Law:Division 6. Escrow Agents (California)

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Contents

Chapter 1. Application Of This Division

Ca Codes (fin:17000-17010) Financial Code Section 17000-17010



17000. This division is known and may be cited as the "Escrow Law."


17001. Unless the context otherwise requires, the definitions set forth in this chapter govern the construction of this division.


17002. "Commissioner" means the Commissioner of Corporations.


17002.5. "Person" means, in addition to the singular, persons, group of persons, co-operative, association, company, firm, partnership, corporation, limited liability company, or other legal entity.

17003. (a) "Escrow" means any transaction in which one person, for the purpose of effecting the sale, transfer, encumbering, or leasing of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by that third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by that third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter. (b) With regard to Internet escrow companies, "escrow" also includes any transaction in which one person, for the purpose of effecting the sale or transfer of personal property or services to another person, delivers money, or its Internet-authorized equivalent, to a third person to be held by that third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by that third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter.


17004. "Escrow agent" means any person engaged in the business of receiving escrows for deposit or delivery.


17004.5. "Internet escrow agent" means any person engaged in the business of receiving escrows for deposit or delivery over the Internet.

17005. "Licensee" means any person holding a valid, unrevoked license as an escrow agent.


17005.1. "Joint control agent" means a person engaging in the business of receiving money or other property for disbursal or use in payment of the cost of labor, materials, services, permits, fees, or other items of expense incurred in the construction of improvements upon real property. As used in this section, "in the business" means the conduct of the aforesaid transaction either for compensation or without compensation as a primary business or as an incidence to another business, but shall not mean the conduct of the business of real estate lending or of acting as an authorized representative, agent or loan correspondent for such a lender.


17005.2. "Business location" and "business office location" mean a facility or other place of business where a person engages in the business of receiving an escrow for deposit or delivery, but does not include a customer contact center.

17005.3. "Customer contact center" means a facility operated by an Internet escrow agent that exists solely for the purpose of responding to customer electronic messages and telephone inquiries; provided, that no receipt or disbursements relating to an escrow are made from the facility; and provided further, that any documentation or other material generated, transmitted, or otherwise sent from the facility can be reviewed at any time from the business location of the Internet escrow agent.


17005.4. "Person subject to this division" means any person undertaking the performance of escrow agent services. Unless specifically exempted, as in Section 17006, however, this definition shall not be used to exclude anyone.

17005.5. "Within this state" means any activity of a person relating to receiving escrows for deposit or delivery that originates from this state and is directed to persons outside this state, or that originates from outside this state and is directed to persons inside this state, or that originates inside this state and is directed to persons inside this state, or that leads to the formation of a contract and the offer or acceptance thereof is directed to a person in this state, whether from inside or outside this state and whether the offer was made inside or outside this state.


17005.6. Except as provided for in Section 17004, "escrow agent" as used in this division includes joint control agents and Internet escrow agents.

17006. (a) This division does not apply to: (1) Any person doing business under any law of this state or the United States relating to banks, trust companies, building and loan or savings and loan associations, or insurance companies. (2) Any person licensed to practice law in California who has a bona fide client relationship with a principal in a real estate or personal property transaction and who is not actively engaged in the business of an escrow agent. (3) Any person whose principal business is that of preparing abstracts or making searches of title that are used as a basis for the issuance of a policy of title insurance by a company doing business under any law of this state relating to insurance companies. (4) Any broker licensed by the Real Estate Commissioner while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required. (b) The exemptions provided for in paragraphs (2) and (4) of subdivision (a) are personal to the persons listed, and those persons shall not delegate any duties other than duties performed under the direct supervision of those persons. Notwithstanding the provisions of this subdivision, the exemptions provided for in paragraphs (2) and (4) of subdivision (a) are not available for any arrangement entered into for the purpose of performing escrows for more than one business.

17006.5. In any proceeding under this law, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

17008. No foreign corporation shall transact any escrow business in this State without first complying with all the requirements of this division, nor until it has executed and filed with the commissioner a written instrument appointing the commissioner its attorney upon whom all process in any action or proceeding by any resident of this State against it may be served with the same force and effect as if such corporation were formed under the laws of this State, and had been lawfully served with process in this State. Service of process by a resident of this State upon the commissioner constitutes personal service on the foreign corporation.


17009. The commissioner shall forward by prepaid registered mail a copy of every paper served under this chapter, to the secretary of the corporation at its last known post-office address as shown by the records and reports of the corporation filed in the office of the commissioner.

17010. The commissioner shall collect from the plaintiff at the time of service, the sum of two dollars ($2) for each copy of process served on him pursuant to this chapter. This sum shall be recovered by the plaintiff as part of his taxable costs, if he succeeds in the suit or proceeding.


Chapter 2. License And Bond

Ca Codes (fin:17200-17215) Financial Code Section 17200-17215



17200. It shall be unlawful for any person to engage in business as an escrow agent within this state except by means of a corporation duly organized for that purpose licensed by the commissioner as an escrow agent.

17200.8. (a) Within the organization of each escrow agent corporation, either as an owner, officer, or employee, there shall be one or more persons possessing a minimum of five years of responsible escrow or joint control experience to be stationed at the main office of the corporation and one or more persons possessing a minimum of four years of responsible escrow or joint control experience stationed at each branch. At least one such qualified person shall be stationed on duty at each business location licensed by this division during the time the location is open for business. A person who has satisfied educational requirements established by the commissioner may substitute education for up to one year of experience. (b) Subdivision (a) does not apply to an Internet escrow agent with respect to escrows involving personal property. However, within the organization of each Internet escrow agent corporation engaged in the business of an escrow involving personal property, either as an owner, officer, or employee, one or more qualified persons shall possess knowledge and understanding of the Escrow Law (as set forth in Division 6 (commencing with Section 17000)), the rules promulgated thereunder, and accounting so that, among other things, appropriate books and records are used and maintained in order to account for escrows involving personal property. At least one qualified person shall be on duty at each business location of an Internet escrow agent licensed by this division when operations are being conducted that require knowledge of accounting and the Escrow Law and regulations. An Internet escrow agent shall notify the commissioner of the daily business hours during which those operations are to be conducted.

17201. An application for a license as an escrow agent shall be in writing and in such form as is prescribed by the commissioner. The application shall be verified by the oath of the applicant.


17202. (a) At the time of filing an application for an escrow agent' s license, the applicant shall deposit with the commissioner a bond satisfactory to the commissioner in the amount of at least twenty-five thousand dollars ($25,000). Thereafter, a licensee shall maintain a bond satisfactory to the commissioner in the amount of: (1) twenty-five thousand dollars ($25,000) if 150 percent of the previous year's average annual trust fund obligations, as calculated under Section 17348, equals two hundred fifty thousand dollars ($250,000) or less; (2) thirty-five thousand dollars ($35,000) if 150 percent of the previous year's average annual trust fund obligations, as calculated under Section 17348, equals at least two hundred fifty thousand one dollars ($250,001) but not more than five hundred thousand dollars ($500,000); or (3) fifty thousand dollars ($50,000) if 150 percent of the previous year's average annual trust fund obligations, as calculated under Section 17348, equals five hundred thousand one dollars ($500,001) or more. The bond shall run to the state for the use of the state and for any person who has cause against the obligor of the bond under the provision of this division. A deposit given instead of the bond required by this section shall not be deemed an asset of the applicant or licensee for the purpose of complying with Section 17210. An applicant or licensee may obtain an irrevocable letter of credit approved by the commissioner in lieu of the bond. (b) Escrow agents licensed prior to January 1, 1986, shall comply with the requirements of subdivision (a) on or before July 1, 1986.


17202.1. An applicant for an escrow agent's license or a licensee may, in lieu of and subject to the same conditions as the bond required by Section 17202, deposit with the commissioner a cash bond in the sum specified in Section 17202. Evidence of the cash bond shall be a deposit in the amount specified in Section 17202 in a bank or investment certificates of industrial loan companies, authorized to do business in this state and insured by the Federal Deposit Insurance Corporation, or an investment certificate or share account in the amount specified in Section 17202 issued by a savings and loan association doing business in this state and insured by the Federal Savings and Loan Insurance Corporation. Those deposits, certificates, or accounts shall be assigned to and accepted and maintained by the commissioner, upon those terms as the commissioner may prescribe, until released by the commissioner, and shall not be deemed an asset of the applicant or licensee for the purpose of complying with Section 17210.

17203. The bond of an escrow agent shall be conditioned that the licensee will faithfully conform to and abide by the provisions of this division and all the rules made by the commissioner under this division. The bond shall be conditioned that the licensee will honestly and faithfully apply all funds received, will faithfully and honestly perform all obligations and undertakings under this division, and will pay to the state and any person all amounts which become due or owing to the state or to such person under the provisions of this division, including the costs in any conservatorship, or liquidation, whether by the commissioner or by a receiver. In determining the liability of the principal and the sureties under the bond, escrow money held in trust and any money recovered to restore any deficiency in the trust shall not be considered as an asset of the liquidation subject to assessment for the cost of the liquidation. The surety under the bond may pay the full amount of its liability thereunder to the commissioner or a conservator appointed by the commissioner pursuant to Chapter 6 (commencing with Section 17621) in lieu of payment to the state or persons having a cause of action against the principal, and upon such payment the surety is completely released from further liability under the bond.


17203.1. (a) All officers, directors, trustees, and employees of an escrow agent, whether or not compensated, who have access to money or negotiable securities belonging to the escrow agent or in the possession of the escrow agent in the regular discharge of their duties, or persons who draw checks upon the escrow agent or upon the trust funds of the escrow agent in the regular discharge of their duties, before entering upon their duties and throughout the entire term of their office and employment and any subsequent term thereof, shall furnish to the escrow agent a bond indemnifying the escrow agent against loss of money or property. No officer, director, trustee, or employee shall enter upon their duties or have access to money or negotiable securities or draw checks upon the escrow agent or the trust funds of an escrow agent prior to complying with such rules as the commissioner shall adopt with respect to the qualifications of these officers, directors, trustees, or employees to assume their duties. The commissioner shall prescribe the aggregate amount of the bond and the terms during which the bond runs. The sufficiency of the sureties on the bond are at all times subject to the approval of the commissioner. The bond shall be filed in the commissioner's office. The aggregate liability of the surety for all claims shall in no event exceed the penal sum of the bond. (b) The commissioner may at any time require an additional bond or surety to be filed when in the commissioner's opinion any bond then in force is insufficient for any reason.


17205. No action may be brought on an escrow agent's bond by any person after the expiration of two years from the time when the act or default complained of occurs.


17206. When an action is commenced on an escrow agent's bond the commissioner may require the filing of a new bond, and immediately upon the recovery of any action on the bond, the licensee shall file a new bond. Failure to file a new bond within 10 days of the recovery on a bond, or within 10 days after notification of the commissioner that a new bond is required constitutes sufficient grounds for the suspension or revocation of the license.


17207. The commissioner shall charge and collect the following fees and assessments: (a) For filing an application for an escrow agent's license, six hundred twenty-five dollars ($625) for the first office or location and four hundred twenty-five dollars ($425) for each additional office or location. (b) For filing an application for a duplicate of an escrow agent's license lost, stolen, or destroyed, or for replacement, upon a satisfactory showing of the loss, theft, destruction, or surrender of certificate for replacement, two dollars ($2). (c) For investigation services in connection with each application, one hundred dollars ($100), and for investigation services in connection with each additional office application, one hundred dollars ($100). (d) For holding a hearing in connection with the application, as set forth under Section 17209.2, the actual costs experienced in each particular instance. (e) (1) Each escrow agent shall pay to the commissioner for the support of this division for the ensuing year an annual license fee not to exceed two thousand eight hundred dollars ($2,800) for each office or location. (2) On or before May 30 in each year, the commissioner shall notify each escrow agent by mail of the amount of the annual license fee levied against it, and that the payment of the invoice is payable by the escrow agent within 30 days after receipt of notification by the commissioner. (3) If payment is not made within 30 days, the commissioner may assess and collect a penalty, in addition to the annual license fee, of 10 percent of the fee for each month or part of a month that the payment is delayed or withheld. (4) If an escrow agent fails to pay the amount due on or before the June 30 following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to the company. (5) If, after an order is made pursuant to paragraph (4), a request for a hearing is filed in writing and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its certificate is revoked or suspended, a company shall not conduct business pursuant to this division, except as may be permitted by order of the commissioner. However, the revocation, suspension, or surrender of a certificate shall not affect the powers of the commissioner as provided in this division. (f) Fifty dollars ($50) for investigation services in connection with each application for qualification of any person under Section 17200.8, other than investigation services under subdivision (c) of this section. (g) A fee not to exceed twenty-five dollars ($25) for the filing of a notice or report required by rules adopted pursuant to subdivision (a) or Section 17203.1. (h) (1) If costs and expenses associated with the enforcement of this division, including overhead, are or will be incurred by the commissioner during the year for which the annual license fee is levied, and that will or could result in the commissioner's incurring of costs and expenses, including overhead, in excess of the costs and expenses, including overhead, budgeted for expenditure for the year in which the annual license fee is levied, then the commissioner may levy a special assessment on each escrow agent for each office or location in an amount estimated to pay for the actual costs and expenses associated with the enforcement of this division, including overhead, in an amount not to exceed one thousand dollars ($1,000) for each office or location. The commissioner shall notify each escrow agent by mail of the amount of the special assessment levied against it, and that payment of the special assessment is payable by the escrow agent within 60 days of receipt of notification by the commissioner. The funds received from the special assessment shall be deposited into the State Corporations Fund and shall be used only for the purposes for which the special assessment is made. (2) If payment is not made within 60 days, the commissioner may assess and collect a penalty, in addition to the special assessment, of 10 percent of the special assessment for each month or part of a month that the payment is delayed or withheld. If an escrow agent fails to pay the special assessment on or before 60 days following the day upon which payment is due, the commissioner may by order summarily suspend or revoke the certificate issued to the company. If an order is made under this subdivision, the provisions of paragraph (5) of subdivision (e) shall apply. (3) If the amount collected pursuant to this subdivision exceeds the actual costs and expenses, including overhead, incurred in the administration and enforcement of this division and any deficit incurred, the excess shall be credited to each escrow agent on a pro rata basis.


17208. 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 for the sole purpose of administering and enforcing this division.

17209. An application for a license as an escrow agent shall be signed and verified by an authorized officer of the applicant, and such application shall be accompanied by a certified copy of the articles of incorporation and a copy of the bylaws of the proposed licensee. The application shall set forth: (a) The names and addresses of the incorporators, directors, and officers. (b) An itemized statement of the estimated receipts and expenditures of the proposed first year of operations. (c) An audited financial statement showing compliance with Section 17210. (d) The name and address of the person, or persons, meeting the requirements of Section 17200.8, and a statement supporting such persons' qualifications. (e) The type of business for which the license is requested. (f) Any other matters the commissioner may require. (g) An application for a license as an escrow agent filed with the commissioner shall also include a completed statement of identity and questionnaire, as prescribed by the commissioner, for all stockholders, directors, officers, trustees, managers, and other persons participating in the escrow business directly or indirectly compensated by the escrow agent (other than usual and customary employees who file pursuant to subdivision (d) of Section 17414.1 and Section 17419) and shall also include fingerprints and related information for those persons pursuant to subdivision (h). The commissioner shall notify the applicant in writing if any of the information received pursuant to this division shows that a person's employment, participation, or ownership interest would be in violation of Section 17414.1, and the escrow agent shall deny the person the employment or interest. If the application is not satisfactorily amended to remove the deficiency within six months of the first notice of deficiency, the application shall be summarily denied. Persons required to file the employment application pursuant to Section 17419 are not required to file the statement of identity and questionnaire described in this section. (h) (1) The fingerprint images and related information shall be submitted by the commissioner to the Department of Justice, in a manner established by the Department of Justice, for the purposes of obtaining information as to the existence and content of a record of state or federal convictions, state or federal arrests, and information as to the existence of and content of a record of state or 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. (2) Upon receipt, the Department of Justice shall forward to the Federal Bureau of Investigation requests for federal summary criminal history information received from the commissioner pursuant to this section. The Department of Justice shall review the information returned from the Federal Bureau of Investigation and compile and disseminate a response to the commissioner pursuant to subdivision (p) of Section 11105 of the Penal Code. (3) The commissioner shall request from the Department of Justice subsequent arrest notification service as provided pursuant to Section 11105.2 of the Penal Code. (4) The Department of Justice shall charge a fee sufficient to cover the costs of processing the requests pursuant to this subdivision.


17209.1. 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 proposal, including but not limited to its stockholders, directors, officers and managers, proposed location, and estimated receipts and expenditures.


17209.2. The commissioner may or may not require an applicant to submit to an appropriate hearing. If a hearing is held the commissioner shall, on or before 10 days prior to the hearing, mail notice thereof to the applicant. At such hearing any interested person may show cause either in favor of, or opposed to, the application.


17209.3. The commissioner may refuse to issue any license being applied for, and shall refuse to issue any license being applied for if upon the commissioner's examination and investigation, and after appropriate hearing, the commissioner finds any of the following: (a) That the corporation is to be formed for any business other than legitimate escrow agent services, or proposes to use a name that is misleading or in conflict with the name of an existing licensee. (b) That any incorporator, officer, or director of the applicant has, within the last 10 years, been (1) convicted of or pleaded nolo contendere to a crime, or (2) committed any act involving dishonesty, fraud, or deceit, which crime or act is substantially related to the qualifications, functions, or duties of a person engaged in business in accordance with the provisions of this division. (c) That there is no officer or manager possessing a minimum of five years of responsible escrow or joint control experience stationed or to be stationed at the main office of the corporation and that there is no officer, manager or employee possessing a minimum of four years of responsible escrow or joint control experience stationed or to be stationed at each branch. (d) That the proposed licensee's financial program is unsound. (e) A false statement of a material fact has been made in the application for license. (f) The applicant, any officer, director, general partner, or incorporator of the applicant, or any person owning or controlling, directly or indirectly, 10 percent or more of the outstanding equity securities of the applicant has violated any provision of this division or the rules thereunder or any similar regulatory scheme of the State of California or a foreign jurisdiction. (g) The applicant has failed to comply with the Fidelity Corporation's membership requirements set forth in subdivision (b) of Section 17312, in subdivision (a) of Section 17320, and in Sections 17331 and 17331.1.


