SECTIONS 25000-25023

25000.  This division may be known as the "Corporate Securities Lawof 1968." References herein to "this law" refer to the applicable provisionsof this division.25001.  Unless the context otherwise requires, the definitions inthis part apply throughout this division.25002.  "Advertisement" means any written or printed communicationor any communication by means of recorded telephone messages orspoken on radio, television, or similar communications media,published in connection with the offer or sale of a security.25003.  (a) "Agent" means any individual, other than a broker-dealeror a partner of a licensed broker-dealer, who represents abroker-dealer or who for compensation represents an issuer ineffecting or attempting to effect purchases or sales of securities inthis state. (b) "Agent" does not include an individual who only represents anissuer in effecting transactions in securities exempted bysubdivision (a), (b), (e), (f), (g), (j), (k) or (l) of Section 25100or in effecting transactions exempted by Section 25102, and does notinclude an individual who has no place of business in this state ifhe or she effects transactions in this state exclusively withbroker-dealers. (c) "Agent" does not include an associated person of a broker ordealer effecting transactions described in Section 15(h)(3) of theSecurities Exchange Act of 1934, subject to the provisions of Section15(h)(2) of that act. (d) An officer or director of a broker-dealer or issuer, or anindividual occupying a similar status or performing similarfunctions, is an agent only if he otherwise comes within thisdefinition and receives compensation specifically related topurchases or sales of securities.25003.5.  "Business days" are all days other than every Saturday,every Sunday, and such other days as are specified or provided for asholidays in the Government Code of the State of California.25004.  (a) "Broker-dealer" means any person engaged in the businessof effecting transactions in securities in this state for theaccount of others or for his own account. "Broker-dealer" alsoincludes a person engaged in the regular business of issuing orguaranteeing options with regard to securities not of his own issue."Broker-dealer" does not include any of the following: (1) Any other issuer. (2) An agent, when an employee of a broker-dealer or issuer. (3) A bank, trust company, or savings and loan association. (4) Any person insofar as he buys or sells securities for his ownaccount, either individually or in some fiduciary capacity, but notas part of a regular business. (5) A person who has no place of business in this state if heeffects transactions in this state exclusively with (A) the issuersof the securities involved in the transactions or (B) otherbroker-dealers. (6) A broker licensed by the Real Estate Commissioner of thisstate when engaged in transactions in securities exempted bysubdivision (f) or (p) of Section 25100 or in securities the issuanceof which is subject to authorization by the Real Estate Commissionerof this state or in transactions exempted by subdivision (e) ofSection 25102. (7) An exchange certified by the Commissioner of Corporationspursuant to this section when it is issuing or guaranteeing options.The commissioner may by order certify an exchange under this sectionupon such conditions as he by rule or order deems appropriate, andupon notice and opportunity to be heard he may suspend or revoke suchcertification, if he finds such certification, suspension, orrevocation to be in the public interest and necessary and appropriatefor the protection of investors. (b) For purposes of this section, an agent is an employee of abroker-dealer under paragraph (2) of subdivision (a) when the agentis employed by or associated with the broker-dealer under all of thefollowing conditions: (1) The agent is subject to the supervision and control of thebroker-dealer. (2) The agent performs under the name, authority, and marketingpolicies of the broker-dealer. (3) The agent discloses to investors the identity of thebroker-dealer. (4) The agent is reported pursuant to subdivision (c) of Section25210 and the rules adopted thereunder.25005.  "Commissioner" means the Commissioner of Corporations.25005.1.  "Entity conversion transaction" means a conversionpursuant to Section 1151, 1157, 15677.2, 15677.8, 15911.02, 15911.08,16902, 16908, 17540.2, 17540.8, or a conversion that occurs entirelyout of state, unless the interests in the entity resulting from theconversion to be held by the equity holders of the entity beingconverted as a result of the conversion are not securities. Forpurposes of Sections 25103 and 25120 an entity conversion transactionis not a change in the rights, preferences, privileges, orrestrictions of or on outstanding securities or an exchange ofsecurities by the issuer with its existing security holdersexclusively.25006.  "Fraud," "deceit," and "defraud" are not limited to commonlaw fraud or deceit.25007.  "Guaranteed" means guaranteed as to payment of principal,interest, dividends, or call premium.25008.  (a) An offer or sale of a security is made in this statewhen an offer to sell is made in this state, or an offer to buy isaccepted in this state, or (if both the seller and the purchaser aredomiciled in this state) the security is delivered to the purchaserin this state. An offer to buy or a purchase of a security is made inthis state when an offer to buy is made in this state, or an offerto sell is accepted in this state, or (if both the seller and thepurchaser are domiciled in this state) the security is delivered tothe purchaser in this state. (b) An offer to sell or to buy is made in this state when theoffer either originates from this state or is directed by the offerorto this state and received at the place to which it is directed. Anoffer to buy or to sell is accepted in this state when acceptance iscommunicated to the offeror in this state; and acceptance iscommunicated to the offeror in this state when the offeree directs itto the offeror in this state reasonably believing the offeror to bein this state and it is received at the place to which it isdirected. A security is delivered to the purchaser in this state whenthe certificate or other evidence of the security is directed to thepurchaser in this state and received at the place to which it isdirected. (c) An offer to sell or to buy is not made in this state merelybecause (1) the publisher circulates or there is circulated on hisbehalf in this state any bona fide newspaper or other publication ofgeneral, regular and paid circulation which has had more thantwo-thirds of its circulation outside this state during the past 12months, or (2) a radio or television program originating outside thisstate is received in this state.25009.  (a) "Investment adviser" means any person who, forcompensation, engages in the business of advising others, eitherdirectly or through publications or writings, as to the value ofsecurities or as to the advisability of investing in, purchasing orselling securities, or who, for compensation and as a part of aregular business, publishes analyses or reports concerningsecurities. "Investment adviser" does not include (1) a bank, trustcompany or savings and loan association; (2) an attorney at law,accountant, engineer or teacher whose performance of these servicesis solely incidental to the practice of his or her profession; (3) anassociated person of an investment adviser; (4) a broker-dealer oragent of a broker-dealer whose performance of these services issolely incidental to the conduct of the business of a broker-dealerand who receives no special compensation for them; or (5) a publisherof any bona fide newspaper, news magazine or business or financialpublication of general, regular and paid circulation and the agentsand servants thereof, but this paragraph (5) does not exclude anysuch person who engages in any other activity which would constitutethat person an investment adviser within the meaning of this section. (b) "Investment adviser" also includes any person who uses thetitle "financial planner" and who, for compensation, engages in thebusiness, whether principally or as part of another business, ofadvising others, either directly or through publications or writings,as to the value of securities or as to the advisability of investingin, purchasing or selling securities, or who, for compensation andas part of a regular business, publishes analyses or reportsconcerning securities. This subdivision does not apply to: (1) abank, trust company, or savings and loan association; (2) an attorneyat law, accountant, engineer, or teacher whose performance of theseservices is solely incidental to the practice of his or herprofession, so long as these individuals do not use the title"financial planner;" (3) an associated person of an investmentadviser where the investment adviser is licensed or exempt fromlicensure under this law; (4) an agent of a broker-dealer where thebroker-dealer is licensed or exempt from licensure under this law, solong as (A) the performance of these services by the agent is solelyincidental to the conduct of the business of the broker-dealer, and(B) the agent receives no special compensation for the performance ofthese services; or (5) a publisher set forth in paragraph (5) ofsubdivision (a), so long as the publisher or the agents and servantsof the publisher are not engaged in any other activity which wouldconstitute that person an investment adviser within the meaning ofthis section.25009.1.  "Investment adviser" does not include persons exceptedfrom the definition of "investment adviser" by Section 202(a)(11) ofthe Investment Advisers Act of 1940 (15 U.S.C. 80a-1 et seq., asamended), except that with regard to those persons the commissionermay investigate and bring enforcement actions with respect to fraudand deceit, including and without limitation fraud and deceit underSection 25235, and any rules of the commissioner adopted thereunder.25009.5.  (a) "Investment adviser representative" or "associatedperson of an investment adviser" means any partner, officer, directorof (or a person occupying a similar status or performing similarfunctions) or other individual, except clerical or ministerialpersonnel, who is employed by or associated with, or subject to thesupervision and control of, an investment adviser that has obtained acertificate or that is required to obtain a certificate under thislaw, and who does any of the following: (1) Makes any recommendations or otherwise renders adviceregarding securities. (2) Manages accounts or portfolios of clients. (3) Determines which recommendation or advice regarding securitiesshould be given. (4) Solicits, offers, or negotiates for the sale or sellsinvestment advisory services. (5) Supervises employees who perform any of the foregoing. (b) "Investment adviser representative" means, with respect to aninvestment adviser subject to Section 25230.1, a person defined as aninvestment adviser representative by Rule 203A-3 of the Securitiesand Exchange Commission (17 C.F.R. 275.203A-3) and who has a place ofbusiness in this state.25010.  "Issuer" means any person who issues or proposes to issueany security, except that: (a) With respect to certificates of deposit, voting trustcertificates or collateral-trust certificates, or with respect tocertificates of interest or shares in an unincorporated investmenttrust not having a board of directors or persons performing similarfunctions or of the fixed, restricted management or unit type,"issuer" means the person or persons performing the acts and assumingthe duties of depositor or manager pursuant to the provisions of thetrust or other agreement or instrument under which the security isissued. However, with respect to equipment-trust certificates or likesecurities, "issuer" means the person by whom the equipment orproperty is or is to be used. (b) With respect to certificates of interest or participation inoil, gas or mining titles or leases or in payments out of productionunder those titles or leases, "issuer" means the person or persons inactive control of the exploration or development of the property whosell those interests or participations or payments or any person orpersons who subdivide and sell those interests or participations orpayments. The determination of the person or persons in activecontrol of the exploration or development of the property shall bemade on the basis of the actual relationship of the parties and noton the basis of the legal designation of a person's interest. (c) With respect to a fractional or pooled interest in a viaticalor life settlement contract, "issuer" means the person who creates,for the purposes of sale, the fractional or pooled interest. In thecase of a viatical or life settlement contract that is notfractionalized or pooled, "issuer" means the person effecting thetransactions with the investors in those contracts. (d) In the case of an unincorporated association which provides byits articles for limited liability of any or all of its members, orin the case of a trust, committee, or other legal entity, thetrustees or members thereof shall not be individually liable asissuers of any security issued by the association, trust, committee,or other legal entity.25011.  "Nonissuer transaction" means any transaction not directlyor indirectly for the benefit of the issuer. A transaction isindirectly for the benefit of the issuer if any portion of thepurchase price of any securities involved in the transaction will bereceived indirectly by the issuer. An offering which involves both anissuer transaction and a nonissuer transaction shall be treated forthe purposes of Chapters 2 (commencing with Section 25110) and 4(commencing with Section 25130) of Part 2 of this division as anissuer transaction, but for the purposes of Chapter 1 (commencingwith Section 25100) of Part 2 of this division they shall be treatedas separate transactions.25012.  "Owners' association" means a nonprofit corporation orassociation created to own or lease the commonly owned lots, parcelsor areas referred to in clause (a) of Section 25015, or to providemanagement, maintenance, preservation or control of either such lots,parcels or areas or of the separately owned lots, parcels or areas,or both, or any portion of or interest in them, or interest subjectto subdivision (g) of Section 11004.5 of the Business and ProfessionsCode, if the shares or certificates of membership therein aretransferable only by transfer of the interests in the lots, parcelsor areas. Such shares of stock or memberships shall be consideredinterests in a real estate development or in subdivided lands or asubdivision.25013.  "Person" means an individual, a corporation, a partnership,a limited liability company, a joint venture, an association, a jointstock company, a trust, an unincorporated organization, agovernment, or a political subdivision of a government.25014.  "Publish" means publicly to issue or circulate by newspaper,mail, radio or television, or otherwise to disseminate to thepublic.25014.5.  "Rollup participant" means a finite-life limitedpartnership. (a) Except as provided in subdivision (b) of Section 25014.6, alimited partnership has "finite-life" if both of the following apply: (1) It operates as a conduit vehicle for investors to participatein the ownership of assets for a limited period of time. (2) It has a policy or purpose of distributing to investorssubstantially all proceeds from the sale, financing, or refinancingof assets, whether for the term of the partnership or after aninitial period of time following commencement of operations, ratherthan reinvesting those proceeds in the business. (b) Rollup participant does not include any partnership registeredunder the Investment Company Act of 1940 or any business developmentcompany as defined in Section 80a-2(48) of Title 15 of the UnitedStates Code.25014.6.  "Rollup transaction" means any transaction or series oftransactions that directly or indirectly through acquisition orotherwise involves the combination or reorganization of one or morerollup participants and is one of the following: (a) The offer or sale of securities by a successor entity, whethernewly formed or previously existing, to one or more investors of therollup participants to be combined or reorganized. (b) The acquisition of the successor entity's securities by therollup participants being combined or reorganized; provided however,that a rollup transaction shall not include any transaction that: (1) The Securities and Exchange Commission exempts from thedefinition of a rollup transaction pursuant to subparagraph (c) (ii)of Item 901 of Regulation S-K adopted by the Securities and ExchangeCommission. (2) Is determined to be exempt from this definition by theCommissioner of Corporations upon his or her determination that thisaction is in the public interest and consistent with the protectionof investors. (3) Involves one or more limited partnerships all of thesecurities of which are, prior to the transaction, securities forwhich transactions are reported under a transaction reporting plandeclared effective before January 1, 1991, by the Securities andExchange Commission under Section 11A of the Securities Exchange Actof 1934. (4) Involves only those issuers not required to register or reportunder Section 12 of the Securities Exchange Act of 1934 where theresulting issuer is also not required to register or report underSection 12. (5) Involves the reorganization to corporate, trust, orassociation form or restructuring of a single limited partnership if,as a consequence of the proposed transaction there will be nosignificant, adverse change in any of the following: voting rights,the term of existence of the entity, management compensation, orinvestment objectives. (6) Involves the reorganization to corporate, trust, orassociation form or restructuring of a single limited partnership ifeach investor is provided an option to retain a security undersubstantially the same terms and conditions as the original issue. (7) Involves the reorganization to corporate, trust, orassociation form or restructuring of a single limited partnership iftransactions in the security issued as a result of the reorganizationor restructuring are not reported under a transaction reporting plandeclared effective before January 1, 1991, by the Securities andExchange Commission under Section 11A of the Securities Exchange Actof 1934.25014.7.  (a) "Eligible rollup transaction" means a rolluptransaction in which the new securities issued are listed or approvedfor listing on a national securities exchange which has beencertified by the commissioner under subdivision (o) of Section 25100,if the exchange requires as a condition to listing or designationthat the rollup transaction be conducted in accordance withprocedures to protect the rights of limited partners. (b) The rights of limited partners will be presumed to beprotected if the rollup transaction provides for the right ofdissenting limited partners: (1) To receive compensation for their limited partnership unitsbased on an appraisal of the limited partnership assets performed byan independent appraiser unaffiliated with the sponsor or generalpartner of the limited partnership and which value the assets as ifsold in an orderly manner in a reasonable period of time, plus orminus other balance sheet items, and less the cost of sale orrefinancing. Compensation to dissenting limited partners of rolluptransactions may be cash, secured debt instruments, unsecured debtinstruments, or freely tradeable securities; provided, however, that: (A) Rollups which utilize debt instruments as compensation providefor a trustee and an indenture to protect the rights of the debtholders and provide a rate of interest based upon, but not less than,the then applicable federal rate as determined in accordance withSection 1274 of the Internal Revenue Code of 1986. (B) Rollups which utilize unsecured debt instruments ascompensation, in addition to the requirements