Law:Division 14. Securities Depositories (California)
From Law Delta
Chapter 1. Application Of This Division
Ca Codes (fin:30000-30006) Financial Code Section 30000-30006
30000. This division is known and may be cited as the "Securities Depository Law."
30001. Unless the context otherwise requires, the definitions set forth in this chapter govern the construction of this division.
30002. "Commissioner" means the Commissioner of Corporations.
30003. "Person" means, in addition to the singular, persons, group of persons, cooperative, association, company, firm, partnership, corporation, limited liability company, or other legal entity.
30004. "Securities depository" means any person or group of persons who acts as the custodian of securities in accordance with a system for the central handling of securities whereby all securities of a particular class or series of any issues deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entries effected by that person without physical delivery of such securities.
30005. This division does not apply to: (a) A securities depository which is operated by a corporation, all of the capital stock (other than directors' qualifying shares, if any) of which is held by or for a national securities exchange or association registered under a statute of the United States such as the Securities Exchange Act of 1934, or by a corporation all of the capital stock (other than directors' qualifying shares, if any) of which is held by or for such a wholly owned subsidiary of a registered national securities exchange. (b) A securities depository which is registered with the Securities and Exchange Commission pursuant to any provision of federal law or which is regulated by the Comptroller of the Currency, the Federal Reserve Board, or the Federal Deposit Insurance Corporation pursuant to any provision of federal law, or which is regulated by the Commissioner of Financial Institutions under Division 1 (commencing with Section 99) of the Financial Code.
30006. The commissioner may establish such rules and regulations as are reasonable or necessary to carry out the purposes and provisions of this division. The commissioner may, by rule, exempt from any or all of the provisions of this division any securities depository which the commissioner determines is subject to adequate regulatory supervision by an agency, office, or commission of the federal government or by any agency, office, or commission, other than the commissioner, of the State of California.
Chapter 2. License
Ca Codes (fin:30200-30218) Financial Code Section 30200-30218
30200. It shall be unlawful for any person to operate a securities depository within this state, or to solicit holders of securities within this state to place their securities into a securities depository located within this state or outside this state, except by means of a corporation licensed by the commissioner as a securities depository.
30201. A securities depository shall only be operated by a corportion: (a) At least 90 percent of the capital stock of which is held by or for one or more persons (other than individuals), each of whom, (i) is subject to supervision or regulation pursuant to the provisions of federal or state banking laws or state insurance laws, or (ii) is a broker or dealer or investment company registered under the Securities Exchange Act of 1934 or the Investment Company Act of 1940, or (iii) is a national securities exchange or association registered under the Securities Exchange Act of 1934, and none of whom, other than a national securities exchange or association, holds in excess of 20 percent of the capital stock of such corporation; and (b) Any remaining capital stock of which is held by individuals who have purchased such capital stock at or prior to the time of their taking office as directors of such corporation and who have purchased only so much of such capital stock as may be necessary to permit them to qualify as such directors.
30202. The commisioner shall charge and collect the following fees: (a) For filing an application for a securities depository license, two thousand five hundred dollars ($2,500). (b) For holding a hearing in connection with the application, as set forth under Section 30205, the actual costs experienced in each particular instance. (c) For continuing a license as a securities depository in effect, a fee of two thousand five hundred dollars ($2,500) per annum, payable biennially on the 15th day of December of each odd-numbered calendar year. If a license is issued during an even-numbered calendar year, the securities depository shall pay to the commissioner, within 60 days after the issuance of its license, an additional annual fee of two thousand five hundred dollars ($2,500).
30203. All money received by the commissioner shall be paid by him or her into the State Treasury to the credit of the State Corporations Fund.