17209.4. The license shall state whether the licensee is licensed as an escrow agent or joint control agent.


17210. (a) An escrow agent licensed on or after January 1, 1986, shall maintain at all times a tangible net worth of fifty thousand dollars ($50,000), including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (b) An escrow agent licensed prior to January 1, 1986, shall maintain at all times a tangible net worth according to the following schedule: (1) Ten thousand dollars ($10,000) from January 1, 1986, through June 30, 1986, including liquid assets of at least ten thousand dollars ($10,000) in excess of current liabilities. (2) Fifteen thousand dollars ($15,000) as of July 1, 1986, including liquid assets of at least fifteen thousand dollars ($15,000) in excess of current liabilities. (3) Twenty thousand dollars ($20,000) as of July 1, 1987, including liquid assets of at least twenty thousand dollars ($20,000) in excess of current liabilities. (4) Twenty-five thousand dollars ($25,000) as of July 1, 1988, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (5) Thirty thousand dollars ($30,000) as of July 1, 1989, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (6) Thirty-five thousand dollars ($35,000) as of July 1, 1990, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (7) Forty thousand dollars ($40,000) as of July 1, 1991, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (8) Forty-five thousand dollars ($45,000) as of July 1, 1992, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (9) Fifty thousand dollars ($50,000) as of July 1, 1993, and thereafter, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities. (c) The commissioner may determine by rule as to which assets constitute liquid assets and may also determine in an individual case by a specific written ruling whether a particular asset is a liquid asset within the meaning of this section. (d) In the case of a licensed branch office, a tangible net worth in addition to that required by subdivision (a) shall be maintained at an amount equal to 50 percent of the tangible net worth required by subdivision (a), except that licensees operating or applying for more than one branch office shall maintain an additional tangible net worth of at least 25 percent of the amount required by subdivision (a) for each branch office licensed after the first branch office location.

17210.1. The license shall be kept conspicuously posted in all places of business of the licensee.


17210.2. (a) No escrow agent shall disseminate, or cause or permit to be disseminated, in any manner whatsoever, any statement or representation which is false, misleading, or deceptive, or which omits to state material information, or which refers to the supervision of that agent by the State of California or any department or official thereof. (b) A licensed escrow agent, in referring to the corporation's licensure under this law in any written or printed communication or any communication by means of recorded telephone messages or spoken on radio, television, or similar communications media, shall include the following statement: "This escrow company holds California Department of Corporations Escrow License No. ____." (c) The commissioner may order any person to desist from any conduct which the commissioner finds to be a violation of this section.

17212.1. All licensees shall notify the commissioner of any changes in shareholders, directors, officers, trustees, managers, and other persons participating in the escrow business directly or indirectly compensated by the escrow agent (other than usual and customary employees who file pursuant to subdivision (d) of Section 17414.1 and Section 17419), by filing by certified mail, return receipt requested, for those persons a statement of identity and questionnaire, as prescribed by the commissioner for those persons, and fingerprint images and related information, submitted using the process established by the Department of Justice for requesting state and federal summary criminal history information. Persons who have previously submitted fingerprints or fingerprint images and related information to the commissioner may so notify the commissioner and need not submit additional fingerprint images and related information unless requested to do so by the commissioner. The commissioner shall provide written notice to both the licensee and to the person if any of the information received pursuant to this division shows that the person's employment, participation, or ownership interest would be in violation of Section 17414.1, and upon that notification the escrow agent shall deny the person the employment or interest. No person shall have access to trust funds or sign checks or otherwise perform any activities related to the processing of escrow transactions after the licensed escrow agent has been notified by the commissioner that the person's employment, participation, or ownership interest is in violation of Section 17414.1. The requirements set forth in this section are in addition to those required under Section 17213. The commissioner may by regulation require licensees to file at such times as he or she may specify additional information as he or she may reasonably require regarding any changes in the information provided in any application filed pursuant to this division.


17213. (a) An escrow agent shall not transact business pursuant to this division under any other name than that set forth in the articles of incorporation as filed with the commissioner. (b) An escrow agent's license is not transferable or assignable. Further, no license may be acquired, either in whole or in part, directly or indirectly, through stock purchase, foreclosure pursuant to a pledge or hypothecation, or other devices without the consent of the commissioner. Prior to the transfer of 10 percent or more of the shares of an escrow agent, the escrow agent shall file a new application for licensure as required by Section 17201. However, a new application for licensure shall not be required to be filed by the escrow agent if the transfer of 10 percent or more of the shares of the escrow agent will be made by an existing shareholder to another existing shareholder who also owns 10 percent or more of the shares of the escrow agent before the transfer.


17213.1. (a) An escrow agent's business shall not be removed from the premises or address shown on the license without the prior approval of the commissioner, and notice of any intended change shall be transmitted to the commissioner not less than 30 days prior to the date of the intended change of location; provided, however, that the commissioner may waive the 30-day notice requirement when the move is occasioned by fire, emergency, or other catastrophe. The commissioner's approval shall be granted or denied within 30 days from the date of the commissioner's receipt of the licensee's request containing such information as the commissioner may require. (b) When a licensed business is to be moved a distance of five or more miles, and a change in ownership results from a transfer of 50 percent or more of the shares of the corporation, a licensee shall file an application for authorization to change location on a form furnished by the commissioner and the commissioner shall: (1) treat the matter as an application for a new license by invoking the provisions of Sections 17209, 17209.1, 17209.2, and 17209.3, and (2) require the payment of such fees as are applicable under Section 17207. The provisions of this subdivision shall not apply when the actual or contemplated change of ownership is to the transferor's ancestors, descendants, or spouse, or any custodian or trustee for the account of the transferor or the transferor's ancestors, descendants, or spouse.


17213.2. The commissioner may order a licensed escrow agent which opens a branch office or changes its business location or locations without first obtaining the approval of the commissioner to forfeit to the people of the state a sum of up to one hundred dollars ($100) for every day for the first 10 days and ten dollars ($10) for every day thereafter during which the branch office or changed location is maintained without authority.


17213.5. Licensees of this division shall be entitled to establish additional business office locations by compliance with all of the following: (a) Filing with the commissioner notice of the intended address, or addresses. (b) Payment of the fees prescribed in Section 17207. (c) Filing with the commissioner any additional bonds for the purposes set forth in Sections 17202 and 17203. In addition to the amount required by Section 17202, the amounts for additional office locations shall be five thousand dollars ($5,000) for each additional location. The aggregate amounts of all bonds given by a licensee under this section shall be for the purpose of complying with the conditions of Sections 17202 and 17203 regardless of the office location at which any act violating those conditions takes place, and upon payment of the aggregate amount, the surety is completely released from further liability under the bond or bonds. An escrow agent licensed prior to January 1, 1996, shall comply with the requirements of this subdivision at the time of the next renewal of its bond. (d) Filing with the commissioner financial statements prepared in accordance with generally accepted accounting principles. If the licensee's fiscal year end is more than six months before the date of filing the application, the commissioner may require current financial statements which shall not be more than 60 days old. The interim financial statements may be unaudited. (e) Filing with the commissioner the names and addresses of the licensee's owners and employees to be stationed at the new location, showing that the operation of the additional office, or offices, will be under the complete management and control of the parent licensee. (f) Filing with the commissioner statements offsetting and meeting each of the conditions set forth in Section 17209.3. With respect to all applications for authorization to establish additional locations, the commissioner shall promptly commence his or her investigation and review of the application. The commissioner shall within 30 days from the receipt by the commissioner of a separate and complete application, license the designated premises as a branch of the parent licensee, unless the commissioner finds (1) that the applicant has failed to comply with all of the requirements of this section, (2) that the applicant then fails to meet any of the standards applicable for the issuance of a license pursuant to Section 17209.3, or (3) that a hearing shall be held to determine whether the application should be granted or denied.


17214. (a) There is established in the Department of Corporations an Escrow Law Advisory Committee consisting of 11 members. The members shall consist of the commissioner or his or her designee; the chairman of the board and the immediate past chairman of the board for the Escrow Agents' Fidelity Corporation; the current chairman of the board and the immediate past chairman of the board for the Escrow Institute of California; a person selected by the commissioner to represent a different type of business ownership under this division; a person selected by the commissioner to represent a different type of business specialization; a person selected by the commissioner to represent small businesses operating pursuant to this division; a person selected by the commissioner to represent medium-sized businesses operating pursuant to this division; an attorney at law experienced in escrow matters selected by the commissioner; and a certified public accountant experienced in the escrow business selected by the commissioner. Except for the members from the Escrow Agents' Fidelity Corporation and the Escrow Institute of California, members appointed by the commissioner shall serve for a term of two years. The committee shall meet at least quarterly. The commissioner or his or her designee shall chair the committee. All members shall serve without compensation or reimbursement for expenses. Where the chairman of the board or the immediate past chairman of the board of the Escrow Agents' Fidelity Corporation is the same person, or is unable to serve on the advisory committee, then the commissioner after consultation with the board of directors of the Escrow Agents' Fidelity Corporation, shall choose a member of the board of directors to serve on the committee. Where the president or past president of the Escrow Institute of California is the same person, or is unable to serve on the advisory committee, then the commissioner after consultation with the board of directors of the Escrow Institute of California, shall choose a member of the board of directors to serve on the committee. (b) The purpose of the committee is to assist the commissioner in the implementation of the commissioner's duties under this chapter.


17215. Whenever the commissioner issues a license or order under this division, the commissioner may impose conditions that are necessary and appropriate to carry out the provisions and purposes of this division and, with respect to Internet escrow agents, are also consistent with the intent of the Legislature.


Chapter 2.5. Escrow Agents' Fidelity Corporation

Article 1. Definitions

Ca Codes (fin:17300-17305) Financial Code Section 17300-17305



17300. "Fidelity Corporation" means the Escrow Agents' Fidelity Corporation.

17301. "Member" means any person licensed under this division who is required by Section 17312 to be a member of Fidelity Corporation.


17302. "Trust obligation" means: (a) All money and property deposited with a member within the State of California in an escrow or joint control transaction. (b) All money and property deposited with a member to be held in trust within the State of California pursuant to a federal or state statute or requirements of a governmental agency.


17303. "Commissioner" means the Commissioner of Corporations.


17304. "Loss," within the meaning of this chapter, means the loss of trust obligations held by a member within the State of California as a result of the fraudulent or dishonest abstraction, misappropriation, or embezzlement of trust obligations by an officer, director, trustee, stockholder, manager, or employee of a member.


17305. "Monthly average escrow liability," as used in this chapter, means the average escrow liability for the 12-month period as reported in the most recent report made by the member to the commissioner pursuant to Section 17348.


Article 2. Purpose: Scope Of Guarantee

Ca Codes (fin:17310-17315) Financial Code Section 17310-17315



17310. (a) It shall be the purpose of Fidelity Corporation to indemnify a member within the State of California against loss, subject to the limitations set forth in this chapter. (b) Fidelity Corporation shall not be liable for any consequential damages sustained by a member, or by any other person, nor for any punitive damages whatsoever. (c) The indemnification shall be provided by any of the following: (1) A fund established by Fidelity Corporation pursuant to Section 17320. (2) A fidelity bond or insurance policy to be approved by the commissioner. (3) A combination of paragraphs (1) and (2) subject, however, to the maximum coverage specified in subdivision (b) of Section 17314. (d) Fidelity Corporation shall provide a copy to all of its members and the commissioner of the fidelity bond or insurance policy as it is acquired or renewed, and Fidelity Corporation shall promptly provide a copy to any member or successor in interest, upon request.


17311. (a) Persons licensed pursuant to this division shall maintain a corporation under the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) operating under the name Escrow Agents' Fidelity Corporation. (b) The State of California, the Department of Corporations, or any officer, agent, or employee of either shall not be liable in any way for the conduct of Fidelity Corporation, its directors, officers, agents, employees, or members.


17312. (a) Each person licensed pursuant to this division who is engaged in the business of receiving escrows specified in subdivision (c) and whose escrow business location is located within the State of California shall participate as a member in Fidelity Corporation in accordance with this chapter and rules established by the Board of Directors of Fidelity Corporation. Fidelity Corporation shall not deny membership to any escrow agent holding a valid unrevoked license under the Escrow Law who is required to be a member under this subdivision. (b) Upon filing a new application for licensure as required by Section 17201, persons required to be a member of Fidelity Corporation shall file a copy thereof concurrently with Fidelity Corporation. If an application for licensure submitted to Fidelity Corporation contains personal or confidential information, Fidelity Corporation and its board shall maintain this information in confidence to protect the privacy of the information. The copy of the application shall include the three-thousand-dollar ($3,000) fee specified in subdivision (a) of Section 17320 and all required Fidelity Corporation Certificates set forth in Sections 17331 and 17331.1. Fidelity Corporation shall promptly furnish to the commissioner a compliance letter confirming that the applicant has satisfied the requirements to be a member of Fidelity Corporation. (c) The required membership in Fidelity Corporation shall be limited to those licensees whose escrow business location is located within the State of California and who engage, in whole or in part, in the business of receiving escrows for deposit or delivery in the following types of transactions: (1) Real property escrows, including, but not limited to, the sale, encumbrance, lease, transfer of title, loans or other obligations to be secured by a lien upon real property, and exchanges, excluding money or property held or deposited pursuant to paragraph (3) of subdivision (a) of Section 51003. (2) Bulk sale escrows, including, but not limited to, the sale or transfer of title to a business entity and the transfer of liquor licenses or other types of business licenses or permits. (3) Fund or joint control escrows, including, but not limited to, transactions specified in Section 17005.1, and contracts specified in Section 10263 of the Public Contract Code. (4) The sale, transfer of title, or refinance escrows for manufactured homes or mobilehomes. (5) Reservation deposits required under Article 2 (commencing with Section 11010) of Chapter 1 of Part 2 of Division 4 of the Business and Professions Code or by regulation of the Department of Real Estate to be held in an escrow account. (6) Escrows for sale, transfer, modification, assignment, or hypothecation of promissory notes secured by deeds of trust. (d) Coverage required to be provided by Fidelity Corporation under this chapter shall be provided to members only for loss of trust obligations with respect to those types of transactions specified in subdivision (c). If a loss covered by Fidelity Corporation is also covered by a member's general liability, dishonesty, or indemnity policy, or other private insurance policy, then the member's private policy shall first be applied as the primary indemnity to cover the loss. However, the failure of the member's private primary policy to indemnify the member's loss within the time specified for Fidelity Corporation indemnity in subdivision (a) of Section 17314 shall not limit the indemnity obligations of Fidelity Corporation as defined in this chapter. Indemnity coverage for those types of transactions not specified in subdivision (c) shall be provided by escrow agents in accordance with Section 17203.1.

17313. The commissioner shall review and approve the articles of incorporation and bylaws of Fidelity Corporation before they are filed with the Secretary of State.


17313.1. The fiscal year of Fidelity Corporation shall commence on July 1 of each year.


17314. (a) Fidelity Corporation shall pay a member for loss of trust obligations subject to the limitations set forth in this chapter. Fidelity Corporation shall pay or deny the claim within 90 days of receipt of the proof of loss filed by a member, or a member's successor in interest. Notwithstanding any other provision of this article, the protection to members provided by Fidelity Corporation and by the fidelity bond or insurance policy, if any, shall not extend to any transaction involving any member at any branch or business location outside the State of California, but shall extend only to escrow trust obligations and trust funds located within the State of California. (b) Coverage shall be provided to members in accordance with the following schedule: MONTHLY AVERAGE ESCROW LIABILITY PER LOCATION COVERAGE $0 - $ 1,000,000 $1,000,000 over $1,000,000 - $ $2,000,000 3,000,000 over $3,000,000 - $ $3,000,000 5,000,000 over $5,000,000 - $ $4,000,000 7,500,000 over $7,500,000 - $5,000,000 $10,000,000 Pursuant to the schedule, the minimum coverage by Fidelity Corporation for each licensed location shall be one million dollars ($1,000,000) and the maximum coverage for each licensed location shall be five million dollars ($5,000,000). (c) A member shall maintain minimum coverage in accordance with the schedule in subdivision (b) and shall monitor its escrow liability monthly. An increase in escrow liability above the monthly average escrow liability coverage as provided for in subdivision (b) shall be reported immediately to Fidelity Corporation. Upon receipt of this report, Fidelity Corporation shall immediately provide for the increase in coverage, and shall immediately bill and collect pursuant to Section 17321, an amount necessary to provide for the increased coverage. (d) Any member with a licensed location or locations with a monthly average escrow liability greater than ten million dollars ($10,000,000) shall obtain a bond from a corporate surety which is an admitted insurer in the State of California insuring the balance of trust funds not covered by Fidelity Corporation, in a ratio of one dollar of coverage for every three dollars of trust obligations not covered by Fidelity Corporation. The Fidelity Corporation shall have the authority to obtain the excess coverage bond. The cost of the bond shall be shared pro rata by those members included in the coverage. (e) If a member establishes, to the satisfaction of the commissioner, that a bond is not available or is impracticable under subdivision (d), then, at the member's election, either: (1) The member shall place average trust obligations in excess of ten million dollars ($10,000,000) in a restricted escrow trust account. Each transfer or release of the funds to be made by specific resolution of the member's board of directors and the signature of a neutral third party; or (2) The licensed location of the member with average trust balances in excess of ten million dollars ($10,000,000) shall be subject to examinations to be conducted at a frequency as deemed appropriate and necessary by the commissioner or Fidelity Corporation, but not less frequently than once a year. (f) Any member subject to subdivision (e) shall within 10 business days after the effective date of this section notify Fidelity Corporation of its election. A member who subsequently becomes subject to subdivision (e) shall within a like period of time notify Fidelity Corporation of its election. Fidelity Corporation shall also be notified of any change of election in a like period of time. Fidelity Corporation shall notify the commissioner within 10 business days of receipt of any notice under this subdivision of the elections made. All notices under this subdivision shall be in writing.