of subparagraph (A),limit total leverage to 70 percent of the appraised value of theassets. (C) All debt securities have a term no greater than seven yearsand provide for prepayment with 80 percent of the net proceeds of anysale or refinancing of the assets previously owned by the entity orany part thereof. (D) Freely tradeable securities utilized as compensation todissenting limited partners must be issued by an issuer whosesecurities are listed on a national securities exchange that has beencertified for at least one year prior to the transaction, and thenumber of securities to be received in return for limited partnershipinterests must be determined by an appraisal of limited partnershipassets, conducted in a manner consistent with this paragraph, inrelation to the average last sale price of the freely tradeablesecurities in the 20-day period following the transaction. If theissuer of the freely tradeable securities is affiliated with thesponsor or general partner, newly issued securities to be utilized ascompensation to dissenting limited partners shall not represent morethan 20 percent of the issued and outstanding shares of that classof securities after giving effect to the issuance. For the purposesof the preceding sentence, a sponsor or general partner is"affiliated" with the issuer of the freely tradeable securities ifthe sponsor or general partner receives any material compensationfrom the issuer or its affiliates in conjunction with the rolluptransaction or the purchase of the general partner's interest;provided, however, that nothing herein shall restrict the ability ofa sponsor or general partner to receive any payment for its equityinterests and compensation as otherwise provided by this section. (2) To receive or retain a security with substantially the sameterms and conditions as the security originally held, provided thatthe receipt or retention of that security is not a step in a seriesof subsequent transactions that directly or indirectly throughacquisition or otherwise involves future combinations orreorganizations of one or more rollup participants. Securitiesreceived or retained will be considered to have the same terms andconditions as the security originally held if: (A) There is no material adverse change to dissenting limitedpartners' rights, including, but not limited to, rights with respectto voting, the business plan, or the investment, distribution,management compensation and liquidation policies of the limitedpartnership or resulting entity. (B) The dissenting limited partners receive the same preferences,privileges, and priorities as they had pursuant to the securityoriginally held. The rights set forth in paragraphs (1) and (2) are the only rightsof dissenting limited partners to which the presumption under thissubdivision applies. A general partner or sponsor shall file anapplication for qualification pursuant to Section 25110 or Section25120 with respect to any other rights proposed to be offered todissenting limited partners. At the time a registration statement is filed with the Securitiesand Exchange Commission with respect to an eligible rolluptransaction, a general partner or sponsor shall notify, to themaximum extent permitted by the federal securities laws, each limitedpartner who has an address in this state by certified mail of thefollowing: That a registration statement has been filed with theSecurities and Exchange Commission with respect to a rolluptransaction; that the general partner or sponsor claims an exemptionfrom the review process under the law by virtue of Section 25014.7,which defines "eligible rollup transaction"; that the general partneror sponsor has the burden of proof under the law that thetransaction meets the definition of eligible rollup transaction; andthat the commissioner does not recommend or endorse the transaction. (c) The rights of limited partners shall be presumed not to beprotected if the general partner: (1) Converts an equity interest in the limited partnershipssubject to a rollup for which consideration was not paid and whichwas not otherwise provided for in the limited partnership agreementand disclosed to limited partners, into a voting interest in the newentity, provided, however, an interest originally obtained in orderto comply with the provisions of Internal Revenue Service RevenueProclamation 89-12 may be converted. (2) Fails to follow the valuation provisions in the limitedpartnership agreements of the subject limited partners when valuingtheir limited partnership interests. (3) Utilizes a future value of their equity interest rather thanthe current value of their equity interest, as determined by anappraisal conducted in a manner consistent with paragraph (1) ofsubdivision (b), when determining their interest in the new entity. (d) The rights of limited partners shall be presumed not to beprotected as to voting rights, if: (1) The voting rights in the entity resulting from a rollup do notgenerally follow the original voting rights of the limitedpartnerships