25240. Every applicant for a certificate as a broker-dealer or an
investment adviser (other than a California corporation), and every
investment adviser subject to Section 25230.1, shall file with the
commissioner, in such form as the commissioner by rule prescribes, an
irrevocable consent appointing the commissioner or the commissioner'
s successor in office to be the person's attorney to receive service
of any lawful process in any noncriminal suit, action or proceeding
against the person or the person's successor, executor, or
administrator, which arises under this law or any rule or order
hereunder after the consent has been filed, with the same force and
validity as if served personally on the person filing the consent. A
person who has filed such a consent in connection with a previous
application under this law (or under any prior law if the application
states that such consent is still effective), or a person who has
filed such a consent in connection with a previous notice filed under
Section 25230.1, need not file another. Service may be made by
leaving a copy of the process in the office of the commissioner, but
it is not effective unless (1) the plaintiff, who may be the
commissioner in a suit, action or proceeding instituted by the
commissioner, forthwith sends notice of the service and a copy of the
process by registered or certified mail to the defendant or
respondent at the person's last address on file with the
commissioner, and (2) the plaintiff's affidavit of compliance with
this section is filed in the case on or before the return day of the
process, if any, or within such further time as the court allows.
25241. (a) Every broker-dealer and every investment adviser
licensed under Section 25230 shall make and keep accounts,
correspondence, memorandums, papers, books, and other records and
shall file financial and other reports as the commissioner by rule
requires, subject to the limitations of Section 15(h) of the
Securities Exchange Act of 1934 with respect to broker-dealers and
Section 222 of the Investment Advisers Act of 1940 with respect to
investment advisers.
(b) All records so required shall be preserved for the time
specified in the rule.
(c) All records referred to in this section are subject at any
time and from time to time to reasonable periodic, special, or other
examinations by the commissioner, within or without this state, as
the commissioner deems necessary or appropriate in the public
interest or for the protection of investors.
(d) For the purpose of avoiding unnecessary duplications of
examinations, the commissioner, insofar as he or she deems it
practicable in administering this section, may cooperate with the
securities administrators of other states, the Securities and
Exchange Commission and any national securities exchange or national
securities association.
(e) Unless otherwise provided by rule, every investment adviser
subject to Section 25230 and every broker-dealer, including an
applicant for a license under Section 25210 or 25230, shall furnish
an authorization for disclosure to the commissioner of financial
records of the licensee's broker-dealer or investment adviser
business pursuant to Section 7473 of the Government Code.
25242. (a) Surrender of a certificate as a broker-dealer or
investment adviser becomes effective 30 days after receipt of an
application to surrender that certificate or within a shorter period
of time as the commissioner may determine, unless a revocation or
suspension proceeding is pending when the application is filed or a
proceeding to revoke or suspend or to impose conditions upon the
withdrawal is instituted within 30 days after the application is
filed. If a proceeding is pending or instituted, withdrawal becomes
effective at a time and upon any conditions as the commissioner by
order determines.
(b) If the commissioner finds that any broker-dealer or investment
adviser is no longer in existence, or has ceased to do business as a
broker-dealer or investment adviser, or is subject to an
adjudication of mental incompetence or to the control of a committee
or conservator or guardian, or cannot be located after reasonable
search, the commissioner may by order summarily revoke the
certificate of that broker-dealer or investment adviser.
(c) The commissioner may summarily suspend or revoke the
certificate of a broker-dealer or investment adviser if he or she (1)
fails to pay any fee required by Section 25608 or imposed pursuant
to Section 25217, 25218 or 25236 within 10 days after notice by the
commissioner that the fee is due and unpaid, (2) fails to file any
report required under Section 25241 within 10 days after notice by
the commissioner that the report is due, (3) fails to maintain any
bond required by subdivision (e) of Section 25216 or by Section
25237, (4) fails to file an application pursuant to subdivision (a)
of Section 25211 when required by subdivision (c) of that section,
within the time specified therein or within 10 days after notice by
the commissioner that the application is required, whichever last
occurs, (5) fails to maintain any capital required by subdivision (c)
of Section 25216 or by Section 25237, or (6) fails to maintain
records as required by Section 25241.
25243. It is unlawful for any person holding a certificate as a
broker-dealer or investment adviser under this part to represent or
imply in any manner whatsoever that such person has been sponsored,
recommended, or approved or that the person's abilities or
qualifications have in any respect been passed upon by the
commissioner. Nothing in this section prohibits a statement (other
than in a paid advertisement) that a person holds a certificate under
this law, if such statement is true in fact and if the effect of
such licensing is not misrepresented.
25243.5. (a) A broker-dealer or investment adviser, or an agent or
representative thereof, shall not use a senior-specific
certification, credential, or professional designation in connection
with the offer, sale, or purchase of securities, or the provision of
advice as to the value of or the advisability of investing in,
purchasing, or selling securities, either directly or indirectly or
through publications or writings or by issuing or promulgating
analyses or reports relating to securities, that indicates or implies
that the broker-dealer, investment adviser, or an agent or
representative thereof, has special certification or training in
advising or servicing senior citizens or retirees, in such a way as
to mislead any person.
(b) The prohibited use of these certifications, credentials, or
professional designations includes, but is not limited to, the
following:
(1) The use of a certification, credential, or professional
designation by a person who has not actually earned or is otherwise
ineligible to use the certification, credential, or designation.
(2) The use of a nonexistent or self-conferred certification,
credential, or professional designation.
(3) The use of a certification, credential, or professional
designation that indicates or implies a level of occupational
qualifications obtained through education, training, or experience
that the person using the certification, credential, or professional
designation does not have.
(4) The use of a certification, credential, or professional
designation that was obtained from a designating, credentialing, or
certifying organization where any of the following apply:
(A) The organization is primarily engaged in the business of
instruction in sales marketing.
(B) The organization does not have reasonable standards or
procedures for assuring the competency of individuals to whom it
grants a certification, credential, or professional designation.
(C) The organization does not have reasonable standards or
procedures for monitoring and disciplining individuals with a
certification, credential, or professional designation for improper
or unethical conduct.
(D) The organization does not have reasonable continuing education
requirements for individuals with a certification, credential, or
professional designation in order to maintain the certificate,
credential, or professional designation.
(c) There is a rebuttable presumption that a designating,
credentialing, or certifying organization is not disqualified solely
for the purposes of paragraph (4) of subdivision (b) when the
organization has been accredited by the American National Standards
Institute, the National Commission for Certifying Agencies, or an
organization that is on the United States Department of Education's
list entitled "Accrediting Agencies Recognized for Title IV Purposes"
and the certification, credential, or professional designation
issued therefrom does not primarily apply to sales and/or marketing.
