locations operated by an agent, the agent, and not
the licensee, shall be responsible for the failure to properly post
the required notice.
2106. (a) No licensee shall sell or issue any form of payment
instrument in California unless a certified copy of the payment
instrument has first been filed with the commissioner. The payment
instrument shall clearly identify the licensee as the issuer.
(b) The commissioner may by order or regulation declare that a
form of payment instrument is prohibited if it is misleading in any
material respect or otherwise does not comply with applicable law.
(c) A payment instrument that identifies the agent through which
the licensee sells the payment instrument shall identify the agent as
such and shall identify the licensee at least as conspicuously as it
does the agent.
CHAPTER 7. EXAMINATIONS, SPECIAL REPORTS, AND RECORDS
2120. (a) The commissioner may at any time and from time to time
examine the business and any office, within or outside this state, of
any licensee or any agent of a licensee in order to ascertain
whether that business is being conducted in a lawful manner and
whether all money transmission is properly accounted for.
(b) The directors, officers, and employees of any licensee or
agent of a licensee being examined by the commissioner shall exhibit
to the commissioner, on request, any or all of the licensee's
accounts, books, correspondence, memoranda, papers, and other records
and shall otherwise facilitate the examination so far as it may be
in their power to do so.
2121. The commissioner may consult and cooperate with other state
or federal money transmission regulators in enforcing and
administering this chapter. They may jointly pursue examinations and
take other official action that they are otherwise empowered to take.
2122. A licensee shall file a report with the commissioner within
five business days after the licensee has reason to know of the
occurrence any of the following events:
(a) The filing of a petition by or against the licensee under the
United States Bankruptcy Code (11 U.S.C. Secs. 101-110, incl.) for
bankruptcy or reorganization.
(b) The filing of a petition by or against the licensee for
receivership, the commencement of any other judicial or
administrative proceeding for its dissolution or reorganization, or
the making of a general assignment for the benefit of its creditors.
(c) The commencement of a proceeding to revoke or suspend its
license in a state or country in which the licensee engages in
business or is licensed.
(d) The cancellation or other impairment of the licensee's bond or
other security.
(e) A charge or conviction of the licensee or of an executive
officer, manager, director, or person in control of the licensee for
a felony.
(f) A charge or conviction of an agent for a felony.
2123. A licensee that is a money services business under the
regulations adopted pursuant to the United States Bank Secrecy Act
(31 C.F.R. Part 103) and the agents of the licensee that are money
services businesses shall comply with those regulations.
2124. (a) A licensee shall maintain the following records for
determining its compliance with this chapter for at least three
years:
(1) A record of each payment instrument or stored value obligation
sold.
(2) A general ledger posted at least monthly containing all asset,
liability, capital, income, and expense accounts.
(3) Bank statements and bank reconciliation records.
(4) Records of outstanding payment instruments and stored value
obligations.
(5) Records of each payment instrument and stored-value obligation
paid within the three-year period.
(6) A list of the last known names and addresses of all of the
licensee's agents and their branch offices.
(7) Any other records the commissioner reasonably requires by
order or regulation.
(b) A licensee or its agent shall maintain records of any receipts
provided pursuant to Section 2102 for six months or a longer period
of time specified in the contract between the licensee and its agent.
(c) The items specified in subdivisions (a) and (b) may be
maintained in any form of record.
(d) Records may be maintained outside this state if they are made
available to the commissioner on seven days' notice that is sent in a
record.
(e) If records not required to be maintained in English pursuant
to Section 456 are in a language other than English, the licensee
shall provide records translated into English within seven days'
notice that is sent in a record.
CHAPTER 8. ADDITIONAL ENFORCEMENT PROVISIONS
2148. (a) If it appears to the commissioner that a licensee is
violating or failing to comply with any law of this state, the
commissioner may direct the licensee to comply with the law by an
order issued under the commissioner's official seal, or if it appears
to the commissioner that any licensee is conducting its business in
an unsafe or injurious manner, the commissioner may in like manner
direct it to discontinue the unsafe or injurious practices. The order
shall require the licensee to show cause before the commissioner, at
a time and place to be fixed by the commissioner, as to why the
order should not be observed.
(b) If, upon any hearing held pursuant to subdivision (a), the
commissioner finds that the licensee is violating or failing to
comply with any law of this state or is conducting its business in an
unsafe or injurious manner, the commissioner may make a final order
directing it to comply with the law or to discontinue the unsafe or
injurious practices. A licensee shall comply with the final order
unless, within 10 days after the issuance of the order, its
enforcement is restrained in a proceeding brought by the licensee.