17314.1. (a) Notwithstanding any other provision of this article, Fidelity Corporation shall not be obligated to pay any claim made by a member unless (1) the claim would, except for the dollar amount thereof, be a valid claim under the bond as prescribed by Section 17203.1 and (2) the claim is made within the time prescribed by Section 17205. The protection to members provided by Fidelity Corporation and by the fidelity bond or insurance policy, if any, shall therefore be deemed to be coextensive except as to the dollar amounts as set forth in Section 17314. All defenses available to the insurer under the fidelity bond or insurance policy, if any, on any claim shall also be a defense to Fidelity Corporation, as either an indemnitor or surety, on any claim brought against the corporation. (b) No person other than a member, or the member's successor in interest, who shall be the commissioner, a conservator, receiver, or trustee as designated by a court of competent jurisdiction, is entitled to assert a claim against Fidelity Corporation for losses covered under this article.


17314.2. Claims filed prior to the effective date of this chapter shall be governed by the provisions in effect when the loss occurred.


17314.3. (a) A deductible shall apply to each loss suffered by a member in the amount of five thousand dollars ($5,000), plus 5 percent of the amount by which the loss exceeds five thousand dollars ($5,000). If a member with more than one licensed location suffers a covered loss at more than one location, the deductible shall apply to each location separately in proportion to the amount of the loss suffered at each such licensed location. (b) Fidelity Corporation shall pay the full amount of any member's loss to the member or the member's successor in interest. The member shall be obligated to pay to Fidelity Corporation the amount of the member's deductible after payment in full of the loss by Fidelity Corporation. (c) In the event a license is surrendered, suspended, or revoked prior to payment in full by the member of all or any portion of the deductible, the member shall nevertheless be liable to Fidelity Corporation for the amount of the deductible. If the license of the member is surrendered, suspended, or revoked prior to payment in full of the deductible, Fidelity Corporation shall have priority over all other claimants, except the State of California and any conservator or receiver of the member's estate, against the assets of the licensee, including the bond required under Section 17202. (d) Nothing in this section shall be construed to give any person or entity not (1) a member of Fidelity Corporation, or (2) a successor in interest of a member, or (3) the commissioner any right of action or any right to make a claim directly against Fidelity Corporation, its officers, directors, agents, or employees. Fidelity Corporation shall be entitled to recover its reasonable costs and attorney's fees as an item of costs, as provided for in paragraph (10) of subdivision (a) and paragraph (5) of subdivision (c) of Section 1033.5 of the Code of Civil Procedure, in defending any claim made directly against Fidelity Corporation, not authorized in this division. (e) If a member fails to pay the deductible within the time set forth in the bylaws of Fidelity Corporation, Fidelity Corporation may bring an action at law or in equity against the member to recover the amount of the deductible. Fidelity Corporation shall recover its reasonable costs and attorney's fees as an item of costs, as provided for in paragraph (10) of subdivision (a) and paragraph (5) of subdivision (c) of Section 1033.5 of the Code of Civil Procedure, provided, that the payment of the costs and attorney's fees will not cause the member to be in violation of Section 17202, 17202.1, or 17210.

17315. The commissioner may establish rules which are reasonable and necessary to carry out the provisions of this chapter.


Article 3. Membership Fee And Assessments

Ca Codes (fin:17320-17324) Financial Code Section 17320-17324



17320. Fidelity Corporation shall establish and maintain the following funds for payment of claims and for payment of costs of administration: the membership fund, the operations fund, and the fidelity fund. (a) An applicant or a licensee shall, at the time an application is filed for a license, pay to Fidelity Corporation a membership fee of three thousand dollars ($3,000) for each location for which a license is applied. If the application is denied, withdrawn, or abandoned, Fidelity Corporation may retain two hundred dollars ($200) from the membership fee to cover costs of administration. (1) The membership fund shall be reserved for payment of claims which exceed the fidelity fund balance and for payment of extraordinary operational costs. (2) Any member who, on the effective date of this section, has an account balance which exceeds the three thousand dollars ($3,000) membership fee times the number of its licensed locations shall be credited in a special reserve account for the excess amount. This balance shall be credited against future assessments made pursuant to subdivision (b) of Section 17321 in an amount not exceeding four hundred dollars ($400) per licensed location per year. Any member whose account balance is less than three thousand dollars ($3,000) times the number of its licensed locations shall, on or before December 1, 1988, pay to Fidelity Corporation an amount sufficient to allow the member's account to be maintained at three thousand dollars ($3,000) times the number of licensed locations. Fidelity Corporation shall provide each member with an accounting of the amounts being reserved for the members' membership account and amounts being held as a special reserve. (3) The membership fee, less any unpaid assessments and related costs, shall be refunded to the member in accordance with Fidelity Corporation's bylaws not less than 30 months and no more than 36 months after the effective date of surrender of a license. (4) Any member who does not engage in any escrow transactions pursuant to subdivision (c) of Section 17312 may terminate its membership in Fidelity Corporation by written notice to Fidelity Corporation and the Department of Corporations, as provided in the Fidelity Corporation's bylaws and rules and regulations. The membership fee, less any unpaid assessments and related costs, shall be refunded to the member in accordance with Fidelity Corporation's bylaws not less than 30 months and no more than 36 months after the effective date of the member's written request to terminate its membership in Fidelity Corporation. Before a licensee resumes those escrow transactions, it shall first be required to become a member of Fidelity Corporation, as provided in this subdivision. (b) Fidelity Corporation shall prepare, prior to its fiscal year end, an estimated annual operational budget projecting the costs of operations and administration for the succeeding fiscal year, excluding the amount paid for claims and premiums paid for excess coverage bonding. The amount of the assessment shall be 150 percent of the budgetary projection. In succeeding years, the assessment shall be adjusted by adding the prior year's deficit or deducting unused surplus from the prior year. (c) Fidelity Corporation shall establish a fidelity fund for the payment of claims and for the payment of the premium for the fidelity bond or insurance policy, if any. All claims shall be paid from the fidelity fund, provided that, to the extent that the fidelity fund balance is not sufficient to pay claims, the claim shall be paid from the membership fund by charging each member's membership account a pro rata share of the excess. (d) All interest earned on the membership fund and the operations fund shall be credited to the fidelity fund.


17321. Fidelity Corporation shall bill and collect from each member an annual premium that in the aggregate shall consist of assessments for the operations fund and the fidelity fund. (a) The annual assessment for the operations fund shall be assessed no later than October 15 of each year for the current fiscal year in accordance with subdivision (b) of Section 17320. The payment of any invoice for assessments under this subdivision is payable by the member escrow agent in three equal and consecutive monthly installments with the first installment payable at or within 30 days after receipt of the Fidelity Corporation invoice. The assessment shall include: (1) All costs and expenses of administration as budgeted by the board of directors for the current fiscal year. (2) Any expenses actually incurred in the preceding fiscal year which exceeded the budgeted costs of expenses and administration except for expenses recovered pursuant to subdivision (a) of Section 17321.1. Each member's assessment shall be determined pro rata based upon the ratio of each member's licensed locations to the total licensed locations of all members as of the preceding June 30. Members licensed on or after July 1 of each year shall be assessed only for costs and expenses pursuant to paragraph (1) of this subdivision. This assessment shall be prorated on a monthly basis. (b) The annual assessment for the fidelity fund shall be assessed no later than May 1. The assessment shall include any amount necessary to replenish the membership fund pursuant to Section 17324, and shall be based upon the balances of the membership fund and the fidelity fund as of December 31 of the previous year and the escrow liability schedule of each licensed location as provided in Section 17348, and shall be calculated as follows: (1) If the membership fund and fidelity fund in the aggregate equal an amount less than five million dollars ($5,000,000), or if the balance in the fidelity fund is less than two million five hundred thousand dollars ($2,500,000), then the assessment shall be the greater of: (A) the amount necessary to bring the membership fund and fidelity fund in the aggregate up to five million dollars ($5,000,000), but not to exceed one million dollars ($1,000,000) per assessment, or (B) the amount necessary to maintain a minimum fidelity fund balance of two million five hundred thousand dollars ($2,500,000), including the amount of the assessment, or (C) four hundred thousand dollars ($400,000). (2) If the membership fund and fidelity fund in the aggregate equal an amount that is at least five million dollars ($5,000,000), and the balance in the fidelity fund is at least two million five hundred thousand dollars ($2,500,000), then the assessment shall be four hundred thousand dollars ($400,000). Each member's fidelity fund assessment for paragraphs (1) and (2) shall be the amount derived by multiplying the amount to be assessed by the ratio that each member's risk factors bear to the total of all members' risk factors. A member's risk factors shall be computed in accordance with the following formula, except that the total factors of a member shall be reduced by one for each licensed branch location: Coverage per Licensed Location Factors $1,000,000 3 $2,000,000 5 $3,000,000 7 $4,000,000 8 $5,000,000 9 (c) Notwithstanding subdivision (b), the assessment for the fidelity fund for the fiscal year beginning July 1, 1989, shall be made immediately upon 90-day notice of cancellation of the fidelity bond or insurance policy permitted by paragraph (2) of subdivision (c) of Section 17310, but in no event later than 60 days prior to the date of cancellation. (d) Every licensed member as of March 31 shall pay the fidelity fund assessment, without any pro rata adjustment, notwithstanding that the member may have surrendered a license or have a license revoked prior to the date that the assessment is mailed.


17321.1. Fidelity Corporation shall levy a special assessment against its members whenever: (a) Deemed necessary by the board of directors in the event of any extraordinary expenses which would seriously deplete the resources of the operations fund; or (b) A proof of loss has been submitted by a member which, if paid during that fiscal year, would reduce the membership fund by 10 percent or more.


17321.2. Fidelity Corporation shall be entitled to collect late fees as specified in Fidelity Corporation's bylaws for any late payment of assessments under Section 17320, 17321, or 17321.1.


17322. Fidelity Corporation shall report to the commissioner each levy of assessment within 10 business days after the levy.


17323. (a) In the event any member fails to pay an assessment when due, Fidelity Corporation shall by written demand addressed to the member request the payment of the assessment within 30 days of the demand letter. If the member fails to pay an assessment, the commissioner may issue an order pursuant to subdivision (b). (b) If a member fails to pay the assessment, or any applicable late fee, the commissioner may by order summarily suspend the license issued to the company. If after the order is made, a request for a hearing is filed in writing and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when its license is suspended, a company shall not conduct business pursuant to this division, except as may be permitted by order of the commissioner. However, the suspension of a license shall not affect the powers of the commissioner as provided in this division. (c) Fidelity Corporation may bring an action at law or in equity against the member to recover any assessment or fees. (d) Fidelity Corporation may be awarded costs and reasonable attorney's fees, if it prevails in any action against a member, or against a third party, except the commissioner, to enforce a claim against the bond or other security posted by the member pursuant to Section 17202, or in any action against a member pursuant to subdivision (c). Those costs and attorney's fees may be awarded as an item of costs, as provided for in paragraph (10) of subdivision (a) and paragraph (5) of subdivision (c) of Section 1033.5 of the Code of Civil Procedure, provided that the payment of the costs and attorney' s fees will not cause the member to be in violation of Section 17202, 17202.1, or 17210.


17324. Any reduction in the membership fund caused by payment of an extraordinary expense pursuant to subdivision (a) of Section 17320 or payment of claims pursuant to subdivision (c) of Section 17320 shall be replenished by the operations fund or the fidelity fund, as appropriate. The next assessment for the operations fund or the fidelity fund, as appropriate, shall include an amount necessary for that replenishment.


Article 4. General Provisions

Ca Codes (fin:17330-17350) Financial Code Section 17330-17350



17330. Any member or successor in interest who suffers a loss may file a claim with Fidelity Corporation for the amount of the loss.


17331. (a) An applicant applying for licensure as an escrow agent under this division is required to apply for a Fidelity Corporation Certificate, prepared and issued by Fidelity Corporation, for each proposed shareholder, officer, director, trustee, manager, or employee who is to be directly or indirectly compensated by the escrow agent, prior to licensure of the escrow agent by the commissioner. (b) A shareholder, officer, director, trustee, manager, or employee of an escrow agent, directly or indirectly compensated by an escrow agent within this state, is required to complete and execute a Fidelity Corporation Certificate application, prepared and issued by Fidelity Corporation, as a condition of his or her employment or entitlement to compensation, before the person may continue the regular discharge of his or her duties, or have access to moneys or negotiable securities belonging to or in the possession of the escrow agent, or draw checks upon the escrow agent or the trust funds of the escrow agent. (c) Fidelity Corporation Certificates may also be known as Escrow Agent's Fidelity Corporation Certificates or EAFC Certificates. The certificate at all times remains the property of Fidelity Corporation, and is not transferable by either a member or employee. The certificate is not a warranty or guarantee by Fidelity Corporation of the integrity, veracity, or competence of the person. (d) An application for a Fidelity Corporation Certificate shall be in writing and in the form prescribed by Fidelity Corporation. The application may include (1) a fee not to exceed fifty dollars ($50), (2) two passport-size photographs, and (3) a set of fingerprint images and related information using the process established by the Department of Justice for requesting state summary criminal history information, plus the fee charged by the Department of Justice for processing noncriminal applicant fingerprint images and related information, in a manner established by the Department of Justice pursuant to subdivision (l). The Department of Justice shall honor the Fidelity Corporation report request form and issue a report to Fidelity Corporation, notwithstanding any other provision of law or regulation to the contrary. Fidelity Corporation is also entitled to submit a set of fingerprint images and related information in the Department of Justice specified noncriminal applicant fingerprint format for the purpose of requesting and obtaining a report from the Department of Justice, for the officers and employees of Fidelity Corporation. A member shall cause the filing of applications for all existing employees as required by this section within 30 days of written notice by Fidelity Corporation to the member. (e) The application form shall include a provision for binding arbitration to allow for arbitration of any appeal or dispute as to a decision by Fidelity Corporation concerning the certificate, as follows: A DISPUTE AS TO WHETHER THE DENIAL OF THIS CERTIFICATE APPLICATION OR ANY SUBSEQUENT SUSPENSION OR REVOCATION OF THE CERTIFICATE IS UNNECESSARY OR UNAUTHORIZED OR WAS IMPROPERLY, NEGLIGENTLY, OR UNLAWFULLY RENDERED, MAY BE DETERMINED BY SUBMISSION TO ARBITRATION AS PROVIDED BY CALIFORNIA LAW, AND NOT BY A LAWSUIT OR RESORT TO COURT PROCESS EXCEPT AS CALIFORNIA LAW PROVIDES FOR JUDICIAL REVIEW OF ARBITRATION PROCEEDINGS OR EXCEPT AS PROVIDED BY SECTION 17331.3 OF THE FINANCIAL CODE. THE APPLICANT MAY, SUBJECT TO AGREEMENT, SUBMIT ANY ISSUE ARISING FROM A DECISION BY FIDELITY CORPORATION TO DENY THIS CERTIFICATE APPLICATION OR TO SUSPEND OR REVOKE THE CERTIFICATE TO BE DECIDED BY BINDING NEUTRAL ARBITRATION. UPON AN AGREEMENT TO SUBMIT TO BINDING NEUTRAL ARBITRATION, THE APPLICANT HAS NO RIGHT TO HAVE ANY DISPUTE CONCERNING THIS CERTIFICATE APPLICATION LITIGATED IN A COURT OR JURY TRIAL NOR ANY JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, EXCEPT AS SPECIFICALLY PROVIDED IN THE ESCROW LAW. ARBITRATION MAY BE COMPELLED AS PROVIDED BY LAW. (f) There is no liability on the part of and no cause of action of any nature may arise against Fidelity Corporation or its members, directors, officers, employees, or agents, the State of California, the Department of Corporations, or any officer, agent, or employee of the state or the Department of Corporations for statements made by Fidelity Corporation in reports or recommendations made pursuant to this division, or for reports or recommendations made pursuant to this division to Fidelity Corporation by its members, directors, officers, employees or agents, the State of California, the Department of Corporations, or any officer, agent, or employee of the state or the Department of Corporations, unless the information provided is false and the party making the statement or providing the false information does so with knowledge and malice. Reports or recommendations made pursuant to this section, or Section 17331.1, 17331.2, or 17331.3, are not public documents. (g) There is no liability on the part of and no cause of action of any nature may arise against Fidelity Corporation or its members, directors, officers, employees, or agents, the State of California, the Department of Corporations, or an officer, agent, or employee of the state or the Department of Corporations for the release of any information furnished to Fidelity Corporation pursuant to this section unless the information released is false and the party, including Fidelity Corporation, its members, directors, officers, employees, or agents, the state, the Department of Corporations, or any officer, agent, or employee of the state or the Department of Corporations, who releases the false information does so with knowledge and malice. (h) There is no liability on the part of and no cause of action of any nature may arise against Fidelity Corporation or its directors, officers, employees, or agents, for any decision to deny an application for a certificate or to suspend or revoke the certificate of any person or for the timing of any decision or the timing of any notice to persons or members thereof, or for any failure to deny an application under subdivision (a) of Section 17331.2. This subdivision does not apply to acts performed in bad faith or with malice. (i) Fidelity Corporation, any member of Fidelity Corporation, an agent of Fidelity Corporation or of its members, or any person who uses any information obtained under this section for any purpose not authorized by this chapter is guilty of a misdemeanor. (j) Section 17331, 17331.1, or 17331.2 does not constitute a restriction or limitation upon the obligation of Fidelity Corporation to indemnify members against loss, as provided in Sections 17310 and 17314. The failure to obtain a certificate, the denial of an application for a certificate, or the suspension, cancellation, or revocation of a certificate does not limit the obligation of Fidelity Corporation to indemnify a member against loss. (k) Notwithstanding Section 11105 of the Penal Code, Fidelity Corporation is entitled to receive state summary criminal history information and subsequent arrest notification from the Department of Justice as a result of fingerprint images and related information submitted to the Department of Justice by the Department of Corporations, pursuant to subdivision (g) of Section 17209, Section 17212.1, and subdivision (d) of Section 17414.1, by or on behalf of escrow agents, shareholders, officers, directors, trustees, managers, or employees of an escrow agent, directly or indirectly compensated by an escrow agent. The Department of Justice and Fidelity Corporation shall enter into an agreement to implement this subdivision. The Department of Corporations shall forward to Fidelity Corporation, weekly, a list of names of individual fingerprints submitted to the Department of Justice. (l) (1) The fingerprint images and related information required pursuant to subdivision (d) shall be submitted by the Department of Corporations to the Department of Justice, in a manner established by the Department of Justice, for the purposes of obtaining information as to the existence and content of a record of state or federal convictions, state or federal arrests, and information as to the existence of and content of a record of state or 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. (2) Upon receipt, the Department of Justice shall forward to the Federal Bureau of Investigation requests for federal summary criminal history information received pursuant to this section. The Department of Justice shall review the information returned from the Federal Bureau of Investigation and compile and disseminate a response to the Department of Corporations and a fitness determination to Fidelity Corporation pursuant to subdivision (p) of Section 11105 of the Penal Code. (3) The Department of Justice shall charge a fee sufficient to cover the costs of processing the requests pursuant to this subdivision.