(d) In determining whether a combination of words, or an acronym
standing for a combination of words, constitutes a certification,
credential, or professional designation indicating or implying that a
person has special certification or training in advising or serving
senior citizens or retirees, factors to be considered shall include
both of the following:
(1) Use of one or more word such as "senior," "retirement,"
"elder," or like words combined with one or more words such as
"certified," "registered," "chartered," "adviser," "specialist,"
"consultant," "planner," or like words, in the name of the
certification, credential, or professional designation or credential.
(2) The manner in which those words are combined.
(e) This section shall not apply to the use of a job title by a
person within an organization that is licensed or registered by the
Department of Corporations or a federal financial services regulatory
agency, when that job title indicates seniority or standing within
the organization, or specifies a person's area of specialization
within the organization. For the purposes of this subdivision,
federal financial services regulatory agency includes, but is not
limited to, an agency that regulates brokers or dealers, investment
advisers, or investment companies as described under the Investment
Company Act of 1940 (15 U.S.C. Sec. 809-1 et seq.).
(f) (1) This section shall not apply to a broker or agent who is
licensed by the Department of Insurance and is in compliance with the
requirements of Section 787.1 of the Insurance Code.
(2) This subdivision shall be operative only if Assembly Bill 2150
of the 2007-08 Regular Session is chaptered and becomes effective
and that bill adds Section 787.1 to the Insurance Code.
(g) This section shall become operative on July 1, 2009.
25244. Any person whose certificate as a broker-dealer or
investment adviser has been suspended or revoked shall immediately
surrender such certificate to the commissioner.
25245. It is unlawful for any person willfully to make any untrue
statement of a material fact in any application, notice, or report
filed with the commissioner under this part, or willfully to omit to
state in any such application, notice, or report any material fact
which is required to be stated therein.
25246. It is unlawful for any agent or broker-dealer to require, as
a condition to the purchase or sale of securities for and in the
name of a married person, that the prior consent or authorization of
the spouse of that person be obtained.
25247. (a) Upon written or oral request, the commissioner shall
make available to any person the information specified in Section
6254.12 of the Government Code and made available through the Public
Disclosure Program of the Financial Industry Regulatory Authority
with respect to any broker-dealer or agent licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of a
broker-dealer. Any information disclosed pursuant to this subdivision
shall constitute a public record. Notwithstanding any other
provisions of law, the commissioner may disclose either orally or in
writing that information pursuant to this subdivision. 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, or any officer,
agent, or employee of the state or of the Department of Corporations
for the release of any false or unauthorized information, unless the
release of that information was done with knowledge and malice.
(b) Any broker-dealer or agent licensed or regulated under this
part shall upon request deliver a written notice to any client when a
new account is opened stating that information about the license
status or disciplinary record of a broker-dealer or an agent may be
obtained from the Department of Corporations, or from any other
source that provides substantially similar information.
(c) The notice provided under subdivision (b) shall contain the
office location or telephone number where the information may be
obtained.
(d) A broker-dealer or agent shall be exempt from providing the
notice required under subdivision (b) if a person who does not have a
financial relationship with the broker-dealer or agent, requests
only general operational information such as the nature of the
broker-dealer's or agent's business, office location, hours of
operation, basic services, and fees, but does not solicit advice
regarding investments or other services offered.
(e) Upon written or oral request, the commissioner shall make
available to any person the disciplinary records maintained on the
Investment Adviser Registration Depository and made available through
the Investment Advisor Public Disclosure Web site with respect to
any investment adviser, investment adviser representative, or
associated person of an investment adviser licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of an
investment adviser. Any information disclosed pursuant to this
subdivision shall constitute a public record. Notwithstanding any
other provision of law, the commissioner may disclose that
information either orally or in writing pursuant to this subdivision.
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, or any
officer, agent, or employee of the state or of the Department of
Corporations for the release of any false or unauthorized
information, unless the release of that information was done with
knowledge and malice.
(f) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations when using a national,
uniform application adopted or approved for use by the Securities and
Exchange Commission, the North American Securities Administrators
Association, or the Financial Industry Regulatory Authority that is
required for participation in the Central Registration Depository or
the Investment Adviser Registration Depository.
(g) This section shall not require the disclosure of criminal
history record information maintained by the Federal Bureau of
Investigation pursuant to Section 534 of Title 28 of the United
States Code, and the rules thereunder, or information not otherwise
subject to disclosure under the Information Practices Act of 1977.
25248. (a) If the commissioner finds, as a result of any
examination or investigation or from any report made to the
commissioner, that any person subject to this part, other than an
investment adviser subject to Section 25230.1, is in an insolvent
condition, or is conducting a securities, broker-dealer, or
investment advisory business in such an unsafe, injurious, or
unauthorized manner as to render further operations hazardous to the
public or to customers, the commissioner may, by an order addressed
to and served by registered or certified mail or by personal service
on that person and on any other person having in his or her
possession or control any client funds, trust funds, or other
property deposited with that person, direct discontinuance of the
disbursement of client or trust funds by the parties or any of them,
the receipt of client or trust funds, or other business operations.
No person having in his or her possession any of these funds 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 Section 25253, the commissioner has
assumed possession of the broker-dealer or investment adviser.
(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 Part 1 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 that 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 the 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).
25249. If, after examination or investigation, the commissioner has
reasonable grounds to believe that any broker-dealer or investment
adviser has violated any law or rule binding upon it, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the violation.
The order shall be effective immediately, but shall not become final
except in accordance with the provisions of Section 25251.
25250. If, after examination or investigation, the commissioner has
reasonable grounds to believe that any broker-dealer or investment
adviser, other than an investment adviser subject to Section 25230.1,
is conducting business in an unsafe or injurious manner, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the unsafe or
injurious practices. The order shall be effective immediately, but
shall not become final except in accordance with the provisions of
Section 25251.
25251. (a) No order issued pursuant to Section 25249 or 25250 may
become final except after notice to the affected broker-dealer or
investment adviser of the commissioner's intention to make the order
final and of the reasons for the finding. The commissioner shall also
notify the broker-dealer or investment adviser that upon receiving a
request the matter shall be set for hearing to commence within 15
business days after receipt of the request. The broker-dealer or
investment adviser may consent to have the hearing commence at a
later date. If no hearing is requested within 30 days after the
mailing or service of the required notice, and none is ordered by the
commissioner, the order may become final without a hearing and the
broker-dealer or investment adviser 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 under that
act. If, upon the conclusion of the hearing, it appears to the
commissioner that the broker-dealer or investment adviser is
conducting business in an unsafe and injurious manner or is violating
any law of this state, or any rule binding upon it, the commissioner
shall make the order of discontinuance final and the broker-dealer
or investment adviser shall immediately discontinue the practices
named in the order.
(b) The broker-dealer or investment adviser may within 10 days
after an order is made final commence an action to restrain
enforcement of the order. If the enforcement of the order is not
enjoined within 10 days by the court in which the action is brought,
the broker-dealer or investment adviser shall comply with the order.