2149. (a) The commissioner may issue an order suspending or
revoking a license, or taking possession of and placing a licensee in
receivership, if after notice and an opportunity for hearing, the
commissioner finds that:
(1) The licensee is violating this chapter or a regulation adopted
or an order issued under this chapter, or a condition of approval
issued under this chapter.
(2) The licensee does not cooperate with an examination or
investigation by the commissioner.
(3) The licensee engages in fraud, intentional misrepresentation,
or gross negligence.
(4) The competence, experience, character, or general fitness of
the licensee, or any director, officer, employee, or person in
control of a licensee, indicates that it is not in the public
interest to permit the person to provide money transmission services.
(5) The licensee engages in an unsafe or unsound practice.
(6) The licensee is insolvent, suspends payment of its
obligations, or makes a general assignment for the benefit of its
creditors.
(7) The licensee does not remove an agent after the commissioner
issues and serves upon the licensee a final order including a finding
that the agent has violated this chapter.
(8) The licensee has applied for an adjudication of bankruptcy,
reorganization, arrangement, or other relief under any bankruptcy,
reorganization, insolvency, or moratorium law, or any person has
applied for any such relief under that law against the licensee and
the licensee has by any affirmative act approved of or consented to
the action or the relief has been granted.
(9) Any fact or condition exists that, if it had existed at the
time when the licensee applied for its license, would have been
grounds for denying the application.
(b) In determining whether a licensee is engaging in an unsafe or
unsound practice, the commissioner may consider the size and
condition of the licensee's provision of money transmission services,
the magnitude of the loss, the gravity of the violation of this
chapter, and the previous conduct of the person involved.
2150. (a) The commissioner may issue an order suspending or
revoking the designation of an agent if, after notice and an
opportunity for hearing, the commissioner finds that:
(1) The agent violated this chapter or a regulation adopted or an
order issued under this chapter.
(2) The agent did not cooperate with an examination or
investigation by the commissioner.
(3) The agent engaged in fraud, intentional misrepresentation, or
gross negligence.
(4) The agent is convicted of a violation of a state or federal
anti-money laundering statute.
(5) The competence, experience, character, or general fitness of
the agent, or any director, officer, employee, or person in control
of the agent, indicates that it is not in the public interest to
permit the agent to provide money transmissions.
(6) The agent is engaging in an unsafe or unsound practice.
(7) The agent has made or caused to be made in any application or
report filed with the commissioner or in any proceeding before the
commissioner, any statement that was at the time and in the light of
the circumstances under which it was made, false or misleading with
respect to any material fact, or has omitted to state in any of those
applications, reports, or proceedings any material fact which is
required to be stated therein.
(8) The agent is an agent of a licensee who, because of its
operations and financial condition, is not competent to supervise and
monitor the agent.
(9) The agent will not comply with all applicable provisions of
this chapter and of any regulation or order issued under this
chapter.
(b) In determining whether an agent is engaging in an unsafe or
unsound practice, the commissioner may consider the size and
condition of the agent's provision of money transmission services,
the magnitude of the loss, the gravity of the violation of this
chapter or a rule adopted or order issued under this chapter, and the
previous conduct of the agent.
(c) No licensee shall appoint as an agent any person with respect
to whom an order issued under this section is in effect.
(d) No person with respect to whom an order issued under this
section is in effect shall become or continue to be an agent of any
licensee.
(e) If applicable, the commissioner may disclose to the licensee
criminal history information upon which an order is based.
2150.1. (a) Every order, decision, or other official act of the
commissioner is subject to review in accordance with law.
(b) Whenever the commissioner has taken possession of the
property and business of any licensee, the licensee, within 10 days
after that taking, if it deems itself aggrieved thereby, may apply to
the superior court in the county in which the head office of the
licensee is located to enjoin further proceedings. The court, after
citing the commissioner to show cause why further proceedings should
not be enjoined and after a hearing and a determination of the facts
upon the merits, may dismiss the application or enjoin the
commissioner from further proceedings and direct the commissioner to
surrender the property and business to the licensee.
2150.2. (a) If the commissioner finds that any of the factors set
forth in Section 2149 is true with respect to any licensee and that
it is necessary for the protection of the public interest, the
commissioner may issue an order immediately suspending or revoking
the licensee's license.
(b) Within 30 days after the license is suspended or revoked
pursuant to subdivision (a), the licensee may file with the
commissioner an application for a hearing on the suspension or
revocation.
(c) If the commissioner fails to commence a hearing within 15
business days after the application is filed with the commissioner
pursuant to subdivision (b) or within a longer period of time agreed
to by the licensee, the suspension or revocation shall be deemed
rescinded.
(d) Within 30 days after the hearing, the commissioner shall
affirm, modify, or rescind the suspension or revocation. Otherwise,
the suspension or revocation shall be deemed rescinded.