17331.1. (a) Any person not previously issued a certificate must, upon employment with an escrow agent within this state, apply to Fidelity Corporation for a certificate. The member shall submit all applications for certificates to Fidelity Corporation within 10 business days of the date of employment. The person may continue employment until or unless denied a certificate by Fidelity Corporation. (b) Upon written notice by Fidelity Corporation to any or all members that any person has been denied a certificate, or has had a certificate suspended, canceled, or revoked, no member or person acting on behalf of a member shall authorize that person to have access to money or negotiable securities belonging to or in the possession of the escrow agent, or to draw checks upon the escrow agent or the trust accounts of the escrow agent. Any member or person who commits or who causes a violation of this section, which violation was either known or should have been known by the member or the person committing or causing the violation, may be subject to action by the commissioner and Fidelity Corporation as provided for in this division. (c) Each member and each person required to have a certificate shall comply with the Fidelity Corporation rules, to be approved by the commissioner, concerning the manner and timing within which Fidelity Corporation shall receive notice of employment, change of the person's name, mailing address, or employment status, the certificate form, and the procedures for the administration thereof. Fidelity Corporation may collect a fee to cover the cost of processing the notices but no fee shall exceed twenty-five dollars ($25). (d) Fidelity Corporation shall assess the member a penalty at the rate of twenty-five dollars ($25) for every day that the member has not fully complied with this section, Section 17331, or Section 17331.2. (e) Any member that suffers a loss of trust obligations caused by any person who is required to have a certificate but has (1) failed to apply for a certificate, (2) has had the application for a certificate denied, (3) has a suspended certificate, or (4) whose certificate has been revoked shall be obligated to pay a deductible in the amount of 100 percent of the amount of the loss, notwithstanding the amount of the statutory deductible as prescribed by Section 17314.3. The failure to obtain a certificate, the denial of an application for a certificate, or the suspension, cancellation, or revocation of a certificate shall not limit the obligation of Fidelity Corporation to indemnify a member against loss of trust obligations as defined in this division.


17331.2. (a) Fidelity Corporation shall deny the application for a certificate or revoke the certificate of any person, upon any of the following grounds: (1) The application contains a material misrepresentation of fact or fails to disclose a material fact so as to render the application false or misleading, or if any fact or condition exists which, if it had existed at the time of the original application for a certificate, reasonably would have warranted Fidelity Corporation to refuse originally to issue that certificate. (2) That the person has been convicted of a crime or offense, whether a felony, an offense punishable as a felony, or a misdemeanor, that involved dishonesty, fraud, deceit, embezzlement, fraudulent conversion, misappropriation of property, or any other crime reasonably related to the qualifications, functions, or duties of a person engaged in business in accordance with this division. A conviction within the meaning of this section is a plea or verdict of guilty or a conviction following a plea of nolo contendere. A conviction also includes an order granting probation and suspending the imposition of sentence, notwithstanding a subsequent order pursuant to Section 1203.4 or 1203.4a of the Penal Code permitting the person to withdraw his or her plea of guilty and to enter a plea of not guilty, or setting aside the verdict of guilty, or dismissing the accusation, information, or indictment. If, however, the conviction is more than 10 years old, or the conviction has been expunged, or the person has obtained a certificate of rehabilitation or relief under Section 1203.4 or 1203.4a of the Penal Code, or if the conviction was an infraction, then the person may have a Fidelity Corporation certificate upon showing by clear and convincing proof to a reasonable certainty that the conviction is no longer reasonably related to the qualifications, functions, or duties of a person engaged in business in accordance with this division or that person's employment with a member. (3) That the person has been held liable in a civil action by final judgment of any court if the judgment involved dishonesty, fraud, deceit, embezzlement, fraudulent conversion, or misappropriation of property or the person has been ordered to make restitution to a victim in any criminal case involving a crime or offense set forth in paragraph (2). The person may have a Fidelity Corporation certificate upon showing by clear and convincing proof to a reasonable certainty that the judgment or restitution order is no longer reasonably related to the qualifications, functions, or duties of a person engaged in business in accordance with this division or that person's employment with a member. (4) That the person has (A) committed or caused to be committed an act which caused any member to suffer a loss; (B) committed or caused to be committed or colluded with any other person committing any act which caused a loss, for which Fidelity Corporation or the insurer on any insurance policy or fidelity bond purchased by Fidelity Corporation, or both, to become liable to indemnify any member; or (C) committed or caused to be committed an act of dishonesty, fraud, deceit, embezzlement, fraudulent conversion, or misappropriation of property, to the material damage of a member or for which the member has been held liable to any third party, by final judgment. (5) That the person has been barred from employment by final order of the commissioner pursuant to Section 17423. (6) That the person has been deemed not qualified to serve in any capacity as a director or officer or in any other position involving management duties with a financial institution, pursuant to Division 1.8 (commencing with Section 4990). (7) That the person has been denied coverage or reinstatement by any insurer under any fidelity bond or crime policy, unless a decision of reinstatement of coverage has been made after that denial. A person who obtained a decision of reinstatement of coverage prior to the effective date of this section may have a Fidelity Corporation certificate notwithstanding paragraphs (2) and (3), unless any other ground for denial or revocation applies to that person. (b) Fidelity Corporation shall suspend the certificate of any person upon either of the following grounds: (1) That the person has been censured or suspended from any position of employment by final order of the commissioner. The certificate suspension shall be for a term concurrent with the final order of the commissioner. (2) That the person has been barred from any position of employment or management or control of any escrow agent, for a term of less than permanent, by final order of the commissioner. The certificate suspension shall be for a term concurrent with the final order of the commissioner. (c) Fidelity Corporation may suspend the certificate of any person under either of the following grounds: (1) That there is an action commenced by the commissioner to either suspend or bar that person, under Section 17423. (2) That any member with whom the person was employed has given a proof of loss or a notice of an occurrence which may give rise to a claim for a loss of trust obligations either of which identifies the person as the person responsible for the loss or as a person acting in collusion with the person causing the loss. (d) Upon denial of an application for, or upon suspension or revocation of the certificate of any person, Fidelity Corporation shall provide written notice to the member with whom that person is employed of the decision, pending any appeal therefrom which might be made. Thereafter, the member shall not allow that person to have access to money or negotiable instruments or securities belonging to or in the possession of the escrow agent, or to draw checks upon the escrow agent or the trust accounts of the escrow agent, but that person may otherwise continue in the performance and discharge of other duties of an employee. Fidelity Corporation shall notify the person in writing of the decision to deny, suspend, or revoke the certificate and of the person's right of appeal, together with the notice of appeal. The grounds and basis for the decision shall be stated in the notice thereof. All notices may be served either personally or by mail, properly addressed to the address of record for the member and the person. (e) Any person whose application for a certificate has been denied, or whose certificate has been suspended or revoked, may appeal the decision, as provided in Section 17331.3. While that appeal is pending, the person may not have access to money or negotiable instruments or securities belonging to or in the possession of the escrow agent, or to draw checks upon the escrow agent or the trust accounts of the escrow agent, but that person may otherwise continue in the performance and discharge of other duties of an employee pending final decision of that person's appeal. Failure to remove the person whose application has been denied, or whose certificate has been suspended or revoked, as a signer on the trust accounts may be subject to action by the commissioner as provided for in this division and shall be subject to penalties as set forth in Section 17331.1. (f) Upon expiration of the time for an appeal, or upon conclusion of the appeal, the decision to deny an application for or to suspend or revoke the certificate of any person shall become final. Fidelity Corporation shall give written notice to the member and to the person of the final decision within 10 days. Thereafter, Fidelity Corporation shall disclose in writing to all members the identity of persons whose application has been denied or whose certificate has been revoked. The person whose certificate has been denied or revoked may file a certificate reapplication after the period of time specified in Section 11522 of the Government Code, dating from the Fidelity Corporation final decision, provided that the person has satisfied all obligations to Fidelity Corporation under any prior arbitration award or judgment.


17331.3. (a) Notice to the person, and to the member with whom the person is employed, of the decision to deny an application for or to revoke or suspend a Fidelity Corporation Certificate, shall be effective immediately upon personal delivery, or by facsimile if written acknowledgment of receipt by the member and the person is returned by facsimile, or within five days of the date of mailing, and shall become final upon expiration of the time for filing a notice of appeal or upon the conclusion of the appeal, as provided for in this section. (b) The person whose application for a certificate has been denied, or whose certificate has been suspended or revoked may, within 15 days after notice of the decision, file with Fidelity Corporation a notice of appeal and request for a hearing, by binding arbitration or judicial action, as provided herein. Neither the notice of appeal nor the request for a hearing shall stay the decision of Fidelity Corporation under Section 17331.2. A late notice of appeal and request for a hearing may be accepted upon a showing of good cause. (c) The hearing for the appeal may be resolved by arbitration in accordance with Chapter 1 (commencing with Section 1280) of Title 9 of Part 3 of the Code of Civil Procedure. The notice of the person's right to appeal and notice of appeal provided by Fidelity Corporation shall contain a schedule of proposed arbitrators or of a proposed arbitration forum which provides a panel of arbitrators and method for appointing an arbitrator. The person filing the notice of arbitration may agree to submit the decision and matter to binding arbitration and accept an arbitrator whose name appears on the notice or may propose, in writing, an alternative arbitrator, but if Fidelity Corporation does not notify the person of acceptance of the proposed alternative arbitrator within 10 days, then either party may within 30 days petition the court to appoint an arbitrator, as provided by law. (d) If the person does not agree to submit the decision and matter to binding arbitration, then the person may, within 30 days after the notice of the decision, file an action in superior court concerning the decision to deny an application for, or to suspend or revoke the certificate. The court may, on its own motion, or shall, upon the filing of an election by any or either party, order that the action be submitted to arbitration pursuant to Chapter 2.5 (commencing with Section 1141.10) of Title 3 of Part 3 of the Code of Civil Procedure, in which case the action shall be accorded that priority for hearing as circumstances permit, unless the plaintiff may otherwise request. (e) Either Fidelity Corporation or the person whose application for a certificate has been denied, or whose certificate has been suspended or revoked, may apply to the superior court for relief to compel compliance with this section in accordance with Chapter 2 (commencing with Section 1084) of Title 1 of Part 3 of the Code of Civil Procedure. (f) Upon the conclusion of the hearing on appeal, either the arbitrator or the court may in its discretion award to the prevailing party as an item of costs, reasonable attorneys' fees, and costs. All other expenses and fees for the arbitration incurred prior to the decision of the arbitrator or confirmation of the decision by the court shall be shared equally by the parties except for attorneys' fees, witness fees or other expenses incurred by either party for his or her own benefit. (g) Upon the filing of any action in the superior court by the person whose application for a certificate has been denied, or whose certificate has been suspended or revoked, Fidelity Corporation at any time within 30 days after service of the summons may upon notice and hearing, move the court for an order requiring the plaintiff to furnish an undertaking to secure an award of costs and attorneys' fees which may be awarded in the action. The motion shall be supported by affidavit showing that the action filed is frivolous and that there is no reasonable possibility that the prosecution of the action will benefit the plaintiff and that the moving party fully complied with this section and Section 17331.2. At the hearing upon the motion, the court shall consider any written or oral evidence, by witnesses or affidavit, as may be material (1) to the ground or grounds upon which the motion is based, or (2) to a determination of the probable reasonable expenses, including attorneys' fees, of the defendant and the moving party, which will be incurred in the defense of the action. If the court determines, after hearing the evidence adduced by the parties, that the moving party has established a probability in support of any of the grounds upon which the motion is based, the court shall fix the amount of the undertaking, not to exceed twenty-five thousand dollars ($25,000), to be furnished by the plaintiff for reasonable expenses, including attorneys' fees, which may be incurred by the moving party in connection with the action. A ruling by the court on the motion shall not be a determination of any issue in the action or of the merits thereof. If the court, upon the motion, makes a determination that a bond shall be furnished by the plaintiff, the action shall be dismissed as to the defendant, unless the bond required by the court has been furnished within a reasonable time as may be fixed by the court. Upon the filing of a motion pursuant to this subdivision, no other pleadings need be filed by the defendant and the prosecution of the action shall be stayed until 10 days after the motion has been disposed of. The motion shall be considered pursuant to this subdivision and in accordance with Chapter 2 (commencing with Section 995.010) of Title 14 of Part 2 of the Code of Civil Procedure.


17332. When either Fidelity Corporation or the insurer providing the fidelity bond or insurance policy, if any, under Section 17310, or both, pay an obligation on behalf of a member, Fidelity Corporation and the insurer shall be subrogated to the rights, claims, and remedies of the member up to the amount paid by Fidelity Corporation and the insurer on behalf of the member. Independent of any duty or obligation of Fidelity Corporation, the member shall do nothing to prejudice those rights. In any subrogation action filed by Fidelity Corporation, the provider of the fidelity bond or insurance policy if payment was made thereunder, or both, Fidelity Corporation shall have the first right to the proceeds of any judgment or settlement obtained against the principal obligors and any other party who is held liable jointly or severally, in whole or in part, with the principal obligors, up to the amount actually paid on the claim by Fidelity Corporation. Fidelity Corporation and the insurer, as subrogees, shall also recover in the subrogation action reasonable costs and attorney's fees which may be awarded either as part of any judgment or as an item of costs, as provided for in paragraph (10) of subdivision (a) and paragraph (5) of subdivision (c) of Section 1033.5 of the Code of Civil Procedure. No member engaged in business pursuant to Section 17200 shall be required to pay those costs and attorney's fees awarded pursuant to this section. Amounts recouped by Fidelity Corporation through subrogation, minus all costs, attorney' s fees, and other administrative expenses incurred in obtaining that recovery, shall be credited to the fidelity fund.


17333. The commissioner may forthwith upon written notice and order take possession of the property and business of Fidelity Corporation and retain possession until Fidelity Corporation satisfies the commissioner that it will operate in conformity with this chapter whenever it appears to the commissioner that Fidelity Corporation has done any of the following: (a) Violated its articles of incorporation or any law of this state. (b) Invested its funds in violation of Section 17337. (c) Not levied assessments as required by Sections 17320, 17321 and 17321.1. (d) Has not diligently prosecuted an action pursuant to Section 17323. (e) Violated any section of this chapter. (f) Neglected or refused to submit its books, papers, and affairs to the inspection of the commissioner. During the time the commissioner has possession the commissioner shall perform the duties and carry out the obligations of Fidelity Corporation.

17334. Whenever the commissioner has taken possession of the property and business of Fidelity Corporation, Fidelity Corporation within 10 business days after the taking, if it deems itself aggrieved thereby, may apply to the superior court in the county in which the head office of Fidelity Corporation 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 Fidelity Corporation, or make a further order as may be just.


17335. An appeal may be taken from the judgment of the court by the commissioner or by Fidelity Corporation in the manner provided by law for appeals from the judgment of a superior court to the court of appeal. An appeal from the judgment of the court does not operate as a stay of the judgment unless the court, on good cause, so orders. No bond need be given if the appeal is taken by the commissioner, but if the appeal is taken by Fidelity Corporation a bond shall be given as required by Sections 917.2 and 917.5 of the Code of Civil Procedure as a condition to any stay.