25252. The commissioner may, after appropriate notice and
opportunity for hearing, by orders, levy administrative penalties as
follows:
(a) Any person subject to this division, other than a
broker-dealer or investment adviser, who willfully violates any
provision of this division, or who willfully violates any rule or
order adopted or issued pursuant to this division, is liable for
administrative penalties of not more than one thousand dollars
($1,000) for the first violation, and not more than two thousand five
hundred dollars ($2,500) for each subsequent violation.
(b) Any broker-dealer or investment adviser that willfully
violates any provision of this division to which it is subject, or
that willfully violates any rule or order adopted or issued pursuant
to this division and to which it is subject, is liable for
administrative penalties of not more than five thousand dollars
($5,000) for the first violation, not more than ten thousand dollars
($10,000) for the second violation, and not more than fifteen
thousand dollars ($15,000) for each subsequent violation.
(c) The administrative penalties shall be collected by the
commissioner and paid into the State Corporations Fund.
(d) The administrative penalties available to the commissioner
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the commissioner to
enforce the provisions of this division.
25253. (a) Whenever it appears to the commissioner that any of the
conditions specified in subdivision (b) has occurred with respect to
any broker-dealer or investment adviser subject to this division, the
commissioner shall dispatch a written notice demanding remedial
action and a summary of findings, as referred to in Section 25248, to
the principal officer of that broker-dealer or investment adviser or
to its manager of record.
(b) The conditions that require the commissioner to commence
remedial action against a broker-dealer or investment adviser
pursuant to subdivision (a) includes any of the following:
(1) The broker-dealer or investment adviser is in an insolvent
condition.
(2) It is conducting its securities, broker-dealer, or investment
advisory business in an unsafe or unauthorized manner.
(3) It has violated any rule or order adopted or issued pursuant
to this division that is or has been necessary for the protection of
any investor.
(4) It refuses to submit its books, papers, and affairs to the
inspection of any examiner or investigator.
(5) It neglects or refuses to observe any order of the
commissioner made pursuant to this division that is or has been
necessary for the protection of any investor, within the time
specified therein, unless the enforcement of the order is restrained
in a proceeding brought by the broker-dealer or investment adviser.
(6) It has violated any provision of this division or any similar
regulatory scheme of this state or a foreign jurisdiction relating to
the protection of any investor.
(7) Any officer, director, stockholder, or partner of the
broker-dealer or investment adviser, or attorney-in-fact of the
broker-dealer or investment adviser has embezzled, misappropriated,
or willfully diverted the assets or client or trust funds of the
broker-dealer or investment adviser.
(8) It has permitted its capital to be lower than the minimum
required by law, including any rule or order adopted or issued
pursuant to this division.
(9) It has failed to comply with the bonding requirements of
Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing
with Section 25230) of this part.
(c) The broker-dealer or investment adviser shall be afforded a
reasonable opportunity to comply or otherwise effect those remedies
specified in the written notice or any other remedies that the
commissioner may deem acceptable. However, if the broker-dealer or
investment adviser fails 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
written notice is impossible, the commissioner may take possession of
the property and business of the broker-dealer or investment adviser
and retain possession until the broker-dealer or investment adviser,
subject to those conditions that the commissioner may prescribe,
resumes its business or its affairs are finally liquidated.
(d) Whenever the commissioner has taken possession of any
broker-dealer or investment adviser, the broker-dealer or investment
adviser, within 10 days after the taking, may apply to the superior
court to enjoin further proceedings in any California county or city
and county in which the California office or offices of the
broker-dealer or investment adviser is located. The court, after
ordering the commissioner to show cause why further proceedings
should not be enjoined and after a hearing and a determination of the
facts upon the merits, may dismiss the application or enjoin the
commissioner from further proceedings and direct the commissioner to
surrender the property and business to the broker-dealer or
investment adviser, or make any further order that may be just.
(e) If any facts occur that would entitle the commissioner under
subdivision (b) to take possession of the property, business, and
assets of a broker-dealer or investment adviser, the commissioner may
appoint a conservator of the broker-dealer or investment adviser and
require the conservator to post a bond. The conservator, under the
direction of the commissioner, shall take possession of the property,
business, and assets of the broker-dealer or investment adviser and
take any action that the conservator deems necessary to conserve the
assets of the broker-dealer or investment adviser pending further
disposition of its business. The conservator shall retain possession
until the property, business, and assets of the broker-dealer or
investment adviser are returned to the broker-dealer or investment
adviser or until further order of the commissioner.
(f) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a broker-dealer or investment adviser, 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 broker-dealer or investment adviser. During that time,
the rights of a broker-dealer or investment adviser and of all
persons with respect thereto, subject to the other provisions of this
section, are the same as if the commissioner had taken possession of
the property, business, and assets. A conservator, while in
possession of the property, business, and assets of a broker-dealer
or investment adviser shall have all the rights, powers, and
privileges of the broker-dealer or investment adviser, its officers
and directors or partners. All expenses of the conservatorship shall
be paid out of the assets of the broker-dealer or investment adviser
and shall be a lien thereon which shall be prior to any other lien.
(g) An investment adviser subject to Section 25230.1 is not
subject to this section, unless that investment adviser or persons
acting on behalf of that investment adviser committed any of the acts
of fraud or deceit set forth in paragraph (7) of subdivision (b).
25254. (a) If the commissioner determines it is in the public
interest, the commissioner may include in any administrative action
brought under this part 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 administrative law judge
shall have jurisdiction to award additional relief.
(b) In an administrative action brought under this part, the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include an amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations.
25255. The civil, criminal, and administrative remedies available
to the commissioner pursuant to this division are not exclusive, and
may be sought and employed in any combination deemed advisable by the
commissioner to enforce the provisions of this division.
25256. (a) For any broker-dealer or investment adviser, 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 precludes the commissioner from
applying a specific statutory provision in this division providing
for discipline against a broker-dealer or investment adviser, as a
result of disciplinary action taken against a broker-dealer or an
investment adviser, by the State of California, another state, an
agency of the federal government, or another country.
25240. Every applicant for a certificate as a broker-dealer or an
investment adviser (other than a California corporation), and every
investment adviser subject to Section 25230.1, shall file with the
commissioner, in such form as the commissioner by rule prescribes, an
irrevocable consent appointing the commissioner or the commissioner'
s successor in office to be the person's attorney to receive service
of any lawful process in any noncriminal suit, action or proceeding
against the person or the person's successor, executor, or
administrator, which arises under this law or any rule or order
hereunder after the consent has been filed, with the same force and
validity as if served personally on the person filing the consent. A
person who has filed such a consent in connection with a previous
application under this law (or under any prior law if the application
states that such consent is still effective), or a person who has
filed such a consent in connection with a previous notice filed under
Section 25230.1, need not file another. Service may be made by
leaving a copy of the process in the office of the commissioner, but
it is not effective unless (1) the plaintiff, who may be the
commissioner in a suit, action or proceeding instituted by the
commissioner, forthwith sends notice of the service and a copy of the
process by registered or certified mail to the defendant or
respondent at the person's last address on file with the
commissioner, and (2) the plaintiff's affidavit of compliance with
this section is filed in the case on or before the return day of the
process, if any, or within such further time as the court allows.