(e) The right of the licensee to petition for judicial review of
the suspension or revocation shall not be affected by the failure of
the licensee to apply to the commissioner for a hearing on the
suspension or revocation pursuant to subdivision (b).
2151. (a) If the commissioner finds that any of the factors set
forth in Section 2150 is true with respect to any agent and that it
is necessary for the protection of the public interest, the
commissioner may issue an order immediately suspending or barring
that agent from continuing to be or becoming an agent of any licensee
during the period for which that order is in effect.
(b) Within 30 days after an order is issued pursuant to
subdivision (a), the licensee or the agent or former agent with
respect to whom the order was issued may file with the commissioner
an application for a hearing on the order.
(c) If the commissioner fails to commence a hearing within 20
business days after the application is filed with the commissioner
pursuant to subdivision (b) or within a longer period of time agreed
to by the parties, the suspension or revocation shall be deemed
rescinded.
(d) Within 30 days after the hearing, the commissioner shall
affirm, modify, or rescind the order.
(e) The right of the licensee or agent or former agent to petition
for judicial review of the order shall not be affected by the
failure of that person to apply to the commissioner for a hearing on
the order pursuant to subdivision (b).
2151.1. The commissioner may assess a civil penalty against a
person that violates this chapter or a regulation adopted or an order
issued under this chapter in an amount not to exceed one thousand
dollars ($1,000) for each violation or, in the case of a continuing
violation, one thousand dollars ($1,000) for each day or part thereof
during which the violation continues, plus this state's costs and
expenses for the investigation and prosecution of the matter,
including reasonable attorney's fees.
2152. (a) A person that intentionally makes a false statement,
misrepresentation, or false certification in a record filed or
required to be maintained under this chapter or that intentionally
makes a false entry or omits a material entry in such a record is
guilty of a felony.
(b) A person that knowingly engages in an activity for which a
license is required under this chapter without being licensed or
exempt from licensure under this chapter is guilty of a felony.
(c) Nothing in this chapter limits the power of the state to
punish any person for any act that constitutes a crime under any
statute.
2153. The enforcement provisions of this chapter are in addition
to any other enforcement powers that the commissioner may have under
law.
CHAPTER 9. MISCELLANEOUS PROVISIONS
2170. Any licensee may surrender its license by filing with the
commissioner the license and a report with any information as the
commissioner requires. The voluntary surrender of the license shall
become effective at the time and upon the conditions as the
commissioner specifies by order.
2171. If any provision of this chapter or the application thereof
to any person or circumstances is held invalid, illegal, or
unenforceable, that invalidity, illegality, or unenforceability shall
not affect other provisions or applications of this chapter that can
be given effect without the invalid, illegal, or unenforceable
provision or application, and to this end, the provisions of this
chapter are declared to be severable.
2172. (a) A license issued under the former Chapter 14
(commencing with Section 1800), Chapter 14A (commencing with Section
1851), or the former Division 16 (commencing with Section 33000) that
is in effect immediately before January 1, 2011, shall remain in
effect as a valid license under this chapter.
(b) Any person that, prior to January 1, 2011, was not required to
obtain a license under the former Chapter 14 (commencing with
Section 1800), Chapter 14A (commencing with Section 1851), or
Division 16 (commencing with Section 33000), but is required to have
a license under this chapter, shall file an application for a license
pursuant to this chapter by July 1, 2011, in order to continue
conducting money transmission in this state directly or through
agents. If the application is timely filed and pending with the
commissioner, that person may continue to conduct money transmission
in this state, until the application has been approved, abandoned, or
denied.
SEC. 5. The heading of Division 1.1 (commencing with Section 4000)
of the Financial Code is amended and renumbered to read:
DIVISION 1.3. THE SETTING OF FEES IN CONSUMER CREDIT
AGREEMENTS AND RELATED CONSUMER PROTECTIONS
SEC. 6. The heading of Division 1.2 (commencing with Section 4050)
of the Financial Code is amended and renumbered to read:
DIVISION 1.4. CALIFORNIA FINANCIAL INFORMATION PRIVACY ACT
SEC. 7. The heading of Division 1.3 (commencing with Section 4100)
of the Financial Code is amended and renumbered to read:
DIVISION 1.5. FINANCIAL INSTITUTIONS
SEC. 8. The heading of Division 1.5 (commencing with Section 4800)
of the Financial Code is amended and renumbered to read:
DIVISION 1.6. DEPOSITORY CORPORATIONS--SALE, MERGER, AND
CONVERSION
SEC. 9. The heading of Division 1.6 (commencing with Section 4970)
of the Financial Code is amended and renumbered to read:
DIVISION 1.7. Covered Loans
SEC. 10. The heading of Division 1.7 (commencing with Section
4981) of the Financial Code is amended and renumbered to read:
DIVISION 1.8. SECURITIES SALES
SEC. 11. The heading of Division 1.8 (commencing with Section
4990) of the Financial Code is amended and renumbered to read:
DIVISION 1.9. PERSONS CONNECTED WITH FINANCIAL INSTITUTIONS
SEC. 12. The heading of Division 1.9 (commencing with Section
4995) of the Financial Code is amended and renumbered to read:
DIVISION 1.10. HIGHER-PRICED MORTGAGE LOANS
SEC. 13. Section 1861 is added to the Financial Code, to read:
1861. It shall be unlawful for any director, officer, agent, or
employee of any corporation to use or to conspire to use the credit,
the funds, or the power of the corporation to fix or control the
price of any commodities, and any person violating this section shall
be punished by a fine of not less than two thousand dollars ($2,000)
nor more than ten thousand dollars ($10,000), imprisonment in a
county jail for not more than one year, imprisonment pursuant to
subdivision (h) of Section 1170 of the Penal Code, or by both that
fine and imprisonment, in the discretion of the court.