17336. (a) Fidelity Corporation shall have independent authority to investigate claims filed by members pursuant to Section 17330. (b) Fidelity Corporation, upon submitting written notice to the commissioner, may conduct an examination or investigation of the business practices of a member's handling and processing of trust obligations or the failure to pay an assessment under Section 17320, 17321, or 17321.1. The result of every investigation or examination shall be reported to the commissioner together with the recommendations of the Board of Directors of Fidelity Corporation. The investigation or examination reports prepared by the duly designated representatives of the board of the Escrow Agents' Fidelity Corporation shall not be public records. (c) Fidelity Corporation may submit reports and make recommendations to a member on its findings as a result of an examination or investigation conducted pursuant to this section. These reports and recommendations shall not be public documents. A copy of all reports and recommendations shall be furnished to the commissioner by Fidelity Corporation. There shall be no liability on the part of, and no cause of action of any nature shall arise against, Fidelity Corporation or its members, directors, officers, employees, stockholders, or agents or the commissioner or commissioner's authorized representatives for any statements made by them in any reports or recommendations made hereunder. (d) Fidelity Corporation, upon the request of the commissioner, may participate in an examination or investigation of the books and records of a member. There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State of California, the commissioner, or members of the commissioner's staff or the commissioner's authorized representative for the release of any information furnished to Fidelity Corporation pursuant to this subdivision. (e) With the written consent of a majority of its directors, Fidelity Corporation, in order to fulfill its obligations under this section, may appoint an independent certified public accountant or public accountant or hire or appoint a specialized committee or employees to conduct an examination or investigation authorized by this section. Any reports as a result thereof shall be furnished to the commissioner pursuant to the provisions of subdivision (c). (f) For the purposes of conducting an examination or investigation, Fidelity Corporation or its appointee shall have free access to the offices and places of business, books, accounts, bank account records and statements, papers, records, files, safes and vaults of the member. (g) Fidelity Corporation may cause an examination or audit of the places of business, books, accounts, bank account records, papers, records, files, safes and vaults of a member to be conducted in accordance with Fidelity Corporation's bylaws and rules. (h) Costs and expenses for the examination or investigation conducted pursuant to subdivision (b) shall be paid to the Fidelity Corporation by the licensee, its shareholders, directors, and officers, or person examined, each of whom shall be jointly and severally liable therefor. The Fidelity Corporation may maintain an action for recovery of these costs in any court of competent jurisdiction, and shall recover its reasonable costs and attorney's fees as an item of costs as provided for in paragraph (10) of subdivision (a) and paragraph (5) of subdivision (c) of Section 1033.5 of the Code of Civil Procedure, provided that the payment of the costs and attorney's fees will not cause the member to be in violation of Section 17202, 17202.1, or 17210. (i) Fidelity Corporation, any member of Fidelity Corporation, an agent of Fidelity Corporation or of its members, or any person who uses any information obtained under this section for any purpose not authorized herein is guilty of a misdemeanor. (j) Fidelity Corporation may cause an examination or audit of a member, to be conducted in accordance with Fidelity Corporation's Bylaws and Rules, whenever: (1) The member has failed to pay an assessment as provided for under Section 17320, 17321, or 17321.1. (2) Fidelity Corporation has received any information of irregular or improper handling of the trust obligations of the member or of an occurrence which may give rise to a claim for loss of trust obligations. (3) Fidelity Corporation so elects, either with or without notice. (k) Costs and expenses for any examination under this section shall be paid for by the member. Fidelity Corporation shall also be entitled to recover costs and expenses for any examination under this section from those persons, if any, who are discovered to be responsible for, or to have caused, any irregular or improper handling of trust obligations of the member or any occurrence which may give rise to a claim for loss of trust obligations, or otherwise by failure to cooperate, unnecessarily increase the cost of the examination. Fidelity Corporation may maintain an action for recovery of these examination costs and expenses in any court of competent jurisdiction, and shall recover its reasonable costs and attorney's fees as an item of costs, as provided for in paragraph (10) of subdivision (a) and paragraph (5) of subdivision (c) of Section 1033.5 of the Code of Civil Procedure, provided that the payment of the costs and attorney's fees will not cause the member to be in violation of Section 17202, 17202.1, or 17210.


17337. Fidelity Corporation may invest its funds only as provided by rules of the commissioner adopted with a view to preserving reasonable liquidity. Upon request of the commissioner, Fidelity Corporation shall furnish an authorization for disclosure to the commissioner of financial records of funds pursuant to Section 7473 of the Government Code.


17339. Prior to incurring any extraordinary or nonrecurring expense, Fidelity Corporation shall first obtain the written consent of the commissioner.

17340. In the event the board of directors of Fidelity Corporation deem it necessary and prudent to raise additional moneys for payment of claims or expenses of administration, it may, with the commissioner's written consent, borrow money against its assets, including future assessments.


17341. The commissioner shall give prompt notice to Fidelity Corporation when the commissioner takes possession of the property and business of a member and shall give further prompt notice when the commissioner determines to liquidate the property and business of a member.


17342. Memberships issued by Fidelity Corporation shall be nontransferable and shall be exempt from the provisions of the Corporate Securities Law of 1968.

17343. No provision of the Insurance Code shall apply to Fidelity Corporation.


17344. The operation of Fidelity Corporation shall at all times be subject to the regulation of the commissioner and the commissioner's duly designated representatives. The commissioner and the commissioner's duly designated representatives may at any time investigate the affairs and examine the books, accounts, records, and files used by Fidelity Corporation. The commissioner and the commissioner's duly designated representatives shall have free access to the offices, books, accounts, papers, records, files, safes, and vaults of Fidelity Corporation.

17345. Any member aggrieved by any action or decision of Fidelity Corporation may appeal to the commissioner within 30 days from the action or decision, except that all matters relating to claims for loss of trust obligations shall be decided under Section 17345.1. The commissioner's decision on appeal shall be made within 60 days from the date of the appeal and shall be considered final.


17345.1. (a) A member or successor in interest aggrieved by any action or decision of Fidelity Corporation may file a written request for a hearing with the commissioner within 30 days from the action or decision. (b) (1) Except as provided in subdivision (c), the hearing shall be conducted by an administrative law judge on the staff of the Office of Administrative Hearings and the administrative law judge's proposed decision shall be made within 120 days from the date of the request for hearing. This time limit does not constitute a jurisdictional deadline and may be extended by stipulation of the parties or by order of the administrative law judge for good cause. (2) The hearing shall be conducted in accordance with the administrative adjudication provisions of Chapters 4.5 (commencing with Section 11400) and Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, except as specified in this subdivision. (3) The following sections of the Government Code shall not apply to a hearing under this subdivision: Section 11503 (relating to accusations), Section 11504 (relating to statements of issues), Section 11505 (relating to contents of the statement to respondent), Section 11506 (relating to the notice of defense), Section 11507 (relating to amended or supplemental accusations), and Section 11516 (relating to amendment of accusations after submission of case). (4) The sole parties to the hearing shall be the member or successor in interest (complainant) and Fidelity Corporation (respondent). Third-party intervention shall not be permitted. The disputes, claims, and interests of third parties shall not be within the jurisdiction of the proceedings. However, nothing in this paragraph prohibits any interested party from submitting an amicus brief upon approval by the administrative law judge, after a duly noticed motion demonstrating good cause. (5) Within 10 days of receipt of the request for a hearing, the commissioner shall schedule the hearing with the Office of Administrative Hearings and shall serve each party by personal service or mail with notice of the hearing, which is to include the date, time, and place of the hearing. (A) Within 10 days of service of the notice of hearing, the complainant shall file with the Office of Administrative Hearings, and serve upon the respondent by personal service or mail, a written statement setting forth the matters to be considered at the hearing in sufficient detail to permit the respondent to prepare and present its response. The statement shall contain the following: (i) A brief statement of the facts that give rise to the hearing. (ii) A statement of the issues to be considered at the hearing including relevant statutes and rules. If the statement includes issues not raised in the proof of loss claim or considered by respondent in its decision, respondent may move for abatement of the proceedings for consideration of those issues by respondent. The administrative law judge may abate the proceedings for a period not to exceed 60 days from the issuance of the order to abate. The administrative law judge may extend the time period for good cause upon motion by respondent or by stipulation of the parties. If respondent has not issued a revised decision within the period of abatement, the administrative law judge shall reset the matter for hearing. (B) Within 20 days of service of the statement, respondent may file with the Office of Administrative Hearings, and serve upon the complainant by personal service or mail a written response to the statement. (C) The statement of issues and response may be amended upon completion of discovery, except that notice of the amendment shall be no later than 30 days before the date set for hearing. (6) Where the statement of issues includes a claim for a loss of trust obligations that has been denied by respondent, complainant shall bear the burden of establishing by a preponderance of the evidence that a loss as defined in Section 17304 has occurred and that respondent is required to pay the claim in accordance with this chapter. Each legal issue shall be adjudicated in the proposed decision and the commissioner's decision, except for any issue either withdrawn or waived by complainant or respondent, upon the submission of the case after hearing. (7) Any party may move for a judgement on the pleadings or summary judgment, as a dispositive motion, pursuant to the Rules of Procedure of the Office of Administrative Hearings. The evidence in support of and standards for deciding the motions shall be as set forth in the Code of Civil Procedure. If the administrative law judge denies the motion, the matter shall be heard on the merits by the administrative law judge. If the administrative law judge grants the motion, the order shall be in the form of a proposed decision to the commissioner pursuant to subdivision (b) of Section 11517 of the Government Code. (8) Nothing in this section shall be construed to require the losing party to pay the other party's costs and expenses, including attorney's fees. (9) If the statement of issues is abated and respondent issues a revised decision, the parties may amend their pleadings within a reasonable period of time, as ordered by the administrative law judge. (c) (1) If a request for hearing includes a claim for loss of trust obligations that has been denied by Fidelity Corporation and the claim involves the factors described in paragraph (3), the commissioner, upon the request of Fidelity Corporation and as provided herein, shall abstain from proceeding with a hearing. The matter may be adjudicated in a court of competent jurisdiction upon the filing of an action by the member or successor in interest. Fidelity Corporation shall notify the commissioner, in writing, of the grounds for abstention of jurisdiction within five days of the filing of the request for a hearing by the member or successor in interest. The commissioner shall rule on the abstention of jurisdiction request within 10 days of the notice and the ruling shall be considered final. In making a determination on the request for abstention, the commissioner may examine and investigate all facts connected with the request for abstention and may request information from any person as deemed necessary. (2) If the commissioner denies the request for abstention of jurisdiction, the hearing shall be conducted in accordance with subdivision (b), except that compliance by the commissioner with paragraph (5) of subdivision (b) shall be within five days of the ruling denying the abstention request. (3) The factors requiring abstention of jurisdiction by the commissioner are as follows: (A) The claim for a loss is based upon an alleged escrow transaction in which an officer, director, trustee, stockholder, manager, or employee of the member was a principal to the transaction. (B) The claim involves (i) the need to determine conflicting claims or disputes to real property and (ii) there is a potential for double recovery by any principal to an escrow. (4) The commissioner shall abstain if determination of the claim will cause some escrows to have preferable or favorable treatment over the other escrows held by the member or successor in interest.


17346. (a) Fidelity Corporation and its members shall not advertise, print, display, publish, distribute, or broadcast, or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, in any manner any statement or representation with regard to a guarantee of trust obligations in their advertisements that is false or misleading or calculated to deceive or misinform the public. Any statement or representation with regard to a guarantee of trust obligations, except the statement set forth in subdivision (b), shall be reviewed and approved by the commissioner prior to its use. (b) Any advertising referring to Fidelity Corporation shall state in a clear and conspicuous manner, the following statement: "MEMBER OF ESCROW AGENTS' FIDELITY CORPORATION (EAFC). EAFC PROVIDES FIDELITY COVERAGE TO ITS MEMBERS. EAFC IS NOT A GOVERNMENT AGENCY, AND THERE IS NO GUARANTEE OF A PAYMENT OF ANY CLAIM BY THE STATE OF CALIFORNIA." (c) Neither Fidelity Corporation nor its members shall advertise that trust obligations of escrow agents are "protected," "guaranteed," "insured," or use words to that effect.


17347. (a) The Secretary of State shall not file articles for the incorporation of Fidelity Corporation or an amendment to the articles unless the commissioner has issued a written approval of the articles or amendment. (b) Fidelity Corporation shall not adopt any bylaws or amendments thereto without the written consent of the commissioner. Within 60 calendar days from the receipt of any bylaws or amendments thereto, submitted to the commissioner, the commissioner shall inform Fidelity Corporation, in writing, that the bylaws or amendments are not disapproved, or that those bylaws or amendments are disapproved and specify the information needed to complete the submittal. Within 60 calendar days from the receipt of a complete submittal, the commissioner shall reach a decision on the submittal.


17348. In order to permit Fidelity Corporation to fulfill its obligation under this chapter, the commissioner shall furnish a list of all persons licensed under this division as of December 31 of each year and a copy of an escrow liability schedule filed with the commissioner. Each member on or before February 15 shall furnish to the commissioner and Fidelity Corporation the schedule of its escrow liability for each of its licensed locations as of the last day of each month for the preceding 12 months which ended December 31. A list of officers, directors, stockholders, trustees, agents, managers, and employees as of that date shall also be submitted to Fidelity Corporation, with the schedule. The schedule shall be in the form and contain such information as the commissioner may require.


17349. If Fidelity Corporation is dissolved, subject to the approval of the commissioner, the net assets after settling all liabilities shall be distributed to the members on the basis of the number of each member's licensed locations compared to the total number of all members' licensed locations.


17350. All costs and expenses incurred by the commissioner in the administration of this chapter shall be paid to the commissioner by Fidelity Corporation. The limitation on the total assessment for each year set forth in paragraph (1) of subdivision (e) of Section 17207 shall not apply to Fidelity Corporation's payment of costs and expenses incurred by the commissioner in the administration of this chapter. The commissioner may institute an action for the recovery of costs and expenses incurred in the administration of this chapter in any court of competent jurisdiction.


Chapter 3. Escrow Regulations

Ca Codes (fin:17400-17425) Financial Code Section 17400-17425



17400. The commissioner may from time to time make, amend, and rescind the rules, forms, and orders that are necessary to carry out the provisions of this division, and define any terms, whether or not used in this division, insofar as the definitions are not inconsistent with the provisions of this division. For the purpose of rules and forms, the commissioner may, among other things, classify persons and matters within the commissioner's jurisdiction and may prescribe different requirements for different classes. The commissioner may, in the commissioner's discretion, waive any requirement of any rule or form in situations where in his or her opinion the requirement is not necessary in the public interest or for the protection of the public.


17402. No person subject to this division or any officer thereof shall advertise in any manner or publish any statement of its capital, other than amounts fully paid in and accumulated surplus.


17403. (a) No person subject to this division shall issue, circulate, or publish any advertisement by any means of communication, or make use of or circulate any letterheads, billheads, blank notes, blank receipts, blank escrow instructions, certificates, circulars, or any written, printed, partially written or printed paper containing any fictitious or corporate name or other words indicating that the person is in the escrow business, unless the person is a licensed escrow agent. (b) If, in the opinion of the commissioner, any person has violated this section, the commissioner may order that person to desist and refrain from that violation. If, within 30 days after the order is served, a request for hearing is filed in writing and the hearing is not held within 60 days thereafter, the order is rescinded.


17403.1. No person subject to this division shall describe as an escrow, whether orally, in writing, or electronically, any transaction that is not defined as such in Section 17003.


17403.2. (a) No person subject to this division shall solicit or accept an escrow instruction or amended or supplemental escrow instruction containing any blank to be filled in after signing or initialing of the escrow instruction or amended or supplemental escrow instruction, nor permit any person to make any addition to, deletion from, or alteration of an escrow instruction or amended or supplemental escrow instruction, unless the addition, deletion or alteration is signed or initialed by all persons who had signed or initialed the escrow instruction or amended or supplemental escrow instruction prior to the addition, deletion or alteration. (b) In addition to subdivision (a), no Internet escrow agent subject to this division shall solicit or accept electronically over the Internet an escrow instruction or amended or supplemental escrow instruction containing any blank to be filled in after executing that escrow instruction or amended or supplemental escrow instruction, nor permit any person to electronically, over the Internet, make any addition to, deletion from, or alteration of an escrow instruction or amended or supplemental escrow instruction, unless that addition, deletion or alteration is executed by all persons who had executed the escrow instruction or amended or supplemental escrow instruction prior to the addition, deletion, or alteration.


17403.3. (a) At the time of execution a copy of each escrow instruction or amended or supplemental escrow instruction shall be delivered to all persons executing the same. (b) Internet escrow agents shall deliver electronically over the Internet a copy of each executed escrow instruction or amended or supplemental escrow instruction to all persons executing the same. In the event a person is not able to electronically receive the instructions, the Internet escrow agent shall mail a true and correct copy of the instructions to the person within 24 hours of execution.


17403.4. All written escrow instructions and all escrow instructions transmitted electronically over the Internet executed by a buyer or seller, whether prepared by a person subject to this division or by a person exempt from this division under Section 17006, shall contain a statement in not less than 10-point type which shall include the license name and the name of the department issuing the license or authority under which the person is operating. This section shall not apply to supplemental escrow instructions or modifications to escrow instructions. This section shall become operative on July 1, 1993.


17403.5. (a) All records required by this chapter may be retained by an Internet escrow agent and provided to the commissioner in electronic format. (b) All transfers by an Internet escrow agent between trust accounts and interest-bearing accounts, and between escrow accounts, may be made electronically. (c) A statement of account may be delivered by an Internet escrow agent to a customer by electronic mail or via the Internet, unless otherwise requested by the customer.


17404. 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 escrow functions performed by such person comply with the provisions of this division and with all rules made by the commissioner under this division.