25241. (a) Every broker-dealer and every investment adviser
licensed under Section 25230 shall make and keep accounts,
correspondence, memorandums, papers, books, and other records and
shall file financial and other reports as the commissioner by rule
requires, subject to the limitations of Section 15(h) of the
Securities Exchange Act of 1934 with respect to broker-dealers and
Section 222 of the Investment Advisers Act of 1940 with respect to
investment advisers.
(b) All records so required shall be preserved for the time
specified in the rule.
(c) All records referred to in this section are subject at any
time and from time to time to reasonable periodic, special, or other
examinations by the commissioner, within or without this state, as
the commissioner deems necessary or appropriate in the public
interest or for the protection of investors.
(d) For the purpose of avoiding unnecessary duplications of
examinations, the commissioner, insofar as he or she deems it
practicable in administering this section, may cooperate with the
securities administrators of other states, the Securities and
Exchange Commission and any national securities exchange or national
securities association.
(e) Unless otherwise provided by rule, every investment adviser
subject to Section 25230 and every broker-dealer, including an
applicant for a license under Section 25210 or 25230, shall furnish
an authorization for disclosure to the commissioner of financial
records of the licensee's broker-dealer or investment adviser
business pursuant to Section 7473 of the Government Code.
25242. (a) Surrender of a certificate as a broker-dealer or
investment adviser becomes effective 30 days after receipt of an
application to surrender that certificate or within a shorter period
of time as the commissioner may determine, unless a revocation or
suspension proceeding is pending when the application is filed or a
proceeding to revoke or suspend or to impose conditions upon the
withdrawal is instituted within 30 days after the application is
filed. If a proceeding is pending or instituted, withdrawal becomes
effective at a time and upon any conditions as the commissioner by
order determines.
(b) If the commissioner finds that any broker-dealer or investment
adviser is no longer in existence, or has ceased to do business as a
broker-dealer or investment adviser, or is subject to an
adjudication of mental incompetence or to the control of a committee
or conservator or guardian, or cannot be located after reasonable
search, the commissioner may by order summarily revoke the
certificate of that broker-dealer or investment adviser.
(c) The commissioner may summarily suspend or revoke the
certificate of a broker-dealer or investment adviser if he or she (1)
fails to pay any fee required by Section 25608 or imposed pursuant
to Section 25217, 25218 or 25236 within 10 days after notice by the
commissioner that the fee is due and unpaid, (2) fails to file any
report required under Section 25241 within 10 days after notice by
the commissioner that the report is due, (3) fails to maintain any
bond required by subdivision (e) of Section 25216 or by Section
25237, (4) fails to file an application pursuant to subdivision (a)
of Section 25211 when required by subdivision (c) of that section,
within the time specified therein or within 10 days after notice by
the commissioner that the application is required, whichever last
occurs, (5) fails to maintain any capital required by subdivision (c)
of Section 25216 or by Section 25237, or (6) fails to maintain
records as required by Section 25241.
25243. It is unlawful for any person holding a certificate as a
broker-dealer or investment adviser under this part to represent or
imply in any manner whatsoever that such person has been sponsored,
recommended, or approved or that the person's abilities or
qualifications have in any respect been passed upon by the
commissioner. Nothing in this section prohibits a statement (other
than in a paid advertisement) that a person holds a certificate under
this law, if such statement is true in fact and if the effect of
such licensing is not misrepresented.
25243.5. (a) A broker-dealer or investment adviser, or an agent or
representative thereof, shall not use a senior-specific
certification, credential, or professional designation in connection
with the offer, sale, or purchase of securities, or the provision of
advice as to the value of or the advisability of investing in,
purchasing, or selling securities, either directly or indirectly or
through publications or writings or by issuing or promulgating
analyses or reports relating to securities, that indicates or implies
that the broker-dealer, investment adviser, or an agent or
representative thereof, has special certification or training in
advising or servicing senior citizens or retirees, in such a way as
to mislead any person.
(b) The prohibited use of these certifications, credentials, or
professional designations includes, but is not limited to, the
following:
(1) The use of a certification, credential, or professional
designation by a person who has not actually earned or is otherwise
ineligible to use the certification, credential, or designation.
(2) The use of a nonexistent or self-conferred certification,
credential, or professional designation.
(3) The use of a certification, credential, or professional
designation that indicates or implies a level of occupational
qualifications obtained through education, training, or experience
that the person using the certification, credential, or professional
designation does not have.
(4) The use of a certification, credential, or professional
designation that was obtained from a designating, credentialing, or
certifying organization where any of the following apply:
(A) The organization is primarily engaged in the business of
instruction in sales marketing.
(B) The organization does not have reasonable standards or
procedures for assuring the competency of individuals to whom it
grants a certification, credential, or professional designation.
(C) The organization does not have reasonable standards or
procedures for monitoring and disciplining individuals with a
certification, credential, or professional designation for improper
or unethical conduct.
(D) The organization does not have reasonable continuing education
requirements for individuals with a certification, credential, or
professional designation in order to maintain the certificate,
credential, or professional designation.
(c) There is a rebuttable presumption that a designating,
credentialing, or certifying organization is not disqualified solely
for the purposes of paragraph (4) of subdivision (b) when the
organization has been accredited by the American National Standards
Institute, the National Commission for Certifying Agencies, or an
organization that is on the United States Department of Education's
list entitled "Accrediting Agencies Recognized for Title IV Purposes"
and the certification, credential, or professional designation
issued therefrom does not primarily apply to sales and/or marketing.
(d) In determining whether a combination of words, or an acronym
standing for a combination of words, constitutes a certification,
credential, or professional designation indicating or implying that a
person has special certification or training in advising or serving
senior citizens or retirees, factors to be considered shall include
both of the following:
(1) Use of one or more word such as "senior," "retirement,"
"elder," or like words combined with one or more words such as
"certified," "registered," "chartered," "adviser," "specialist,"
"consultant," "planner," or like words, in the name of the
certification, credential, or professional designation or credential.
(2) The manner in which those words are combined.
(e) This section shall not apply to the use of a job title by a
person within an organization that is licensed or registered by the
Department of Corporations or a federal financial services regulatory
agency, when that job title indicates seniority or standing within
the organization, or specifies a person's area of specialization
within the organization. For the purposes of this subdivision,
federal financial services regulatory agency includes, but is not
limited to, an agency that regulates brokers or dealers, investment
advisers, or investment companies as described under the Investment
Company Act of 1940 (15 U.S.C. Sec. 809-1 et seq.).