SEC. 14. Section 1881 is added to the Financial Code, to read:
1881. Whoever being connected in any capacity with any
corporation represents in any way that the State of California is
liable for the payment of any bond or other obligation, or the
interest thereon, issued or incurred by any corporation, or that the
State of California incurs any liability in respect of any act or
omission of the corporation, shall be punished by a fine of not more
than ten thousand dollars ($10,000) and by imprisonment pursuant to
subdivision (h) of Section 1170 of the Penal Code.
SEC. 15. Section 14315 of the Financial Code is amended to read:
14315. (a) On taking possession of the business and assets of any
credit union as provided in this chapter, the commissioner may
proceed to liquidate the credit union in the manner provided by
Chapter 7 (commencing with Section 600) of Division 1, and the
provisions of that chapter, except Sections 700, 701, 702, and 710,
shall apply as if the California credit union were a California state
commercial bank, or he or she may appoint a liquidating agent or a
liquidating committee of three members of the credit union to
liquidate the business and assets of the credit union in the manner
provided in Article 2 (commencing with Section 15250) of Chapter 9,
except that in lieu of the certificate required under Section 15252
the commissioner shall prepare and file in the office of the
Secretary of State a certificate of commencement of liquidation
proceedings upon taking possession of the business and assets, and
the commissioner or his authorized deputy shall countersign the
certificate referred to in Sections 15257 and 15258 whenever
liquidation is involuntary. The commissioner may, however, prepare
and file a final certificate whenever he or she retains possession of
the assets of any credit union for the purpose of liquidation. The
liquidating agent need not be a member of the credit union to be
liquidated, and may be a person, firm, or corporation as determined
by the commissioner.
(b) If the commissioner takes possession of the property and
business of a California credit union pursuant to Section 14313, the
commissioner may tender to the National Credit Union Administration
an appointment as conservator or receiver of the California credit
union. If the National Credit Union Administration accepts the
appointment, the National Credit Union Administration shall have, in
addition to any powers conferred by federal law, the powers conferred
on the commissioner pursuant to subdivision (a).
SEC. 16. Section 14652 of the Financial Code is amended to read:
14652. Every credit union may invest in securities and other
assets described in Chapter 10 (commencing with Section 800) of
Division 1 as legal investments for nonbank licensees.
SEC. 17. (a) It is the intent of the Legislature to provide
licensees under Division 1.2 (commencing with Section 2000) of the
Financial Code, as added by Section 4 of this bill, which recasts the
provisions of Chapter 14 (commencing with Section 1800) of Division
1 of the Financial Code, as added by Section 2 of Chapter 612 of the
Statutes of 2010, adequate time to update receipts, notices,
disclosures, and postings to conform to the provisions of this bill.
(b) A licensee under Division 1.2 (commencing with Section 2000)
of the Financial Code, as added by Section 4 of this bill, shall, by
July 1, 2012, update all receipts, notices, disclosures, and
postings, as set forth in that division, to conform to the provisions
of this bill.
SEC. 18. Sections 13 and 14 of this bill add Sections 1861 and
1881 to the Financial Code. The language in those sections is
identical to the language proposed by Sections 98 and 99 of AB 109,
which has been chaptered but is not operative. Sections 13 and 14 of
this bill shall become operative only if (1) this bill is enacted and
becomes effective on or before January 1, 2012, (2) this bill adds
Sections 1861 and 1881 to the Financial Code with language identical
to Sections 98 and 99 of AB 109, and (3) AB 109 becomes operative, in
which case Sections 1861 and 1881 of the Financial Code, as added by
Section 3 of this bill, shall remain operative only until the
operative date of AB 109, at which time Sections 13 and 14 of this
bill shall become operative.