30204. An application for a securities depository license shall be signed and verified by an authorized officer of the applicant, and shall set forth in such form as the commissioner may prescribe: (a) The names and addresses of the incorporators, directors, and officers, with a statement of their character, experience, and general fitness to operate a securities depository. (b) A showing that the proposed method of operation of such securities depository will be adequate for the protection of investors. (c) The names of every person who holds or is to hold capital stock in the securities depository corporation together with a statement of the percentage interest attributable to each. The commissioner may require disclosure of such additional information as may be necessary to determine the individuals controlling such corporation. (d) The addresses at which facilities of the applicant will be located and a description of each such facility and the functions there performed, and a description of any other business or operations which will be conducted on such premises. (e) By way of exhibits, a copy of the articles of incorporation and a copy of the bylaws of the applicant. (f) By way of exhibits, financial statements of the applicant, which shall include at least a balance sheet and profit and loss statement certified by an independent public accountant or certified public accountant, and if such certified statements are prepared as of a date more than 60 days prior to the filing of the application, a balance sheet and profit and loss statement, which need not be certified, prepared as of a date within such 60-day period, together with profit and loss statements covering at least three years of its operations, or such lesser period as the applicant may have operated, to the date of such certified balance sheet. (g) Such additional information as the commissioner may by rule prescribe.
30205. Upon the receipt of a proper and complete application for license, and all required fees, the commissioner shall immediately examine and investigate all facts connected with the proposed licensee, including but not limited to its stockholders, directors, officers and managers, and its proposed safeguards with respect to custody, handling, recordkeeping, insurance, and auditing of securities on deposit. The commissioner may or may not require the applicant to submit to an appropriate hearing. At such hearing any interested person may show cause either in favor of, or opposed to, the application.
30206. The commissioner may refuse to issue any license being applied for, and shall refuse to issue any license being applied for if upon his examination and investigation, and after appropriate hearing, he finds any of the following: (a) That the incorporators, directors, officers, or stockholders lack the character, experience, or general fitness to engage in such a business. (b) That the proposed licensee's program of safeguards with respect to custody, handling, recordkeeping, insurance, and auditing of securities on deposit is inadequate for the protection of investors. (c) That the requirements with respect to ownership of capital stock of Section 30201 are not met. (d) That the applicant is, or is in danger of becoming, insolvent.
30207. No licensee, or any other person, shall solicit deposits of securities or otherwise conduct the business of a licensee, by means of any statement or representation which is false, misleading, or deceptive, or which omits to state material information, or which infers that such licensee has been sponsored, recommended or approved or that his abilities or qualifications have in any respect been passed upon by the commisioner. The commissioner may order a licensee or other person to desist from any conduct which he shall find to be a violation of this section.
30208. A securities depository license is not transferable or assignable. Further, no license may be acquired, either in whole or in part, through stock purchase or other devices without the consent of the commissioner.
30209. Any person who operates a securities depository, or solicits holders of securities within this state to place securities in a securities depository, either directly as principal or indirectly as agent, employee, manager, fiduciary representative, or in any other capacity, unless such securities depository has applied for and received the license required by this division, is guilty of a misdemeanor punishable by imprisonment in a county jail for not less than three months and not exceeding 12 months, or by a fine of not less than two hundred fifty dollars ($250) and not exceeding one thousand dollars ($1,000), or by both such fine and imprisonment.
30210. Every person subject to this division shall keep and use in its business, books, accounts, and records which will properly enable the commissioner to determine whether the operation of a securities depository by such person complies with the provisions of this division and with all rules and regulations made by the commissioner under this division.
30211. The business, accounts and records of every person licensed under this division are subject to inspection and examination by the commissioner at any time without prior notice.
30212. The actual cost of every inspection and examination shall be paid to the commissioner by the person examined and the commissioner may maintain an action for the recovery of such costs in any court of competent jurisdiction.
30213. (a) Every person subject to this division shall submit to the commissioner, at such person's own expense, financial statements prepared in accordance with generally accepted accounting principles covering the calendar year or, if such person has an established fiscal year, then for such fiscal year, within 105 days after the close of the calendar year or fiscal year. Such financial statements shall be covered by a report or certificate of an independent certified public accountant or independent public accountant. In addition financial statements, which may be unaudited, as of the end of the calendar month next preceding the date of submission of the audited financial statements shall also be filed concurrently with such audited financial statements. All audits referred to in this section shall be by independent certified public accountants or independent public accountants acceptable to the commissioner. The audits shall be conducted in accordance with generally accepted auditing standards. The audited financial statements shall include at least an audited balance sheet showing the person's net worth and a statement of income and expenses for the year ended on the balance sheet date. The commissioner may by rule prescribe the matters to be covered in the report or certification of the auditor. (b) Within such period as the commissioner shall prescribe, which shall not be less than 10 days, a person subject to this division shall submit to the commissioner, at such person's own expense, a report containing such information regarding its financial condition, operations, or the ownership of its outstanding securities as the commissioner may require.