(f) (1) This section shall not apply to a broker or agent who is
licensed by the Department of Insurance and is in compliance with the
requirements of Section 787.1 of the Insurance Code.
(2) This subdivision shall be operative only if Assembly Bill 2150
of the 2007-08 Regular Session is chaptered and becomes effective
and that bill adds Section 787.1 to the Insurance Code.
(g) This section shall become operative on July 1, 2009.
25244. Any person whose certificate as a broker-dealer or
investment adviser has been suspended or revoked shall immediately
surrender such certificate to the commissioner.
25245. It is unlawful for any person willfully to make any untrue
statement of a material fact in any application, notice, or report
filed with the commissioner under this part, or willfully to omit to
state in any such application, notice, or report any material fact
which is required to be stated therein.
25246. It is unlawful for any agent or broker-dealer to require, as
a condition to the purchase or sale of securities for and in the
name of a married person, that the prior consent or authorization of
the spouse of that person be obtained.
25247. (a) Upon written or oral request, the commissioner shall
make available to any person the information specified in Section
6254.12 of the Government Code and made available through the Public
Disclosure Program of the Financial Industry Regulatory Authority
with respect to any broker-dealer or agent licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of a
broker-dealer. Any information disclosed pursuant to this subdivision
shall constitute a public record. Notwithstanding any other
provisions of law, the commissioner may disclose either orally or in
writing that information pursuant to this subdivision. 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, or any officer,
agent, or employee of the state or of the Department of Corporations
for the release of any false or unauthorized information, unless the
release of that information was done with knowledge and malice.
(b) Any broker-dealer or agent licensed or regulated under this
part shall upon request deliver a written notice to any client when a
new account is opened stating that information about the license
status or disciplinary record of a broker-dealer or an agent may be
obtained from the Department of Corporations, or from any other
source that provides substantially similar information.
(c) The notice provided under subdivision (b) shall contain the
office location or telephone number where the information may be
obtained.
(d) A broker-dealer or agent shall be exempt from providing the
notice required under subdivision (b) if a person who does not have a
financial relationship with the broker-dealer or agent, requests
only general operational information such as the nature of the
broker-dealer's or agent's business, office location, hours of
operation, basic services, and fees, but does not solicit advice
regarding investments or other services offered.
(e) Upon written or oral request, the commissioner shall make
available to any person the disciplinary records maintained on the
Investment Adviser Registration Depository and made available through
the Investment Advisor Public Disclosure Web site with respect to
any investment adviser, investment adviser representative, or
associated person of an investment adviser licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of an
investment adviser. Any information disclosed pursuant to this
subdivision shall constitute a public record. Notwithstanding any
other provision of law, the commissioner may disclose that
information either orally or in writing pursuant to this subdivision.
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, or any
officer, agent, or employee of the state or of the Department of
Corporations for the release of any false or unauthorized
information, unless the release of that information was done with
knowledge and malice.
(f) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations when using a national,
uniform application adopted or approved for use by the Securities and
Exchange Commission, the North American Securities Administrators
Association, or the Financial Industry Regulatory Authority that is
required for participation in the Central Registration Depository or
the Investment Adviser Registration Depository.
(g) This section shall not require the disclosure of criminal
history record information maintained by the Federal Bureau of
Investigation pursuant to Section 534 of Title 28 of the United
States Code, and the rules thereunder, or information not otherwise
subject to disclosure under the Information Practices Act of 1977.
25248. (a) If the commissioner finds, as a result of any
examination or investigation or from any report made to the
commissioner, that any person subject to this part, other than an
investment adviser subject to Section 25230.1, is in an insolvent
condition, or is conducting a securities, broker-dealer, or
investment advisory business in such an unsafe, injurious, or
unauthorized manner as to render further operations hazardous to the
public or to customers, the commissioner may, by an order addressed
to and served by registered or certified mail or by personal service
on that person and on any other person having in his or her
possession or control any client funds, trust funds, or other
property deposited with that person, direct discontinuance of the
disbursement of client or trust funds by the parties or any of them,
the receipt of client or trust funds, or other business operations.
No person having in his or her possession any of these funds 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 Section 25253, the commissioner has
assumed possession of the broker-dealer or investment adviser.
(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 Part 1 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 that 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 the 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).
25249. If, after examination or investigation, the commissioner has
reasonable grounds to believe that any broker-dealer or investment
adviser has violated any law or rule binding upon it, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the violation.
The order shall be effective immediately, but shall not become final
except in accordance with the provisions of Section 25251.
25250. If, after examination or investigation, the commissioner has
reasonable grounds to believe that any broker-dealer or investment
adviser, other than an investment adviser subject to Section 25230.1,
is conducting business in an unsafe or injurious manner, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the unsafe or
injurious practices. The order shall be effective immediately, but
shall not become final except in accordance with the provisions of
Section 25251.
25251. (a) No order issued pursuant to Section 25249 or 25250 may
become final except after notice to the affected broker-dealer or
investment adviser of the commissioner's intention to make the order
final and of the reasons for the finding. The commissioner shall also
notify the broker-dealer or investment adviser that upon receiving a
request the matter shall be set for hearing to commence within 15
business days after receipt of the request. The broker-dealer or
investment adviser may consent to have the hearing commence at a
later date. If no hearing is requested within 30 days after the
mailing or service of the required notice, and none is ordered by the
commissioner, the order may become final without a hearing and the
broker-dealer or investment adviser 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 under that
act. If, upon the conclusion of the hearing, it appears to the
commissioner that the broker-dealer or investment adviser is
conducting business in an unsafe and injurious manner or is violating
any law of this state, or any rule binding upon it, the commissioner
shall make the order of discontinuance final and the broker-dealer
or investment adviser shall immediately discontinue the practices
named in the order.
(b) The broker-dealer or investment adviser may within 10 days
after an order is made final commence an action to restrain
enforcement of the order. If the enforcement of the order is not
enjoined within 10 days by the court in which the action is brought,
the broker-dealer or investment adviser shall comply with the order.
25252. The commissioner may, after appropriate notice and
opportunity for hearing, by orders, levy administrative penalties as
follows:
(a) Any person subject to this division, other than a
broker-dealer or investment adviser, who willfully violates any
provision of this division, or who willfully violates any rule or
order adopted or issued pursuant to this division, is liable for
administrative penalties of not more than one thousand dollars
($1,000) for the first violation, and not more than two thousand five
hundred dollars ($2,500) for each subsequent violation.
(b) Any broker-dealer or investment adviser that willfully
violates any provision of this division to which it is subject, or
that willfully violates any rule or order adopted or issued pursuant
to this division and to which it is subject, is liable for
administrative penalties of not more than five thousand dollars
($5,000) for the first violation, not more than ten thousand dollars
($10,000) for the second violation, and not more than fifteen
thousand dollars ($15,000) for each subsequent violation.
(c) The administrative penalties shall be collected by the
commissioner and paid into the State Corporations Fund.