17405. (a) The business, accounts and records of every person performing as an escrow agent, whether required to be licensed under this division or not, are subject to inspection and examination by the commissioner at any time without prior notice. The provisions of this section shall not apply to persons specified in Section 17006. (b) Any person subject to this division shall, upon request, exhibit and allow inspection and copying of any books and records by the commissioner or his or her authorized representative. (c) (1) The commissioner shall conduct an examination of each licensed escrow agent as described in subdivision (a) as often as the commissioner deems necessary and appropriate, but not less than once every 48 months. (2) The examination shall be conducted for the 12-month period immediately preceding the date that the examination is commenced unless the commissioner finds, based on information uncovered in the examination or in the most recent independent audit report, that the examination should be extended beyond the 12-month period. (3) In determining how often an examination shall be conducted, the commissioner may consider each licensed escrow agent's compliance with the requirements set forth in this division and other factors the commissioner may by rule or order designate. (4) This subdivision shall apply only to examinations commenced after the effective date established by the rule or order of the commissioner for the factors described in paragraph (3). (d) Notwithstanding subdivision (c), the commissioner may conduct an indoctrination or preliminary examination, or both, under this section of any new licensee within one year of the issuance of the license under this division, and an examination described in subdivision (a) within two years of the issuance of the license under this division.


17405.1. The cost of every inspection and examination of a licensee or other person subject to this division shall be paid to the commissioner by the licensee or person examined, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost of an inspection or examination, the commissioner may use the estimated average hourly cost for all persons performing inspections or examinations of licensees or other persons subject to this division for the fiscal year. For the purposes of this section only, no person other than a licensee shall be deemed to be a person subject to this division unless and until the person is determined to be a person subject to this division by an administrative hearing in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code or by a judicial hearing in any court of competent jurisdiction.


17406. (a) Each licensee shall submit to the commissioner, at the licensee's own expense, an audit report containing audited financial statements covering the calendar year or, if the licensee has an established fiscal year, then for that fiscal year, within 105 days after the close of the calendar or fiscal year, as applicable. At that time, each licensee shall also file additional relevant information as the commissioner may require. (b) Within 30 days after receipt of a request from the commissioner, a licensee or other person subject to this division shall submit to the commissioner, at the person's own expense, an audit report containing audited financial statements covering the 12 calendar months next preceding the month of receipt of the request, or for another period as the commissioner may require. Unless the public interest shall otherwise require, the commissioner shall exempt a licensee from the provisions of subdivision (a) in whole or in part if the licensee has complied with a request pursuant to this subdivision as of a date within the calendar or fiscal year for which the exemption is granted. (c) A licensee whose license has been revoked shall submit to the commissioner, at its own expense, on or before 105 days after the effective date of the revocation, a closing audit report as of that effective date, or for another period as the commissioner may specify. The report shall include the information specified by the commissioner. A licensee who has complied with this subdivision is exempt from subdivision (a) of this section. (d) The reports and financial statements referred to in subdivisions (a) and (b) shall include at least a balance sheet and a statement of income for the year ended on the balance sheet date together with other relevant information as the commissioner may require. The reports and financial statements referred to in subdivisions (a), (b), and (c) shall be prepared in accordance with generally accepted accounting principles, and shall be accompanied by a report, certificate, or opinion of, an independent certified public accountant or independent public accountant. The audits shall be conducted in accordance with generally accepted auditing standards and the rules of the commissioner. (e) A licensee shall make other special reports to the commissioner as the commissioner may from time to time require. (f) For good cause and upon written request, the commissioner may extend the time for compliance with subdivisions (a) and (b). (g) A licensee shall, when requested by the commissioner, submit its unaudited financial statements, prepared in accordance with generally accepted accounting principles and consisting of at least a balance sheet and statement of income and expense as of the date and for the period specified by the commissioner. The commissioner may require the submission of these reports on a monthly or other periodic basis. (h) If the report, certificate, or opinion of the independent accountant referred to in subdivision (d) is in any way qualified, the commissioner may require the licensee to take action as he or she deems appropriate to permit an independent accountant to remove the qualifications from the report, certificate, or opinion. (i) The commissioner may reject any financial statement, report, certificate, or opinion by notifying the licensee or other person required to make the filing of its rejection and the cause of the rejection. Within 30 days after the receipt of the notice, the licensee or other person shall correct the deficiency and the failure so to do shall be deemed a violation of this division. The commissioner shall retain a copy of all rejected filings. (j) The commissioner may make rules specifying the form and content of the reports and financial statements referred to in this section, and may require that those reports and financial statements be verified by the licensee in the manner as he or she may prescribe. (k) Upon completion of the reports and financial statements referred to in subdivisions (a), (b), and (c), the independent accountant shall submit to the commissioner complete copies of the reports and financial statements at the same time that copies of the reports and financial statements are submitted to the licensee. (l) A licensee who engages an independent accountant or other third-party contractor to reconcile trust account records shall request the independent accountant or third-party contractor, at a minimum, to immediately notify the commissioner and Fidelity Corporation in the event of any of the following: (1) The termination or voluntary withdrawal of the independent accountant or third-party contractor from the engagement. (2) The discovery by the independent accountant or third-party contractor of an unreconcilable trust account debit balance. A debit balance exists if an escrow agent withdraws, pays out, or transfers money from an escrow account in excess of the amount to the credit of that account at the time of the withdrawal, payment, or transfer. (3) The discovery by the independent accountant or third-party contractor that trust account reconciliations have not been performed for two months after the end of any calendar month. (4) The discovery by the independent accountant or third-party contractor of exception items in trust account exception reports, that remain uncorrected for two months after the end of any calendar month. Notification pursuant to this subdivision may be accomplished by transmitting to the commissioner and Fidelity Corporation, in either electronic or paper form, copies of trust account reconciliation exception reports. Nothing in this subdivision imposes any duty or obligation on an independent accountant or third-party contractor to Fidelity Corporation, members of Fidelity Corporation, or the commissioner. (m) Nothing in this section shall be deemed to require a licensee to contract with a third party to reconcile trust account records.


17406.1. (a) Whenever the reports and financial statements required pursuant to subdivision (a), (b), or (c) of Section 17406 are to be reported upon or certified by an accountant other than the accountant reporting upon or certifying the licensee's most recent reports or financial statements, the licensee shall furnish the commissioner with a written notice stating whether there was any disagreement with the former accountant on any matter in connection with the preparation of the most recent reports or financial statements reported upon or certified by that former accountant. If there was any disagreement, the licensee's written notice shall describe the reasons for the disagreement. The written notice shall be signed by the chief executive officer of the licensee. The licensee shall also request, in writing, that the former accountant furnish the licensee with a letter addressed to the commissioner stating whether the former accountant agrees with the statements contained in the licensee's written notice. If the former accountant disagrees with any of the licensee's statements, the former accountant's letter shall explain the reasons for disagreeing with the licensee's statements. The written notice of the licensee, along with the former accountant's letter shall be filed with the commissioner no later than 30 days from the date of engagement of the new accountant. (b) The written notice of the licensee required by subdivision (a) shall be considered a notice for purposes of Section 17702.


17408. (a) If any person subject to this division fails to make any report required by law or by the commissioner, the commissioner may immediately cause the books, records, papers, and affairs of said person to be thoroughly examined. (b) The commissioner may impose, by order, a penalty on any person who fails, within the time specified in any written demand of the commissioner, (1) to make and file with the commissioner any report required by law or requested by the commissioner, or (2) to furnish any material information required by the commissioner to be included in the report. The amount of the penalty may not exceed one hundred dollars ($100) for each day for the first five days the report or information is overdue, and thereafter may not exceed five hundred dollars ($500) for each day the report or information is overdue. (c) If, after an order has been made under subdivision (b), a request for hearing is filed in writing within 30 days of the date of service of the order by the person to whom the order was directed, a hearing shall be held in accordance with the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and the commissioner shall have all the powers granted under that chapter. (d) If the person fails to file a written request for a hearing within 30 days of the date of service of the order, the order imposing the penalty shall be deemed a final order of the commissioner, and the penalty shall be paid within five business days. (e) If a hearing is requested, the penalty shall be paid within five business days after the effective date of any decision in the case ordering payment to be made.


17409. (a) All moneys deposited in escrow to be delivered upon the close of the escrow or upon any other contingency shall be deposited and maintained in a noninterest-bearing demand or checking account in a bank, a state or federal savings bank, or a state or federal savings association or in a noninterest-bearing account subject to immediate withdrawal in an industrial loan company insured by the Federal Deposit Insurance Corporation and approved to receive those moneys by the commissioner. Thereafter, these moneys may be deposited in an interest-bearing account in a bank, a state or federal savings bank, a state or federal savings association, an industrial loan company approved to receive those moneys by the commissioner, or a state or federal credit union, if the depositor is qualified for membership under the bylaws of that credit union, and the moneys are maintained separate, distinct, and apart from funds belonging to the escrow agent. Those funds, when deposited, are to be designated as "trust funds," "escrow accounts," or under some other appropriate name indicating that the funds are not the funds of the escrow agent. Upon request of the commissioner, a licensee shall furnish to the commissioner an authorization for examination of financial records of any trust funds or escrow accounts, maintained in a financial institution, in accordance with the procedures set forth in Section 7473 of the Government Code. (b) A licensee engaged in the business of receiving escrows for deposit or delivery of the types specified in subdivision (c) of Section 17312 and of the types not specified therein shall maintain separate escrow trust accounts, for both types of escrow business in the same manner as provided in subdivision (a) of this section and Sections 17409.1, 17410, 17411, and 17411.1. (c) Any agreement with a financial institution to establish a trust account pursuant to this section shall be accompanied by a letter from the licensee authorizing and requesting that the financial institution immediately notify the commissioner and Fidelity Corporation, in either electronic or paper form, when it becomes aware of either of the following: (1) The closure of any account subject to this section, other than to transfer the funds to another designated trust account at the same financial institution in the name of the escrow agent or the remittance of the funds to the Controller's office for escheat purposes. (2) The occurrence of any overdraft balance in an account subject to this section. This subdivision does not impose any duty or obligation on a financial institution to Fidelity Corporation, members of Fidelity Corporation, or the commissioner.

17409.1. (a) Each person subject to this chapter shall maintain separate escrow trust accounts for each licensed location. Transfers between accounts are prohibited except by the actual writing of a check from one escrow to the other, and by depositing the check for the account of, and the writing of a receipt for the escrow to which the funds are being transferred. Each transfer shall be properly supported and documented in escrow files by inclusion of escrow instructions executed by the principals authorizing the transfer. (b) With regard to Internet escrow companies, transfers to trust accounts by commercial banks and from operating accounts to cover losses may be made through wire transfer. Receipts for all these transactions may be maintained in electronic form.


17410. (a) Escrow or trust funds are not subject to enforcement of a money judgment arising out of any claim against the licensee or person acting as escrow agent, and in no instance shall such escrow or trust funds be considered or treated as an asset of the licensee or person performing the functions of an escrow agent. (b) Interest paid or payable on funds deposited in escrow by a licensee are not subject to enforcement of a money judgment arising out of any claim against the licensee or person acting as escrow agent.

17411. No person shall knowingly keep or cause to be kept any funds or money in any bank or state or federal savings and loan association under the heading of "trust funds" or "escrow accounts" or any other name designating such funds or money as belonging to the clients of any escrow agency, except actual escrow or trust funds deposited with such agency.


17411.1. "Trust funds" or "escrow accounts" as used in Sections 17409, 17410, and 17411 shall include all funds required to be held by an escrow agent pursuant to a federal or state law, or requirement of a governmental agency.

17414. (a) It is a violation for any person subject to this division or any director, stockholder, trustee, officer, agent, or employee of any such person to do any of the following: (1) Knowingly or recklessly disburse or cause the disbursal of escrow funds otherwise than in accordance with escrow instructions, or knowingly or recklessly to direct, participate in, or aid or abet in a material way, any activity which constitutes theft or fraud in connection with any escrow transaction. (2) Knowingly or recklessly make or cause to be made any misstatement or omission to state a material fact, orally or in writing, in escrow books, accounts, files, reports, exhibits, statements, or any other document pertaining to an escrow or escrow affairs. (b) Any director, officer, stockholder, trustee, employee, or agent of an escrow agent, who abstracts or willfully misappropriates money, funds, trust obligations or property deposited with an escrow agent, is guilty of a felony. Upon conviction, of an offense under this section or similar offenses specified in Chapter 4 (commencing with Section 470), Chapter 5 (commencing with Section 484), or Chapter 6 (commencing with Section 503) of Title 13 of Part 1 of the Penal Code, the court shall, in addition to any other punishment imposed, order the person to make full restitution, first to the escrow agent and then to Fidelity Corporation, to the extent it has indemnified the escrow agent. 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. (c) Any person subject to this division who knows of a person's involvement in an abstraction or misappropriation of money, funds, trust obligations, or property deposited with a licensed escrow agent shall immediately report the abstraction or misappropriation in writing to the commissioner and to Fidelity Corporation. No person shall be civilly liable for reporting as required under this subdivision, unless the information provided in the report is false and the person providing false information does so with knowledge and malice. The reports filed under this section, including the identity of the person making the filing, shall remain confidential pursuant to state law.

17414.1. (a) Any person who has been convicted of or pleaded nolo contendere to any crime specified in subdivision (b) within the past 10 years, or has been held liable in any civil action by final judgment or any administrative judgment by any public agency within the past seven years, of any of the provisions specified in subdivision (b), shall not serve in any capacity as an officer, director, stockholder, trustee, agent, or employee of an escrow agent, or in any position involving any duties with an escrow agent, in this state. This subdivision shall not apply to any person whose office, employment, ownership interest, or other participation in the business of a licensed escrow agent commenced prior to January 1, 1992. (b) Subdivision (a) applies to criminal convictions of, pleas of nolo contendere to, or civil or administrative judgments entered for offenses including the following: (1) Offenses specified in Chapter 18 (commencing with Section 3350) of Division 1. (2) Offenses specified in Article 4 (commencing with Section 5300) of Chapter 1 of Division 2. (3) Offenses specified in Article 8 (commencing with Section 14750) of Chapter 4 of Division 5. (4) Offenses specified in Chapter 3 (commencing with Section 17400), and Chapter 7 (commencing with Section 17700) of Division 6. (5) Offenses specified in Chapter 6 (commencing with Section 18435) of Division 7. (6) Offenses specified in provisions of the laws of the United States added or amended by the federal Financial Institutions Reform, Recovery and Enforcement Act of 1989 (Public Law 101-73). (7) Offenses involving robbery, burglary, theft, embezzlement, fraud, fraudulent conversion or misappropriation of property, forgery, bookmaking, receiving stolen property, counterfeiting, controlled substances, extortion, checks, credit cards, or computer violations specified in Section 502 of the Penal Code. For the purpose of this section, but not Section 17423, an offense does not include a conviction for which the person has obtained a certificate of rehabilitation from a court of competent jurisdiction under Section 1203.4 or 4852.13 of the Penal Code or a similar certificate of rehabilitation obtained in a foreign jurisdiction. (c) On and after January 1, 1992, any person who seeks employment by, or an ownership interest in, or other participation in the business of a licensed escrow agent shall, as a condition to obtaining that employment, interest, or participation, authorize Fidelity Corporation and the commissioner, or both, to have access to that person's state and federal summary criminal history information, as defined in Section 11105 of the Penal Code, for purposes of determining whether the person has a prior conviction of, or pleaded nolo contendere to, a criminal offense specified in subdivision (b). (d) On or before the 10th day of employment, each escrow agent shall obtain and forward to the commissioner the fingerprint images and related information of persons seeking employment by an escrow agent. The fingerprint images and related information may be submitted by certified mail, return receipt requested, or transmitted electronically, using the process established by the Department of Justice for requesting state and federal summary criminal history information. Persons who have previously submitted fingerprints or fingerprint images and related information to the commissioner may so notify the commissioner and need not submit additional fingerprint images and related information unless requested to do so by the commissioner. The commissioner shall provide written notice to both the escrow agent and to the person if any of the information received pursuant to this division shows that the person's employment would be in violation of Section 17414.1, and the escrow agent shall deny the person the employment. No person whose employment is in violation of subdivision (a) shall have access to trust funds or sign checks or otherwise perform any activities related to the processing of escrow transactions after the licensed escrow agent has been notified by the commissioner that the person's employment is in violation of subdivision (a). (e) Any state and federal summary criminal history information obtained pursuant to this section shall be kept confidential and no recipient shall disclose the contents other than for the purpose of determining eligibility for employment by, or acquisition of an ownership interest in, or other participation in the business of a licensed escrow agent. (f) The authority granted by this section to the commissioner or to Fidelity Corporation shall be in addition to any other authority granted by law to obtain information about any person who is subject to this division. Nothing in this section shall be construed to limit any authority of the commissioner or Fidelity Corporation otherwise provided by law. (g) Any person who knowingly violates subdivision (a) or (d), including, but not limited to, any escrow agent who permits employment by, or an ownership interest in, or other participation in the business of an escrow agent in violation of subdivision (a) or (d) shall, upon conviction, be subject to punishment as set forth in Section 17700. Any person who knows of a violation of subdivision (a) or (d) shall immediately report the violation in writing to the commissioner. No person shall be civilly liable for reporting as required under this subdivision, unless the information provided in the report is false and the person providing false information does so with knowledge and malice. The reports filed under this section, including the identity of the person making the filing, shall remain confidential pursuant to state law. (h) Nothing in this section shall be construed to permit the reinstatement of any person barred by the commissioner pursuant to Section 17423 nor to prohibit the commissioner from bringing any action pursuant to Section 17423. (i) If any provision of this section or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of this section which can be given effect without the invalid provision or application, and to this end the provisions of this section are severable.


17414.2. (a) In response to any written request by an escrow agent or by Fidelity Corporation, any bank, savings association, credit union, any other financial institution, or any other exempt person specified in Section 17006, an escrow agent or Fidelity Corporation may provide a written employment reference that advises of the person' s involvement in a crime or act specified in Section 17414 or subdivision (b) of Section 17414.1, or any theft, embezzlement, misappropriation, or other defalcation which has been reported to federal authorities pursuant to federal banking guidelines, or that has been reported to the commissioner or Fidelity Corporation, pursuant to this division. In order for the immunity provided in subdivision (b) to apply, a copy of the written employment reference shall be sent concurrently by the Fidelity Corporation, person, entity, escrow agent, bank, savings association, credit union, any other financial institution, or exempt person specified in Section 17006 providing the reference, to the last known address of the person concerning whom the reference is provided. (b) No licensed escrow agent, bank, savings association, credit union, any other financial institution, exempt person specified in Section 17006, or Fidelity Corporation shall be civilly liable for providing an employment reference as specified in subdivision (a), unless the information provided is false and the licensed escrow agent, bank, savings association, credit union, any other financial institution, or exempt person specified in Section 17006, or Fidelity Corporation providing false information does so with knowledge and malice.