30214. If any person subject to this division fails to make any report required by law or by the commissioner, the commissioner shall immediately cause the books, records, papers, and affairs of said person to be thoroughly examined. The commissioner may, in carrying out his responsibilities under this section, employ an independent public accountant or certified public accountant the cost of whose services shall be borne by such person in accordance with Section 30212.
30215. If the commissioner, as a result of any examination or from any report made to him, shall find that any person subject to this division is in an insolvent condition, or is operating a securities depository in such an unsafe or injurious manner as to render further operations hazardous to the public or to depositors the commissioner may forthwith, by an order addressed to and served by registered mail on such person, direct discontinuance of the operation of a securities depository within the State of California or direct discontinuance of the solicitation of security holders within the State of California by such securities depository, or otherwise limit the conduct of the business of such depository as may be necessary for the safety of security holders. The order shall remain in effect until set aside by the commissioner in whole or in part.
30216. Whenever in the opinion of the commissioner any person required by this division to be licensed is engaged in operating a securities depository or in soliciting securities holders within this state to place securities in a securities depository, without a license from the commissioner, the commissioner may order said person to desist and to refrain from engaging in such business. If, after such an order is made, a request for a hearing is filed in writing and the hearing is not held within 60 days thereafter, the order is rescinded.
30217. The commissioner may from time to time make, amend, and rescind such rules, forms, and orders as are necessary to carry out the provisions of this law, including rules defining any terms, whether or not used in this law, insofar as the definitions are not inconsistent with the provisions of this law. For the purposes of rules and forms, the commissioner may classify persons and matters within his jurisdiction and may prescribe different requirements for different classes. The commissioner may in his discretion waive any requirement of any rule or form in situations where in his opinion such requirement is not necessary in the public interest or for the protection of investors. All rules of the commissioner other than those relating solely to the internal administration of the Department of Corporations shall be made, amended, or rescinded in accordance with the provisions of Chapter 4.5 (commencing with Section 11371) of Part 1 of Division 3 of Title 2 of the Government Code.
30218. (a) It is unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the administration or enforcement of this division. (b) It is unlawful for any person to knowingly make an untrue statement to the commissioner during the course of licensing, investigation, or examination, with the intent to impede, obstruct, or influence the administration or enforcement of any provision of this division.
Chapter 3. Revocation Of License
Ca Codes (fin:30600-30609) Financial Code Section 30600-30609
30600. A security depository license remains in effect until surrendered, revoked or suspended.
30601. If the commissioner has reason to believe that a licensed securities depository has violated its articles of incorporation, or any law or rule binding upon it, he shall, by written order addressed to the agent direct the discontinuance of such violation.
30602. If any licensed securities depository fails to make any report required by law or by the commissioner within 10 days from the day designated for the making of the report, or within any extension of time granted by the commissioner, or has failed to pay any fee or charge payable under this division within 10 days after notice by the commissioner that such fee is due and unpaid, such failure shall constitute grounds for the suspension or revocation of the license held by such securities depository or for the issuance of an order by the commissioner under the provisions of Section 30215.
30603. If it appears to the commissioner that any licensed securities depository located within this state is conducting business in an unsafe or injurious manner, he shall, by written order addressed to the securities depository direct the discontinuance of such unsafe or injurious practices, or if the licensed securities depository is one which is located outside this state but is soliciting holders of securities in California to place their securities in such securities depository, the commissioner shall direct such securities depository to discontinue all such solicitations until all such unsafe and unsound practices have been corrected.
30604. An order issued pursuant to Section 30601 or 30603 shall require the licensed securities depository to show cause before the commissioner, at a time fixed by the commissioner, why the order should not be observed. If upon the hearing, it appears to the commissioner that the licensed securities depository is conducting business in an unsafe or injurious manner or is violating its articles of incorporation or any law of this state, or any rule binding upon it, the commissioner shall make the order of discontinuance final and the licensed securities depository shall immediately discontinue the practices named in the order.