(d) The administrative penalties available to the commissioner
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the commissioner to
enforce the provisions of this division.
25253. (a) Whenever it appears to the commissioner that any of the
conditions specified in subdivision (b) has occurred with respect to
any broker-dealer or investment adviser subject to this division, the
commissioner shall dispatch a written notice demanding remedial
action and a summary of findings, as referred to in Section 25248, to
the principal officer of that broker-dealer or investment adviser or
to its manager of record.
(b) The conditions that require the commissioner to commence
remedial action against a broker-dealer or investment adviser
pursuant to subdivision (a) includes any of the following:
(1) The broker-dealer or investment adviser is in an insolvent
condition.
(2) It is conducting its securities, broker-dealer, or investment
advisory business in an unsafe or unauthorized manner.
(3) It has violated any rule or order adopted or issued pursuant
to this division that is or has been necessary for the protection of
any investor.
(4) It refuses to submit its books, papers, and affairs to the
inspection of any examiner or investigator.
(5) It neglects or refuses to observe any order of the
commissioner made pursuant to this division that is or has been
necessary for the protection of any investor, within the time
specified therein, unless the enforcement of the order is restrained
in a proceeding brought by the broker-dealer or investment adviser.
(6) It has violated any provision of this division or any similar
regulatory scheme of this state or a foreign jurisdiction relating to
the protection of any investor.
(7) Any officer, director, stockholder, or partner of the
broker-dealer or investment adviser, or attorney-in-fact of the
broker-dealer or investment adviser has embezzled, misappropriated,
or willfully diverted the assets or client or trust funds of the
broker-dealer or investment adviser.
(8) It has permitted its capital to be lower than the minimum
required by law, including any rule or order adopted or issued
pursuant to this division.
(9) It has failed to comply with the bonding requirements of
Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing
with Section 25230) of this part.
(c) The broker-dealer or investment adviser shall be afforded a
reasonable opportunity to comply or otherwise effect those remedies
specified in the written notice or any other remedies that the
commissioner may deem acceptable. However, if the broker-dealer or
investment adviser fails 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
written notice is impossible, the commissioner may take possession of
the property and business of the broker-dealer or investment adviser
and retain possession until the broker-dealer or investment adviser,
subject to those conditions that the commissioner may prescribe,
resumes its business or its affairs are finally liquidated.
(d) Whenever the commissioner has taken possession of any
broker-dealer or investment adviser, the broker-dealer or investment
adviser, within 10 days after the taking, may apply to the superior
court to enjoin further proceedings in any California county or city
and county in which the California office or offices of the
broker-dealer or investment adviser is located. The court, after
ordering the commissioner to show cause why further proceedings
should not be enjoined and after a hearing and a determination of the
facts upon the merits, may dismiss the application or enjoin the
commissioner from further proceedings and direct the commissioner to
surrender the property and business to the broker-dealer or
investment adviser, or make any further order that may be just.
(e) If any facts occur that would entitle the commissioner under
subdivision (b) to take possession of the property, business, and
assets of a broker-dealer or investment adviser, the commissioner may
appoint a conservator of the broker-dealer or investment adviser and
require the conservator to post a bond. The conservator, under the
direction of the commissioner, shall take possession of the property,
business, and assets of the broker-dealer or investment adviser and
take any action that the conservator deems necessary to conserve the
assets of the broker-dealer or investment adviser pending further
disposition of its business. The conservator shall retain possession
until the property, business, and assets of the broker-dealer or
investment adviser are returned to the broker-dealer or investment
adviser or until further order of the commissioner.
(f) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a broker-dealer or investment adviser, 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 broker-dealer or investment adviser. During that time,
the rights of a broker-dealer or investment adviser and of all
persons with respect thereto, subject to the other provisions of this
section, are the same as if the commissioner had taken possession of
the property, business, and assets. A conservator, while in
possession of the property, business, and assets of a broker-dealer
or investment adviser shall have all the rights, powers, and
privileges of the broker-dealer or investment adviser, its officers
and directors or partners. All expenses of the conservatorship shall
be paid out of the assets of the broker-dealer or investment adviser
and shall be a lien thereon which shall be prior to any other lien.
(g) An investment adviser subject to Section 25230.1 is not
subject to this section, unless that investment adviser or persons
acting on behalf of that investment adviser committed any of the acts
of fraud or deceit set forth in paragraph (7) of subdivision (b).
25254. (a) If the commissioner determines it is in the public
interest, the commissioner may include in any administrative action
brought under this part 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 administrative law judge
shall have jurisdiction to award additional relief.
(b) In an administrative action brought under this part, the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include an amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations.
25255. The civil, criminal, and administrative remedies available
to the commissioner pursuant to this division are not exclusive, and
may be sought and employed in any combination deemed advisable by the
commissioner to enforce the provisions of this division.
25256. (a) For any broker-dealer or investment adviser, 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 precludes the commissioner from
applying a specific statutory provision in this division providing
for discipline against a broker-dealer or investment adviser, as a
result of disciplinary action taken against a broker-dealer or an
investment adviser, by the State of California, another state, an
agency of the federal government, or another country.
25240. Every applicant for a certificate as a broker-dealer or an
investment adviser (other than a California corporation), and every
investment adviser subject to Section 25230.1, shall file with the
commissioner, in such form as the commissioner by rule prescribes, an
irrevocable consent appointing the commissioner or the commissioner'
s successor in office to be the person's attorney to receive service
of any lawful process in any noncriminal suit, action or proceeding
against the person or the person's successor, executor, or
administrator, which arises under this law or any rule or order
hereunder after the consent has been filed, with the same force and
validity as if served personally on the person filing the consent. A
person who has filed such a consent in connection with a previous
application under this law (or under any prior law if the application
states that such consent is still effective), or a person who has
filed such a consent in connection with a previous notice filed under
Section 25230.1, need not file another. Service may be made by
leaving a copy of the process in the office of the commissioner, but
it is not effective unless (1) the plaintiff, who may be the
commissioner in a suit, action or proceeding instituted by the
commissioner, forthwith sends notice of the service and a copy of the
process by registered or certified mail to the defendant or
respondent at the person's last address on file with the
commissioner, and (2) the plaintiff's affidavit of compliance with
this section is filed in the case on or before the return day of the
process, if any, or within such further time as the court allows.
25241. (a) Every broker-dealer and every investment adviser
licensed under Section 25230 shall make and keep accounts,
correspondence, memorandums, papers, books, and other records and
shall file financial and other reports as the commissioner by rule
requires, subject to the limitations of Section 15(h) of the
Securities Exchange Act of 1934 with respect to broker-dealers and
Section 222 of the Investment Advisers Act of 1940 with respect to
investment advisers.
(b) All records so required shall be preserved for the time
specified in the rule.