17415. (a) If the commissioner, as a result of any examination or from any report made to him or her, shall find that any person subject to this division is in an insolvent condition, is conducting escrow business in such an unsafe or injurious manner as to render further operations hazardous to the public or to customers, has failed to comply with the provisions of Section 17212.1 or 17414.1, has permitted its tangible net worth to be lower than the minimum required by law, has failed to maintain its liquid assets in excess of current liabilities as set forth in Section 17210, or has failed to comply with the bonding requirements of Chapter 2 (commencing with Section 17200) of this division, the commissioner may, by an order addressed to and served by registered or certified mail or by personal service on such person and on any other person having in his or her possession or control any escrowed funds, trust funds or other property deposited in escrow with said person, direct discontinuance of the disbursement of trust funds by the parties or any of them, the receipt of trust funds, the delivery or recording of documents received in escrow, or other business operations. No person having in his or her possession any of these funds or documents shall be liable for failure to comply with the order unless he or she has received written notice of the order. Subject to subdivision (b), the order shall remain in effect until set aside by the commissioner in whole or in part, the person is the subject of an order for relief in bankruptcy, or pursuant to Chapter 6 (commencing with Section 17621) of this division the commissioner has assumed possession of the escrow agent. (b) Within 15 days from the date of an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) 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. Neither the request for a hearing nor the hearing itself shall stay the order issued by the commissioner under subdivision (a).


17416. Whenever in the opinion of the commissioner any person, except as named in Section 17006, is engaged, either actually or through subterfuge, in the business of receiving escrows for deposit or delivery as defined in this division, without a license from the commissioner the commissioner may order that person to desist and to refrain from engaging in that business. If, within 30 days after such an order is served, a request for a hearing is filed in writing and the hearing is not held within 60 days thereafter, the order is rescinded.

17419. On and after January 1, 1992, any person seeking employment with an escrow agent shall complete an employment application on or before the first day of employment which includes, at least, the following information. A copy of the employment application shall be forwarded to the commissioner on or before the first day of the applicant's employment. Persons required to file a statement of identity and questionnaire pursuant to subdivision (g) of Section 17209 or Section 17212.1 are not required to file the employment application set forth in this section. Each person completing the employment application shall be given the notice required by the Information Practices Act (Section 1798.17 of the Civil Code), copies of which may be obtained from the commissioner. Nothing in this section shall limit an escrow agent from requesting additional information from an applicant. STATEMENT OF IDENTITY AND EMPLOYMENT APPLICATION Name of Escrow Company:________________________ Escrow Agent License Number:_____________________ 1. Exact Full Name: _________________________________________________ (Please Print or Type) First Name Middle Name Last Name (Do not use initials or nicknames) Title of position to be filled in connection with the preparation of this employment application. _________________________________________________

2. Employment for the last 10 years:

+--------+-----------+-------------+---------------+ | | | Employer | Occupation and| | From | To | Name and | Duties | | | | Address | | +--------+-----------+-------------+---------------+ | | Present | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+ | | | | | +--------+-----------+-------------+---------------+

NOTE: Attach separate schedule if space is not adequate. 3. Residence addresses for the last 10 years:

+--------+-----------+----------+---------+---------+ | From | To | Street | City | State | +--------+-----------+----------+---------+---------+ | | Present | | | | +--------+-----------+----------+---------+---------+ | | | | | | +--------+-----------+----------+---------+---------+ | | | | | | +--------+-----------+----------+---------+---------+

NOTE: Attach separate schedule if space is not adequate.

4. Have you ever been named in any order, judgment or decree of any court or any governmental agency or administrator, temporarily or permanently restraining or enjoining you from engaging in or continuing any conduct, practice or employment?

( ) Yes ( ) No If the answer is "Yes," please complete the following: Date of Suit:_____________________________________ Location of Court (City, County, State):__________ Nature of Suit:___________________________________ Note: Attach a certified copy of any order, judgment, or decree.

5. Have you ever been refused a license to engage in any business in this state or any other state, or has any such license ever been suspended or revoked?

( ) Yes ( ) No If the answer is "Yes," please complete the following: State:____________________________ Title of State Department:______________________________________ Nature of License and Number:__________________________________________ Note: Attach a certified copy of any order, judgment, or decree.

6. Have you ever been convicted of or pleaded nolo contendere to a crime other than minor traffic citations that do not constitute a misdemeanor or felony offense? NOTE: A conviction is a plea or verdict of guilty or a conviction following a plea of nolo contendere. A conviction also includes an order granting probation and suspending the imposition of sentence, notwithstanding a subsequent order pursuant to Sections 1203.4 or 1203.4a of the Penal Code permitting the person to withdraw his or her plea of guilty, or dismissing the accusation, information, or indictment.

( ) Yes ( ) No If the answer is "Yes," please complete the following: Date of Case:_____________________________________ Location of Court (City, County, State):__________ Nature of Case:___________________________________ Note: Attach a certified copy of any order, judgment, or decree.

7. Have you ever been a defendant in a civil court action other than divorce, condemnation or personal injury?

( ) Yes ( ) No If the answer is "Yes," please complete the following: Date of Suit:_____________________________________ Location of Court (City, County, State):__________ Nature of Suit:___________________________________ Note: Attach a certified copy of any order, judgment, or decree.

8. Have you ever changed your name or ever been known by any name other than that herein listed? (Including a woman's maiden name)

( ) Yes ( ) No If so, explain. Change in name through marriage or court order should also be listed. EXACT DATE OF EACH NAME CHANGE MUST BE LISTED. __________________________________________________ __________________________________________________

9. Have you ever done business under a fictitious firm name either as an individual or in the partnership or corporate form?

( ) Yes ( ) No If the answer is "Yes," set forth particulars: ___________________________________________________ ___________________________________________________

10. Have you ever been a subject of a bankruptcy or a petition in bankruptcy?

( ) Yes ( ) No

If the answer is "Yes," give date, title of case, location of bankruptcy filing: __________________________________________________ __________________________________________________ __________________________________________________

11. Have you ever been refused a bond, or have you ever had a bond revoked or canceled?

( ) Yes ( ) No If the answer is "Yes," give details: __________________________________________________ __________________________________________________ 12.In what capacity will you be employed? ________ (e.g., Clerk, Escrow Officer, Receptionist, etc.)

13. Do you expect to be a party to, or broker or salesperson in connection with, escrows conducted by the escrow company which is employing you?

( ) Yes ( ) No If the answer is "Yes," please explain: ___________________________________________________ ___________________________________________________ ___________________________________________________ NOTE: Attach separate schedule if space is not adequate.

VERIFICATION I, the undersigned, state that I am the person named in the foregoing Statement of Identity and Employment Application; that I have read and signed the Statement of Identity and Employment Application and know the contents thereof, including all exhibits attached thereto, and that the statements made therein, including any exhibits attached thereto, are true. Any person who knows or should have known of a violation of this section shall immediately report the violation in writing to the commissioner.

I certify/declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed at______________ (City) _________________________ (County) (State) this_______day of , 20__. _________________________ (Signature of Declarant)


17420. Except for the normal compensation of his own employees, it shall be a violation of this division for any person subject to this division to pay over to any other person any commission, fee, or other consideration as compensation for referring, soliciting, handling, or servicing escrow customers or accounts. It shall also be a violation for any person to enter into any arrangement, either of his own making or of a subsidiary nature, or through any other person having a dual capacity, or through any person having a direct or indirect interest in the escrow, or other device permitting any fee, commission, or compensation which is contingent upon the performance of any act, condition, or instruction set forth in an escrow to be drawn or paid, either in whole or in part, or in kind or its equivalent, prior to the actual closing and completion of the escrow.

17421. Notwithstanding the provisions of Section 17420, a disbursal, other than for a fee, commission or compensation may be advanced or paid out prior to the close of an escrow if the written instructions of all parties to the transaction so provide.


17421.5. (a) Notwithstanding Section 17420, a licensee may charge a fee for administering an escrow that has been postponed for at least two months from the most recent closing date agreed upon by the parties in the written instructions or has been canceled if all of the following requirements are met: (1) The postponement or cancellation resulted from the acts or omissions of the parties to the escrow transaction. (2) The fee was disclosed in the written instructions in not less than 8-point bold type on the face or front page of the instructions. (3) The principal parties to the escrow transaction have executed the written fee instructions by initialing those instructions. (b) This section shall apply to written instructions made on and after January 1, 2008.

17422. A joint control agent, unless acting pursuant to written instructions of his principals, shall not disburse funds for the payment of the cost of labor, materials, services, permits, fees, or other items of expense incurred in the construction of improvements upon real property until such time as he determines that the person furnishing such labor, materials, services, permits, fees, or other items has substantially complied with the specifications contained in the control agreement.


17423. (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 escrow agent, 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 escrow agent 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 specified in subdivision (b) of Section 17414.1, 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 5 (commencing with Section 11500) 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 escrow processing activities, including disbursing any trust funds in the escrow agent's possession, custody or control, and the financial institution holding trust funds shall be so notified by service of the notice, accusation and other administrative pleadings. The prohibition against disbursement of trust funds may be set aside, in whole or in part, by the commissioner for good cause. (d) Fidelity Corporation shall disclose to all licensees the identity of persons who have been censured, suspended, or barred from any position of employment, management, or control. (e) Persons suspended or barred under this section are prohibited from participating in any business activity of a licensed escrow agent and from engaging in any business activity on the premises where a licensed escrow agent is conducting escrow business. This subdivision shall not be construed to prohibit suspended or barred persons from having their personal escrow transactions processed by a licensed escrow agent. (f) This section shall apply to any violation, conviction, plea, or judgment occurring at any time prior to and after the enactment of this section. (g) The provisions of Section 17414.1 exempting convictions for which a person has obtained a certificate of rehabilitation from the prohibition against serving as an officer, director, stockholder, trustee, agent, or employee of an escrow agent, or in any position involving any duties with an escrow agent, shall not apply to permit the reinstatement of any person barred by the commissioner pursuant to this section, nor to prohibit the commissioner from bringing any action pursuant to this section. (h) If any provision of this section or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of this section which can be given effect without the invalid provision or application, and to this end the provisions of this section are severable.


17423.1. (a) (1) Whenever the commissioner takes any enforcement or disciplinary action pursuant to Section 17423, upon the action becoming final the commissioner shall notify the Real Estate Commissioner and the Insurance Commissioner of the action or actions taken. The purpose of this notification is to alert the departments that enforcement or disciplinary action has been taken, if the person seeks or obtains employment with entities regulated by the departments. (2) The commissioner shall provide the Real Estate Commissioner and the Insurance Commissioner, in addition to the notification of the action taken, with a copy of the written accusation, statement of issues, or order issued or filed in the matter and, at the request of the Real Estate Commissioner or Insurance Commissioner, with any underlying factual material relevant to the enforcement or disciplinary action. Any confidential information provided by the commissioner to the Insurance Commissioner or the Real Estate Commissioner shall not be made public pursuant to this section. Notwithstanding any other provision of law, the disclosure of any underlying factual material to the Insurance Commissioner or the Real Estate Commissioner shall not operate as a waiver of confidentiality or any privilege that the commissioner may assert. (b) The commissioner shall establish and maintain, on the Web site maintained by the Department of Corporations, a separate and readily identifiable database of all persons who have been subject to any enforcement or disciplinary action that triggers the notification requirements of this section. The database shall also contain a direct link to the databases, described in Section 10176.1 of the Business and Professions Code and Section 12414.31 of the Insurance Code and required to be maintained on the Web sites of the Department of Real Estate and the Department of Insurance, respectively, of persons who have been subject to enforcement or disciplinary action for malfeasance or misconduct related to the escrow industry by the Insurance Commissioner and the Real Estate Commissioner. (c) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State of California, the Department of Corporations, the Commissioner of Corporations, any other state agency, or any officer, agent, employee, consultant, or contractor of the state, for the release of any false or unauthorized information pursuant to this section, unless the release of that information was done with knowledge and malice, or for the failure to release any information pursuant to this section.


17424. (a) For any licensee, a disciplinary action taken by the State of California, another state, an agency of the federal government, or another country for an action substantially related to the activity regulated under this division may be grounds for disciplinary action by the commissioner. A certified copy of the record of the disciplinary action taken against the licensee by the State of California, other state, agency of the federal government, or other country shall be conclusive evidence of the events related therein. (b) Nothing in this section shall preclude the commissioner from applying a specific statutory provision in this division providing for discipline against a licensee as a result of disciplinary action taken against a licensee by the State of California, another state, an agency of the federal government, or another country.


17425. Any person subject to this division or any director, stockholder, trustee, officer, agent, or employee of that person who violates any provision of the federal Real Estate Settlement Procedures Act, as amended (12 U.S.C. Sec. 2601 et seq.), or any regulation promulgated thereunder, violates this division.


Chapter 4. Revocation Of License

Ca Codes (fin:17600-17609.2) Financial Code Section 17600-17609.2



17600. (a) An escrow agent's license remains in effect until surrendered, revoked, or suspended. (b) A licensee that ceases to engage in the business regulated by this division and desires to no longer be licensed shall notify the commissioner in writing and, at that time, tender the license and all other indicia of licensure to the commissioner. Within 105 days of the written notice to the commissioner, the licensee shall submit to the commissioner, at its own expense, a closing audit report as of the date the license is tendered to the commissioner for surrender, or for another period as the commissioner may specify, to be performed by an independent certified public accountant. The closing audit shall include, but not be limited to, information required by the commissioner, a bank reconciliation of the trust account, and a verified statement from a certified public accountant confirming lawful disbursement of funds. A license is not surrendered until the commissioner has reviewed and accepted the closing audit report, a determination has been made by the commissioner that acceptance of the surrender is in the public interest, and tender of the license is accepted in writing by the commissioner.


17601. If the commissioner has reason to believe that any escrow agent is violating the provisions of this division, the commissioner may investigate the escrow agent's business and examine the books, accounts, records, and files used in the business of every escrow agent and of every person who acts or claims to act as principal or agent under or without the authority of this division. For the purposes of examination the commissioner and representatives of the commissioner shall have free access to the offices and places of business, books, accounts, records, papers, files, safes, and vaults of all persons examined. The cost of any investigation, inspection, and examination of a licensee under this section shall be paid to the commissioner as provided in Section 17405.1.


17602. If it appears to the commissioner that any licensed escrow agent has violated its articles of incorporation, or any law or rule binding upon it, the commissioner shall, by written order addressed to the agent direct the discontinuance of such violation. The order shall be effective immediately, but shall not become final except in accordance with the provisions of Section 17604.


17602.5. If any licensed escrow agent fails to make any reports required by law or by the commissioner within ten (10) days from the day designated for the making of the reports, or within any extension of time granted by the commissioner, or fails to include therein any matter required by law or by the commissioner, such failure shall constitute grounds for the suspension or revocation of the license held by such escrow agent.


17603. If it appears to the commissioner that any licensed escrow agent is conducting business in an unsafe or injurious manner, the commissioner shall, by written order addressed to the agent direct the discontinuance of such unsafe or injurious practices. The order shall be effective immediately, but shall not become final except in accordance with the provisions of Section 17604.


17604. No order issued pursuant to Sections 17602 or 17603 may become final except after notice to any licensed escrow agent affected thereby of the intention of the commissioner to make such order final and of the reasons therefor and that upon receipt of a request the matter will be set down for hearing to commence within 15 business days after such receipt unless the licensed agent affected consents to a later date. If no hearing is requested within 30 days after the mailing of such notice and none is ordered by the commissioner, the order may become final without hearing and the licensed escrow agent shall immediately discontinue the practices named in the order. If a hearing is requested or ordered, it shall be held in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and the commissioner shall have all of the powers granted thereunder. If upon the hearing, it appears to the commissioner that the licensed agent is conducting business in an unsafe and 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 escrow agent shall immediately discontinue the practices named in the order.


17605. The licensed escrow agent has ten (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 ten (10) days by the court in which the suit is brought, the licensed escrow agent shall comply with the order.


17606. The commissioner may immediately revoke by order the escrow agent's license if the licensee fails to comply with any order, unless the escrow agent secures a court order restraining the enforcement of the commissioner's revocation order.


17606.1. The license of an escrow agent shall be deemed revoked upon the completion or closure of a court approved liquidation of the business of the escrow agent, whether pursuant to Section 17635 or 17636, or otherwise, unless the escrow agent within 10 days of the court's order approving the closing or completion of liquidation secures a court order restraining the revocation from taking effect.


17607. (a) 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 division or any rule or order hereunder, the commissioner may in the commissioner's discretion bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with this law or any rule or order hereunder. Upon a proper showing a permanent or preliminary injunction, restraining order, or writ of mandate shall be granted and a receiver, monitor, conservator, or other designated fiduciary or officer of the court, which may include the commissioner, may be appointed for the defendant or the defendant's assets, or any other ancillary relief may be granted as appropriate. A receiver, monitor, conservator, or other designated fiduciary or officer of the court appointed by the superior court pursuant to this section may, with the approval of the court, exercise any or all of the powers of the defendant's officers, directors, partners, trustees, or 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 other designated fiduciary or 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. (b) If the commissioner determines it is in the public interest, the commissioner may include in any action authorized by subdivision (a) a claim for ancillary relief, including, but not limited to, a claim for restitution or disgorgement or damages on behalf of the persons injured by the act or practice constituting the subject matter of the action, and the court shall have jurisdiction to award additional relief.