30605. The licensed securities depository has 10 days after an order is made final in which to commence action to restrain enforcement of such order, and unless such action is commenced, and the enforcement of such order is enjoined within 10 days by the court in which the suit is brought, the licensed securities depository shall comply with the order.
30606. (a) If a securities depository fails to comply with a final order and has not secured a court order restraining the enforcement of the final order, the commissioner may revoke the license of the securities depository or may institute proceedings under subdivision (b) to enforce the final order. (b) Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this law or any rule or order under this law, the commissioner may in the commissioner's discretion bring an action in the superior court to enjoin the acts or practices or to enforce compliance with this law or any rule or order under this law. Upon a proper showing, a permanent or preliminary injunction, restraining order, or writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets.
30607. The commissioner may commence and prosecute actions and proceedings to enjoin violations of this division or violations of orders or decisions of the commissioner rendered pursuant to this division, and for the enforcement of any and all civil penalties provided for by this division.
30608. The commissioner may, after notice and a reasonable opportunity to be heard, suspend, revoke, or decline to renew any license if he finds that: (a) The licensee has violated any provision of this division or any rule or order made by the commissioner under and within the authority of this division. (b) Any fact or condition exists which, if it had existed at the time of the original application for such license, reasonably would have warranted the commissioner in refusing originally to issue such license.
30609. (a) The commissioner may, after appropriate notice and opportunity for hearing, by order, censure or suspend for a period not exceeding 12 months, or bar from any position of employment, management, or control any person who operates a securities depository, or any other person, if the commissioner finds either of the following: (1) That the censure, suspension, or bar is in the public interest and that the person has committed or caused a violation of this division or rule or order of the commissioner, which violation was either known or should have been known by the person committing or causing it or has caused material damage to the securities depository, or to the public. (2) That the person has been convicted of or pleaded nolo contendere to any crime, or has been held liable in any civil action by final judgment, or any administrative judgment by any public agency, if that crime or civil or administrative judgment involved any offense involving dishonesty, fraud, or deceit, or any other offense reasonably related to the qualifications, functions, or duties of a person engaged in the business in accordance with the provisions of this division. (b) Within 15 days from the date of a notice of intention to issue an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act (Chapter 4.5 (commencing with Section 11400) of Division 3 of Title 2 of the Government Code). Upon receipt of a request, the matter shall be set for hearing to commence within 30 days after such receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of such notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing. (c) Upon receipt of a notice of intention to issue an order pursuant to this section, the person who is the subject of the proposed order is immediately prohibited from engaging in any activities subject to licensure under the law. (d) Persons suspended or barred under this section are prohibited from participating in any business activity of a securities depository and from engaging in any business activity on the premises where a securities depository is conducting business.
Chapter 4. Hearings
Ca Codes (fin:30700-30704) Financial Code Section 30700-30704
30700. The commissioner, and all persons designated by him, may administer oaths, take the testimony of witnesses, and issue subpoenas requiring the attendance of witnesses and the production of books, documents, and other things under their control, at any examination, investigation, or hearing in any part of the state.
30701. All of the provisions of Chapter 2 (commencing with Section 1985), Title 3, Part 4 of the Code of Civil Procedure relating to the means of production of evidence out of court are applicable to any examination, investigation, or hearing under this division.
30702. The authority to make or conduct any examination, investigation, or hearing, including the authority to administer oaths and to subpoena witnesses, and to take their testimony may be delegated by the commissioner to any deputy, investigator, or auditor appointed by him for that purpose. The appointment shall be made by an instrument in writing, signed by the Commissioner. Upon any examination, investigation, or hearing, the instrument shall be produced by the deputy, investigator, or auditor at any time upon demand.
30703. All hearings provided for in this division shall be conducted in accordance with the provisions of Chapter 5 (commencing with Section 11500), Part 1, Division 3, Title 2, of the Government Code, and the commissioner has all the powers granted therein, except that a hearing held in accordance with Section 30604 may be presided over by a hearing officer qualified under Section 11502 of the Government Code, or by any deputy designated by the commissioner.
30704. Every order, decision, license or other official act of the commissioner is subject to review, in accordance with law.