(c) All records referred to in this section are subject at any
time and from time to time to reasonable periodic, special, or other
examinations by the commissioner, within or without this state, as
the commissioner deems necessary or appropriate in the public
interest or for the protection of investors.
(d) For the purpose of avoiding unnecessary duplications of
examinations, the commissioner, insofar as he or she deems it
practicable in administering this section, may cooperate with the
securities administrators of other states, the Securities and
Exchange Commission and any national securities exchange or national
securities association.
(e) Unless otherwise provided by rule, every investment adviser
subject to Section 25230 and every broker-dealer, including an
applicant for a license under Section 25210 or 25230, shall furnish
an authorization for disclosure to the commissioner of financial
records of the licensee's broker-dealer or investment adviser
business pursuant to Section 7473 of the Government Code.
25242. (a) Surrender of a certificate as a broker-dealer or
investment adviser becomes effective 30 days after receipt of an
application to surrender that certificate or within a shorter period
of time as the commissioner may determine, unless a revocation or
suspension proceeding is pending when the application is filed or a
proceeding to revoke or suspend or to impose conditions upon the
withdrawal is instituted within 30 days after the application is
filed. If a proceeding is pending or instituted, withdrawal becomes
effective at a time and upon any conditions as the commissioner by
order determines.
(b) If the commissioner finds that any broker-dealer or investment
adviser is no longer in existence, or has ceased to do business as a
broker-dealer or investment adviser, or is subject to an
adjudication of mental incompetence or to the control of a committee
or conservator or guardian, or cannot be located after reasonable
search, the commissioner may by order summarily revoke the
certificate of that broker-dealer or investment adviser.
(c) The commissioner may summarily suspend or revoke the
certificate of a broker-dealer or investment adviser if he or she (1)
fails to pay any fee required by Section 25608 or imposed pursuant
to Section 25217, 25218 or 25236 within 10 days after notice by the
commissioner that the fee is due and unpaid, (2) fails to file any
report required under Section 25241 within 10 days after notice by
the commissioner that the report is due, (3) fails to maintain any
bond required by subdivision (e) of Section 25216 or by Section
25237, (4) fails to file an application pursuant to subdivision (a)
of Section 25211 when required by subdivision (c) of that section,
within the time specified therein or within 10 days after notice by
the commissioner that the application is required, whichever last
occurs, (5) fails to maintain any capital required by subdivision (c)
of Section 25216 or by Section 25237, or (6) fails to maintain
records as required by Section 25241.
25243. It is unlawful for any person holding a certificate as a
broker-dealer or investment adviser under this part to represent or
imply in any manner whatsoever that such person has been sponsored,
recommended, or approved or that the person's abilities or
qualifications have in any respect been passed upon by the
commissioner. Nothing in this section prohibits a statement (other
than in a paid advertisement) that a person holds a certificate under
this law, if such statement is true in fact and if the effect of
such licensing is not misrepresented.
25243.5. (a) A broker-dealer or investment adviser, or an agent or
representative thereof, shall not use a senior-specific
certification, credential, or professional designation in connection
with the offer, sale, or purchase of securities, or the provision of
advice as to the value of or the advisability of investing in,
purchasing, or selling securities, either directly or indirectly or
through publications or writings or by issuing or promulgating
analyses or reports relating to securities, that indicates or implies
that the broker-dealer, investment adviser, or an agent or
representative thereof, has special certification or training in
advising or servicing senior citizens or retirees, in such a way as
to mislead any person.
(b) The prohibited use of these certifications, credentials, or
professional designations includes, but is not limited to, the
following:
(1) The use of a certification, credential, or professional
designation by a person who has not actually earned or is otherwise
ineligible to use the certification, credential, or designation.
(2) The use of a nonexistent or self-conferred certification,
credential, or professional designation.
(3) The use of a certification, credential, or professional
designation that indicates or implies a level of occupational
qualifications obtained through education, training, or experience
that the person using the certification, credential, or professional
designation does not have.
(4) The use of a certification, credential, or professional
designation that was obtained from a designating, credentialing, or
certifying organization where any of the following apply:
(A) The organization is primarily engaged in the business of
instruction in sales marketing.
(B) The organization does not have reasonable standards or
procedures for assuring the competency of individuals to whom it
grants a certification, credential, or professional designation.
(C) The organization does not have reasonable standards or
procedures for monitoring and disciplining individuals with a
certification, credential, or professional designation for improper
or unethical conduct.
(D) The organization does not have reasonable continuing education
requirements for individuals with a certification, credential, or
professional designation in order to maintain the certificate,
credential, or professional designation.
(c) There is a rebuttable presumption that a designating,
credentialing, or certifying organization is not disqualified solely
for the purposes of paragraph (4) of subdivision (b) when the
organization has been accredited by the American National Standards
Institute, the National Commission for Certifying Agencies, or an
organization that is on the United States Department of Education's
list entitled "Accrediting Agencies Recognized for Title IV Purposes"
and the certification, credential, or professional designation
issued therefrom does not primarily apply to sales and/or marketing.
(d) In determining whether a combination of words, or an acronym
standing for a combination of words, constitutes a certification,
credential, or professional designation indicating or implying that a
person has special certification or training in advising or serving
senior citizens or retirees, factors to be considered shall include
both of the following:
(1) Use of one or more word such as "senior," "retirement,"
"elder," or like words combined with one or more words such as
"certified," "registered," "chartered," "adviser," "specialist,"
"consultant," "planner," or like words, in the name of the
certification, credential, or professional designation or credential.
(2) The manner in which those words are combined.
(e) This section shall not apply to the use of a job title by a
person within an organization that is licensed or registered by the
Department of Corporations or a federal financial services regulatory
agency, when that job title indicates seniority or standing within
the organization, or specifies a person's area of specialization
within the organization. For the purposes of this subdivision,
federal financial services regulatory agency includes, but is not
limited to, an agency that regulates brokers or dealers, investment
advisers, or investment companies as described under the Investment
Company Act of 1940 (15 U.S.C. Sec. 809-1 et seq.).
(f) (1) This section shall not apply to a broker or agent who is
licensed by the Department of Insurance and is in compliance with the
requirements of Section 787.1 of the Insurance Code.
(2) This subdivision shall be operative only if Assembly Bill 2150
of the 2007-08 Regular Session is chaptered and becomes effective
and that bill adds Section 787.1 to the Insurance Code.
(g) This section shall become operative on July 1, 2009.
25244. Any person whose certificate as a broker-dealer or
investment adviser has been suspended or revoked shall immediately
surrender such certificate to the commissioner.
25245. It is unlawful for any person willfully to make any untrue
statement of a material fact in any application, notice, or report
filed with the commissioner under this part, or willfully to omit to
state in any such application, notice, or report any material fact
which is required to be stated therein.
25246. It is unlawful for any agent or broker-dealer to require, as
a condition to the purchase or sale of securities for and in the
name of a married person, that the prior consent or authorization of
the spouse of that person be obtained.