participating in the rollup transaction. (2) A majority of the interest in an entity resulting from arollup transaction may not, without concurrence by the sponsor,general partners, board of directors or trustee, depending on theform of entity, vote to: (A) Amend the limited partnership agreement, articles ofincorporation or bylaws, or indenture. (B) Dissolve the entity. (C) Remove management and elect new management. (D) Approve or disapprove the sale of substantially all of theassets of the entity. (3) The general partner or sponsor proposing a rollup is notrequired to provide each person whose equity interest is subject tothe rollup transaction with a document which instructs the person onthe proper procedure for voting against or dissenting from the rolluptransaction. (4) The general partner or sponsor does not utilize an independentthird party to receive and tabulate all votes and dissents, andrequire that the third party make the tabulation available to thegeneral partner and any limited partner upon request at any timeduring and after voting occurs. (e) The rights of limited partners shall be presumed not to beprotected as to transaction costs if: (1) Limited partners bear an unfair portion of the transactioncosts of a proposed rollup transaction that is rejected. For purposesof this provision, transaction costs are defined as the costs ofprinting and mailing the proxy, prospectus, or other documents; legalfees not related to the solicitation of votes or tenders; financialadvisory fees; investment banking fees; appraisal fees; accountingfees; independent committee expenses; travel expenses; and all otherfees related to the preparatory work of the transaction, but notincluding costs that would have otherwise been incurred by thesubject limited partnerships in the ordinary course of business, orsolicitation expenses. (2) Transaction costs of a rejected rollup transaction are notapportioned between general and limited partners of the subjectlimited partnerships according to the final vote on the proposedtransaction as follows: (A) The general partner or sponsor bears all rollup transactioncosts in proportion to the number of votes to reject the rolluptransaction. (B) Limited partners bear transaction costs in proportion to thenumber of votes to approve the rollup transaction. (3) The dissenting limited partnership is required to pay any ofthe costs of the rollup transaction and the general partner orsponsor is not required to pay the rollup transaction costs on behalfof the dissenting limited partnerships in a rollup in which one ormore limited partnerships determines not to approve the transaction,but where the rollup transaction is consummated with respect to oneor more approving limited partnerships. (f) The rights of limited partners shall be presumed not to beprotected as to fees of general partners and sponsors, if: (1) General partners and sponsors are not prevented from receivingboth unearned management fees discounted to a present value, ifthose fees were not previously provided for in the limitedpartnership agreement and disclosed to limited partners, and newasset-based fees. (2) Property management fees and other management fees are notappropriate, not reasonable and greater than what would be paid tothird parties for performing similar services. (3) Changes in fees which are substantial and adverse to limitedpartners are not approved by an independent committee according tothe facts and circumstances of each transaction. (g) A general partner or sponsor proposing a rollup transactionshall pay all solicitation expenses related to the transaction,including all preparatory work related thereto, in the event therollup transaction is not approved. For purposes of this section,"solicitation expenses" include direct marketing expenses such astelephone calls, broker-dealer factsheets, legal and other feesrelated to the solicitation, as well as direct solicitationcompensation to brokers and dealers. (h) A broker or dealer may not receive compensation for solicitingvotes or tenders from limited partners in connection with a rolluptransaction unless that compensation: (1) Is payable and equal in amount regardless of whether thelimited partner votes affirmatively or negatively in the proposedrollup. (2) In the aggregate, does not exceed 2 percent of the exchangevalue of the newly created securities. (3) Is paid regardless of whether the limited partners reject theproposed rollup transaction. (i) As used in this section, the following terms have thefollowing meanings: (1) "Limited partnership" includes any entity determined to be a"partnership" pursuant to Section 14(h)(4)(B) of the SecuritiesExchange Act of 1934 or such other entity having a substantiallyeconomically equivalent form of ownership instrument. (2) "Dissenting limited partner" means a holder or a beneficialinterest in a limited partnership that is the subject of a rolluptransaction who casts a vote against the rollup transaction, exceptthat for purposes of an exchange or tender offer dissenting limitedpartner means any person who files a dissent from the terms of thetransaction with the party responsible for tabulating the votes ortenders, to be received in connection with the transaction during theperiod in which the offer is outstanding. (3) "Management fee" means a fee paid to the sponsor, generalpartner, their affiliates, or other persons for management andadministration of the limited partnership.25015.  "Real estate development" means a development (a) whichconsists or will consist of separately owned lots, parcels or areaswith either or both of the following features: (1) one or moreadditional continguous or noncontiguous lots, parcels, or areas ownedin common by the owners of the separately owned lots, parcels, orareas, or (2) mutual, common, or reciprocal interests in orrestrictions upon all or portions of such separately owned lots,parcels, or areas; and (b) in which the several owners of theseparately owned lots, parcels, or areas have rights, directly orindirectly, to the beneficial use and enjoyment of the lots, parcels,or areas owned in common, or any one or more of them or portionsthereof or interests therein, or of the interests or restrictionsreferred to in clause (a) above, or both. The estate in a separatelyor commonly owned lot, parcel, or area may be an estate ofinheritance or perpetual estate, an estate for life, or an estate foryears. The common ownership of the lots, parcels, or areas or theenjoyment of the interests or restrictions referred to in clause (a)above or both may be through ownership of shares of stock ormemberships in an owners' association or otherwise.25016.  "Rule" means any published regulation or standard of generalapplication issued by the commissioner. "Order" means a consent,authorization, approval, permit, or requirement applicable to aspecific case issued by the commissioner.25017.  (a) "Sale" or "sell" includes every contract of sale of,contract to sell, or disposition of, a security or interest in asecurity for value. "Sale" or "sell" includes any exchange ofsecurities and any change in the rights, preferences, privileges, orrestrictions of or on outstanding securities. (b) "Offer" or "offer to sell" includes every attempt or offer todispose of, or solicitation of an offer to buy, a security orinterest in a security for value. (c) Any security given or delivered with, or as a bonus on accountof, any purchase of securities or any other thing constitutes a partof the subject of the purchase and is considered to have beenoffered and sold for value. (d) A purported gift of assessable stock involves an offer andsale. (e) Every sale or offer of a warrant or right to purchase orsubscribe to another security of the same or another issuer, as wellas every sale or offer of a security which gives the holder a presentor future right or privilege to convert the security into anothersecurity of the same or another issuer, includes an offer and sale ofthe other security only at the time of the offer or sale of thewarrant or right or convertible security; but neither the exercise ofthe right to purchase or subscribe or to convert nor the issuance ofsecurities pursuant thereto is an offer or sale. (f) The terms defined in this section do not include: (1) any bonafide secured transaction in or loan of outstanding securities; (2)any stock dividend payable with respect to common stock of acorporation solely (except for any cash or scrip paid for fractionalshares) in shares of such common stock, if the corporation has noother class of voting stock outstanding; provided, that shares issuedin any such dividend shall be subject to any conditions previouslyimposed by the commissioner applicable to the shares with respect towhich they are issued; or (3) any act incident to a transaction orreorganization approved by a state or federal court in whichsecurities are issued and exchanged for one or more outstandingsecurities, claims, or property interests, or partly in that exchangeand partly for cash, and nothing in this division shall be construedto prohibit a court from applying the protections described inSection 25014.7 or 25140 and the regulations adopted thereunder whenapproving any transaction involving a rollup participant.25018.  "Securities Act of 1933," "Securities Exchange Act of 1934,""Public Utility Holding Company Act of 1935," "Investment AdvisersAct of 1940," and "Investment Company Act of 1940" mean the federalstatutes of those names as amended before or after the effective dateof this law.25019.  "Security" means any note; stock; treasury stock; membershipin an incorporated or unincorporated association; bond; debenture;evidence of indebtedness; certificate of interest or participation inany profit-sharing agreement; collateral trust certificate;preorganization certificate or subscription; transferable share;investment contract; viatical settlement contract or a fractionalizedor pooled interest therein; life settlement contract or afractionalized or pooled interest therein; voting trust certificate;certificate of deposit for a security; interest in a limitedliability company and any class or series of those interests(including any fractional or other interest in that interest), excepta membership interest in a limited liability company in which theperson claiming this exception can prove that all of the members areactively engaged in the management of the limited liability company;provided that evidence that members vote or have the right to vote,or the right to information concerning the business and affairs ofthe limited liability company, or the right to participate inmanagement, shall not establish, without more, that all members areactively engaged in the management of the limited liability company;certificate of interest or participation in an oil, gas or miningtitle or lease or in payments out of production under that title orlease; put, call, straddle, option, or privilege on any security,certificate of deposit, or group or index of securities (includingany interest therein or based on the value thereof); or any put,call, straddle, option, or privilege entered into on a nationalsecurities exchange relating to foreign currency; any beneficialinterest or other security issued in connection with a fundedemployees' pension, profit sharing, stock bonus, or similar benefitplan; or, in general, any interest or instrument commonly known as a"security"; or any certificate of interest or participation in,temporary or interim certificate for, receipt for, guarantee of, orwarrant or right to subscribe to or purchase, any of the foregoing.All of the foregoing are securities whether or not evidenced by awritten document. "Security" does not include: (1) any beneficialinterest in any voluntary inter vivos trust which is not created forthe purpose of carrying on any business or solely for the purpose ofvoting, or (2) any beneficial interest in any testamentary trust, or(3) any insurance or endowment policy or annuity contract under whichan insurance company admitted in this state promises to pay a sum ofmoney (whether or not based upon the investment performance of asegregated fund) either in a lump sum or periodically for life orsome other specified period, or (4) any franchise subject toregistration under the Franchise Investment Law (Division 5(commencing with Section 31000)), or exempted from registration bySection 31100 or 31101.25020.  "State" means any state, territory, or possession of theUnited States, the District of Columbia and Puerto Rico.25021.  "Subdivided lands" and "subdivision" have the meaningsprescribed in Sections 11000, 11004.5, and 11218 of the Business andProfessions Code.25022.  "Underwriter" means a person who has agreed with an issueror other person on whose behalf a distribution is to be made (a) topurchase securities for distribution or (b) to distribute securitiesfor or on behalf of such issuer or other person or (c) to manage orsupervise a distribution of securities for or on behalf of suchissuer or other person.25023.  (a) Except as provided in subdivision (b), "viaticalsettlement contract" means an agreement as defined in paragraph (1)of subdivision (a) of Section 10113.1 of the Insurance Code and "lifesettlement contract" means an agreement, other than a viaticalsettlement contract, for the purchase, sale, assignment, transfer,devise, or bequest of any portion of the death benefit or ownershipof a life insurance policy or certificate for consideration that isless than the expected death benefit of the life insurance policy orcertificate. (b) "Viatical settlement contract" and "life settlement contract"do not include any of the following: (1) The assignment, transfer, sale, devise, or bequest of a deathbenefit, life insurance policy, or certificate of insurance by theinsured or the original owner to any person if the assignment,transfer, sale, devise, or bequest (A) is not accompanied by thepublication of any advertisement and (B) is not effected by orthrough a broker-dealer (Section 25004). (2) The assignment of a life insurance policy to a bank, savingsbank, savings association, credit union, or other lender (eitherlicensed or not required to be licensed) as collateral for a loan, orto a stop-loss insurer or reinsurer. (3) The exercise of accelerated benefits pursuant to the terms ofa life insurance policy issued in accordance with the insurance lawsof this state. (4) The assignment, transfer, sale, devise or bequest of anyundivided death benefit, life insurance policy, or certificate ofinsurance by an entity licensed pursuant to Section 10113.2 of theInsurance Code, or a viatical or life settlement provider licensedfrom another state, to one individual or entity, provided that theindividual or entity represents that the individual or entity ispurchasing for its own account (or trust account, if the entity is atrustee) and not with a view to or for sale in connection with adistribution of the individual death benefit, life insurance policy,or certificate of insurance.