17608. The commissioner may, after notice and a reasonable opportunity to be heard, suspend or revoke any license if he finds that: (a) The licensee has failed to maintain in effect a bond required under the provisions of this division. (b) The licensee has violated any provision of this division or any rule made by the commissioner under and within the authority of this division. (c) 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.

17609. The revocation, suspension, surrender or expiration of an escrow agent's license does not impair or affect pre-existing escrows lawfully contracted, but nothing contained in this division shall be deemed to authorize the acceptance of further funds or documents into escrow subsequent to such revocation, surrender or expiration or during any period of suspension.


17609.1. The power of investigation and examination by the commissioner is not terminated by the surrender, suspension, or revocation of any license issued by him.


17609.2. Whenever the commissioner deems it necessary for the general welfare of the public, the commissioner has continuous authority to exercise the powers set forth in this division whether or not an application for a license has been filed with the commissioner, any license has been issued, or if issued, has been surrendered, suspended, or revoked.


Chapter 5. Hearings

Ca Codes (fin:17610-17614) Financial Code Section 17610-17614



17610. The commissioner, and all persons designated by him, may administer oaths, take the testimony of witnesses, and issue subpenas 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.


17611. (a) The commissioner may make such investigations as he or she deems necessary to determine whether any person has violated or is about to violate any provision of this division or any rule or order hereunder or to aid in the enforcement of this division. The commissioner may publish information concerning any violation of this division or any rule or order hereunder. (b) In making any investigation authorized by subdivision (a), the commissioner may, for a reasonable time not exceeding 30 days, take possession of the books, records, accounts, and other papers pertaining to the business of any escrow agent or joint control agent and place a keeper in exclusive charge of them in the place where they are usually kept. During such possession no person shall remove or attempt to remove any of the books, records, accounts, or other papers except pursuant to a court order or with the consent of the commissioner. However, the directors, officers, partners, and employees of the escrow agent or joint control agent may examine the books, records, accounts, or other papers and the employees shall be permitted to make entries therein reflecting current transactions. (c) For the purpose of any investigation or proceeding under this division, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry. (d) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application of the commissioner, may issue to the person an order requiring him or her to appear before the commissioner, or the officer designated by the commissioner, there to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt. (e) No person is excused from attending and testifying or from producing any document or record before the commissioner, or in obedience to the subpoena of the commissioner, or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise) required by the commissioner may tend to incriminate the person or subject him or her to a penalty or forfeiture. However, no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he or she is compelled, after validly claiming his or her privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testimony is not exempt from prosecution and punishment for perjury or contempt committed in testifying.


17612. The authority to make or conduct any examination, investigation, or hearing, including the authority to administer oaths and to subpena 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.

17613. All hearings provided for in this division shall be conducted in accordance with the provisions of Chapter 5, 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 17604 may be presided over by a hearing officer qualified under Section 11502 of the Government Code, or by any deputy designated by the commissioner.


17614. Every order, decision, license or other official act of the commissioner is subject to review, in accordance with law.


Chapter 6. Liquidation And Conservatorship

Article 1. Possession By Commissioner

Ca Codes (fin:17621-17629) Financial Code Section 17621-17629



17621. Whenever it appears to the commissioner that any escrow agent subject to this division: (a) Is in an insolvent condition; (b) Is conducting escrow business in an unsafe or unauthorized manner; (c) Has violated its charter or any law of the State of California; (d) Refuses to submit its books, papers and affairs to the inspection of any examiner; (e) Neglects or refuses to observe any order of the commissioner made pursuant to the provisions of this division, within the time specified therein, unless the enforcement of such order is restrained in a proceeding brought by the escrow agent; (f) Any officer, director, or trustee of such escrow agent refuses to be examined upon oath touching the business of such escrow agent; (g) Any officer, director, stockholder, or trustee of such escrow agent, or attorney in fact of such escrow agent has embezzled, sequestered, or willfully diverted the assets or trust funds of such escrow agent; (h) Has permitted its tangible net worth to be lower than the minimum required by law; (i) Has failed to comply with the bonding requirements of Chapter 2 of this division the commissioner shall dispatch a written notice and summary of findings, as referred to in Section 17415, to the principal officer of the escrow agent involved or to its manager of record; and such escrow agent shall be afforded a reasonable opportunity to comply or otherwise effect such remedies as the commissioner may deem acceptable. However, should the escrow agent so notified fail to comply within five days of receipt of the notice, or as soon as it appears to the commissioner that no compliance is possible, or in the event prompt delivery of the prescribed written notice is impossible, the commissioner may forthwith take possession of the property and business of such escrow agent and retain possession until such escrow agent resumes business or its affairs be finally liquidated as provided in this chapter. The escrow agent, with the consent of the commissioner, may resume business upon such conditions as the commissioner may prescribe.


17622. Whenever the commissioner has taken possession of any licensee, such licensee, within 10 days after such taking, if it deems it is 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 such application or enjoin the commissioner from further proceeding and direct him to surrender the property and business to the licensee, or make such further order as may be just.


17623. An appeal from a judgment enjoining the commissioner from further proceedings and directing the commissioner to surrender the business, property, and assets to the licensee does not operate as a stay of the judgment, unless the trial court in its discretion so orders. If the judgment dismisses the action an appeal therefrom does not operate as a stay of the judgment but the court rendering the judgment may, in its discretion enjoin the commissioner pending the appeal, from further proceedings and direct the commissioner, pending the appeal, to surrender the business, property, and assets to the licensee, if an undertaking is given as required by Chapter 2 (commencing with Section 916) of Title 13 of Part 2 of the Code of Civil Procedure.


17625. If the commissioner's demand for the possession of the property, business and assets is not complied with within 24 hours after service of the demand, the commissioner may call to his assistance the sheriff of the county in which the principal place of business of such licensee is located, by giving the sheriff written demand the sheriff shall enforce the demands of the commissioner.


17626. When the commissioner takes possession of the property, business and assets of any licensee, such licensee or the president and secretary of such licensee shall make and deliver to the commissioner verified schedules of its property, assets, and funds held in escrow. The commissioner may at any time examine under oath any licensee, or any officer, director, trustee, agent, or employee of such licensee, to determine whether or not all such property, assets, and funds held in escrow have been transferred and delivered to his possession.

17627. The commissioner may issue subpoenas and require the attendance of parties for examination under this article as provided for in this chapter.

17628. When the commissioner takes possession of the business, property, and assets of a licensee, he may appoint a custodian. The commissioner may require a good and sufficient bond from the custodian and place him in charge as his representative.


17629. When the commissioner takes possession of the property, business, and assets of a licensee, he may collect all money due to such licensee and give receipt therefor. The commissioner may do such other acts as are necessary or expedient to collect, conserve, or protect the licensee's business, property, and assets.



Article 2. Conservatorship

Ca Codes (fin:17630-17634) Financial Code Section 17630-17634



17630. If any facts occur which would entitle the commissioner under Section 17621 to take possession of the property, business and assets of a licensee the commissioner may appoint a conservator of a licensee and require of him such bond as the commissioner deems proper. The commissioner may also, upon the request of the board of directors of a licensee, appoint a conservator of such licensee and require of him such bond as the commissioner deems proper. The conservator, under the direction of the commissioner, shall take possession of the property, business and assets of the licensee and take such action as he may deem necessary to conserve the assets of such licensee pending further disposition of its business. The conservator shall retain such possession until the property, business and assets of the licensee are returned to the licensee or until further order of the commissioner.


17631. Subject to the other provisions of this article, a conservator, while in possession of the property, business and assets of a licensee, has the same powers and rights and is subject to the same duties and obligations as the commissioner while in possession of the property, business and assets of a licensee; and during such time the rights of a 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 such property, business and assets. A conservator, while in possession of the property, business and assets of a licensee, shall have all the rights, powers and privileges of the licensee, its officers and directors. All expenses of any such 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, fixed by the commissioners, in an amount no greater than that which would be paid by the commissioner to a special deputy in charge of the liquidation of the licensee.


17632. Upon appointing a conservator the commissioner shall cause to be made and completed at the earliest possible date such an examination of the affairs of the licensee as shall be necessary to inform him as to its financial condition.


17633. A conservator, while in possession of the property, business and assets of a licensee, may call, upon the notice required by the licensee's bylaws, a meeting of the investors of the licensee who are entitled to vote, for any purpose, including without limitation the election of a board of directors, and upon the holding of a meeting for such purpose the terms of office of all directors shall expire, or may call, upon the notice required by the licensee's bylaws, a meeting of the board of directors for any purpose, including without limitation the filling of vacancies on the board of directors or the removal and election or the removal or election of officers. Each such meeting shall be supervised by the conservator.


17634. If the commissioner becomes satisfied that it may be done safely and in the public interest, he may terminate the conservatorship and permit the licensee for which a conservator was appointed to resume its business under direction of its board of directors, subject to such terms, conditions, restrictions and limitations as he may prescribe.


Article 3. Liquidation By The Commissioner

Ca Codes (fin:17635-17654) Financial Code Section 17635-17654



17635. If at any time after taking possession of the property and business of a licensee it shall appear to the commissioner that it would be futile to proceed as conservator with the conduct of the business of such person he may apply to the superior court of the county in which is located the principal office of such person in this State for an order to liquidate and wind up the business of said person. Upon a full hearing of such application, the court may make an order directing the winding up and liquidation of the business of such person by the commissioner, as liquidator.


17636. Whenever the commissioner has taken possession of the property and business of a licensee he may petition the superior court for the appointment of a receiver to liquidate the affairs of the licensee.

17637. The commissioner may appoint one or more special deputies to assist in the duties of liquidation and distribution under his direction and may also employ such special legal counsel, accountants, and assistants as may be needed and required and fix their salaries and compensation. All such salaries and compensation with other reasonable and necessary expenses as may be incurred in the liquidation shall be paid by the commissioner from the funds of the licensee in his hands. Such expenses shall include, among other things, that part of the salary of the commissioner and of his deputies, auditors, accountants, appraisers and other assistants, and that part of the general expenses of the commissioner's office, as fairly represent, in the opinion of the commissioner, the proportion properly attributable to such liquidation.


17638. In liquidating the affairs of a licensee the commissioner may: (a) Collect all money due to, and claims of, the licensee and give receipt therefor. (b) Approve and pay all just and equitable claims. (c) Commence and prosecute all actions and proceedings necessary to enforce liquidation. (d) Compound bad or doubtful debts or claims, borrow money, sell, convey, or transfer real or personal property, on order of the superior court of the county in this State in which the principal office of the licensee is located. The order shall be made after hearing and on such notice as the court prescribes.


17639. After the issuance of an order of liquidation under Section 17635, any of the following transactions occurring within four months prior to the application for such order shall be voidable by the commissioner if such transaction has the effect of giving to or enabling any creditor of the licensee to obtain a preference over any other creditor, or to obtain a greater percentage of his debt than any other creditor: (a) A transfer of property of the licensee. (b) The creation of a lien upon the property of the licensee. (c) The suffering of a judgment against such person.


17640. If the commissioner is in possession of the business, property, and assets of a licensee, whether or not he is liquidating the affairs of such licensee, the commissioner may: (a) Apply to the superior court of the county in this State in which the principal office of the licensee is located for an order confirming any action taken by the commissioner, or authorizing the commissioner to do any act or execute any instrument not expressly authorized by this part. The order shall be given after a hearing on such notice as the court prescribes. (b) Pay and discharge any secured claims against the licensee, whether or not such claims have been presented for payment. No secured claim shall be paid in an amount larger than the value of the security at the time of payment.

17641. Claims for damages resulting from the disaffirmance of an executory contract or lease by the commissioner may be filed and allowed. No claim of a landlord for damages resulting from the disaffirmance of an unexpired lease of real property or under any covenant of such 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 such claim must be filed within 30 days of the date of such disaffirmance.


17642. When the commissioner determines to liquidate a licensee, he shall cause an inventory of all the assets of the licensee to be made in duplicate, file the original with the court, and file the duplicate in his office.

17643. When the commissioner determines to liquidate a licensee he shall cause notice to be given by publication once a week for four successive weeks in some newspaper of general circulation published at or near the principal place of business in this State of such licensee, to all persons having claims against the licensee as creditors, investors, or otherwise, requiring them to present and file their claims and make legal proof thereof at a place and within a time designated in such publication. The time shall be not less than six months after the first publication. Within 10 days after the first publication the commissioner shall cause a copy of such notice to be mailed to all persons whose names appear of record upon the licensee's books as creditors, or as parties to an uncompleted escrow transaction.


17644. All claims, demands, or causes of action of creditors, and persons other than the parties to an escrow transaction against the licensee or against any property owned or held by it in trust or otherwise, must be presented to the commissioner in writing, verified by the claimant, or someone in his behalf, within the period specified in the notice for the presentation of claims, whether or not an action is pending to enforce any such claim or demand. The commissioner shall not approve any claim not so presented, and any such claim, demand or cause of action not so presented is forever barred.

17645. Upon the expiration of the time fixed for the presentation of claims, the commissioner shall prepare in duplicate a full and complete schedule of all claims presented, specifying by classes those that have been approved and those that have been disapproved and shall file the original with the court and the duplicate in his office.


17646. Not later than five days after the time of filing the schedule of claims with the court, written notice shall be mailed to all claimants whose claims have been rejected. Action to enforce the payment of or to establish any rejected claim must be brought and service had within four months from and after the date of filing of the schedule of claims with the proper court or all such actions are forever barred.


17647. Regardless of any law of this state, the judges of the superior court of the county in this state in which the principal office of the licensee is located may, whenever the judges deem it necessary or advisable, hold hearings relating to the sale, exchange, or other disposition of any real property or any personal property of the licensee regardless of the location of the property. The hearings shall be held at the county seat of any county in this state or at the places in the home county of the superior court at which sessions are held.

17648. If it appears improbable that anything can be realized from any property of the licensee and that the cost of maintaining, preserving, or protecting the property would probably be lost, the court may direct the commissioner to abandon the property.


17649. For the purpose of executing and performing any of the powers and duties conferred upon him by this article, the commissioner may in the name of the licensee or in his own name prosecute and defend any suit or other legal proceeding and may in the name of the licensee or in his own name as commissioner execute, acknowledge, and deliver any and all deeds, assignments, releases, requests for reconveyance, and other instruments necessary and proper to effectuate any sale of real or personal property or other transaction in connection with the liquidation of the licensee. Any deed, assignment, release, request for reconveyance, or other instrument executed pursuant to this section is valid and effectual for all purposes as though it was executed by the officers of such licensee with the authority of its board of directors.


17650. If any real property of the licensee sold by the commissioner is located in a county other than the county in which the application to the court for permission to sell the property was made, the commissioner shall cause a certified copy of the order authorizing or ratifying such sale to be recorded in the office of the recorder of the county in which the real property is located.


17651. When the commissioner has (a) fully liquidated all claims other than claims of stockholders, and (b) made due provision for any and all known but unclaimed liabilities, excepting claims of stockholders, and (c) paid all expenses of liquidation, then upon the written request of the holders of a majority of the stock of such licensee he shall deliver to the licensee or its trustees any surplus that then remains in his hands, together with all the records and effects. The licensee or its trustees shall have title to such surplus, records, and effects free from any claim of the commissioner.


17652. Upon the payment of a final dividend in liquidation, the commissioner shall prepare and file with the court a full and final statement of the liquidation, including a summary of the receipts and disbursements, and a duplicate of such statement shall be filed in the office of the commissioner. After hearing and approval by the court, the liquidation shall be closed.


17653. In making its order approving the commissioner's final statement of the liquidation of a licensee, the court shall determine the amounts of the liquidating dividends to which claimants and investors are entitled but that then remain unpaid or unclaimed in the hands of the commissioner. The order of the court shall direct the commissioner to deposit the amounts with the Controller. All amounts so deposited shall be deemed to be deposited with the Controller under Chapter 7 (commencing with Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure, and may be recovered in the manner prescribed in that chapter.

17654. The order of the court approving the final statement on liquidation shall provide for the destruction or other disposition of the books and records of the licensee or pertaining to the liquidation of the licensee, and the court may declare the licensee dissolved as a corporation.


Chapter 7. Crimes And Civil Penalties

Ca Codes (fin:17700-17703) Financial Code Section 17700-17703



17700. Any person who willfully violates any provision of this division, or who willfully violates any rule or order under this division, shall, upon conviction, be fined not more than ten thousand dollars ($10,000), imprisoned in a county jail for not more than one year, imprisoned in the state prison, or be punished by both that fine and imprisonment, but no person may be imprisoned for the violation of any rule or order unless he or she had knowledge of the rule or order. Conviction under this section shall not preclude the commissioner from exercising the authority provided in Section 17423.


17700. Any person who willfully violates any provision of this division, or who willfully violates any rule or order under this division, shall, upon conviction, be fined not more than ten thousand dollars ($10,000), imprisoned in a county jail for not more than one year, imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or be punished by both that fine and imprisonment, but no person may be imprisoned for the violation of any rule or order unless he or she had knowledge of the rule or order. Conviction under this section shall not preclude the commissioner from exercising the authority provided in Section 17423.


17701. (a) Any person who violates any provision of this division, or who violates any rule or order under this division, shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the commissioner in any court of competent jurisdiction. (b) As applied to the penalties for acts in violation of this division, the remedies provided by this section and by other sections of this division are not exclusive, and may be sought and employed in any combination to enforce the provisions of this division.


17702. It is unlawful for any person to willfully make any untrue statement of a material fact in any application, notice, or report filed with the commissioner under this division or the regulations issued thereunder, or to willfully omit any material fact which is required to be stated in any application, notice, or report.


17703. (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 any provision 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.


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