25247. (a) Upon written or oral request, the commissioner shall
make available to any person the information specified in Section
6254.12 of the Government Code and made available through the Public
Disclosure Program of the Financial Industry Regulatory Authority
with respect to any broker-dealer or agent licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of a
broker-dealer. Any information disclosed pursuant to this subdivision
shall constitute a public record. Notwithstanding any other
provisions of law, the commissioner may disclose either orally or in
writing that information pursuant to this subdivision. 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, or any officer,
agent, or employee of the state or of the Department of Corporations
for the release of any false or unauthorized information, unless the
release of that information was done with knowledge and malice.
(b) Any broker-dealer or agent licensed or regulated under this
part shall upon request deliver a written notice to any client when a
new account is opened stating that information about the license
status or disciplinary record of a broker-dealer or an agent may be
obtained from the Department of Corporations, or from any other
source that provides substantially similar information.
(c) The notice provided under subdivision (b) shall contain the
office location or telephone number where the information may be
obtained.
(d) A broker-dealer or agent shall be exempt from providing the
notice required under subdivision (b) if a person who does not have a
financial relationship with the broker-dealer or agent, requests
only general operational information such as the nature of the
broker-dealer's or agent's business, office location, hours of
operation, basic services, and fees, but does not solicit advice
regarding investments or other services offered.
(e) Upon written or oral request, the commissioner shall make
available to any person the disciplinary records maintained on the
Investment Adviser Registration Depository and made available through
the Investment Advisor Public Disclosure Web site with respect to
any investment adviser, investment adviser representative, or
associated person of an investment adviser licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of an
investment adviser. Any information disclosed pursuant to this
subdivision shall constitute a public record. Notwithstanding any
other provision of law, the commissioner may disclose that
information either orally or in writing pursuant to this subdivision.
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, or any
officer, agent, or employee of the state or of the Department of
Corporations for the release of any false or unauthorized
information, unless the release of that information was done with
knowledge and malice.
(f) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations when using a national,
uniform application adopted or approved for use by the Securities and
Exchange Commission, the North American Securities Administrators
Association, or the Financial Industry Regulatory Authority that is
required for participation in the Central Registration Depository or
the Investment Adviser Registration Depository.
(g) This section shall not require the disclosure of criminal
history record information maintained by the Federal Bureau of
Investigation pursuant to Section 534 of Title 28 of the United
States Code, and the rules thereunder, or information not otherwise
subject to disclosure under the Information Practices Act of 1977.
25248. (a) If the commissioner finds, as a result of any
examination or investigation or from any report made to the
commissioner, that any person subject to this part, other than an
investment adviser subject to Section 25230.1, is in an insolvent
condition, or is conducting a securities, broker-dealer, or
investment advisory business in such an unsafe, injurious, or
unauthorized manner as to render further operations hazardous to the
public or to customers, the commissioner may, by an order addressed
to and served by registered or certified mail or by personal service
on that person and on any other person having in his or her
possession or control any client funds, trust funds, or other
property deposited with that person, direct discontinuance of the
disbursement of client or trust funds by the parties or any of them,
the receipt of client or trust funds, or other business operations.
No person having in his or her possession any of these funds 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 Section 25253, the commissioner has
assumed possession of the broker-dealer or investment adviser.
(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 Part 1 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 that 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 the 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).
25249. If, after examination or investigation, the commissioner has
reasonable grounds to believe that any broker-dealer or investment
adviser has violated any law or rule binding upon it, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the violation.
The order shall be effective immediately, but shall not become final
except in accordance with the provisions of Section 25251.
25250. If, after examination or investigation, the commissioner has
reasonable grounds to believe that any broker-dealer or investment
adviser, other than an investment adviser subject to Section 25230.1,
is conducting business in an unsafe or injurious manner, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the unsafe or
injurious practices. The order shall be effective immediately, but
shall not become final except in accordance with the provisions of
Section 25251.
25251. (a) No order issued pursuant to Section 25249 or 25250 may
become final except after notice to the affected broker-dealer or
investment adviser of the commissioner's intention to make the order
final and of the reasons for the finding. The commissioner shall also
notify the broker-dealer or investment adviser that upon receiving a
request the matter shall be set for hearing to commence within 15
business days after receipt of the request. The broker-dealer or
investment adviser may consent to have the hearing commence at a
later date. If no hearing is requested within 30 days after the
mailing or service of the required notice, and none is ordered by the
commissioner, the order may become final without a hearing and the
broker-dealer or investment adviser 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 under that
act. If, upon the conclusion of the hearing, it appears to the
commissioner that the broker-dealer or investment adviser is
conducting business in an unsafe and injurious manner or is violating
any law of this state, or any rule binding upon it, the commissioner
shall make the order of discontinuance final and the broker-dealer
or investment adviser shall immediately discontinue the practices
named in the order.
(b) The broker-dealer or investment adviser may within 10 days
after an order is made final commence an action to restrain
enforcement of the order. If the enforcement of the order is not
enjoined within 10 days by the court in which the action is brought,
the broker-dealer or investment adviser shall comply with the order.
25252. The commissioner may, after appropriate notice and
opportunity for hearing, by orders, levy administrative penalties as
follows:
(a) Any person subject to this division, other than a
broker-dealer or investment adviser, who willfully violates any
provision of this division, or who willfully violates any rule or
order adopted or issued pursuant to this division, is liable for
administrative penalties of not more than one thousand dollars
($1,000) for the first violation, and not more than two thousand five
hundred dollars ($2,500) for each subsequent violation.
(b) Any broker-dealer or investment adviser that willfully
violates any provision of this division to which it is subject, or
that willfully violates any rule or order adopted or issued pursuant
to this division and to which it is subject, is liable for
administrative penalties of not more than five thousand dollars
($5,000) for the first violation, not more than ten thousand dollars
($10,000) for the second violation, and not more than fifteen
thousand dollars ($15,000) for each subsequent violation.
(c) The administrative penalties shall be collected by the
commissioner and paid into the State Corporations Fund.
(d) The administrative penalties available to the commissioner
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the commissioner to
enforce the provisions of this division.
25253. (a) Whenever it appears to the commissioner that any of the
conditions specified in subdivision (b) has occurred with respect to
any broker-dealer or investment adviser subject to this division, the
commissioner shall dispatch a written notice demanding remedial
action and a summary of findings, as referred to in Section 25248, to
the principal officer of that broker-dealer or investment adviser or
to its manager of record.
(b) The conditions that require the commissioner to commence
remedial action against a broker-dealer or investment adviser
pursuant to subdivision (a) includes any of the following:
(1) The broker-dealer or investment adviser is in an insolvent
condition.
(2) It is conducting its securities, broker-dealer, or investment
advisory business in an unsafe or unauthorized manner.
(3) It has violated any rule or order adopted or issued pursuant
to this division that is or has been necessary for the protection of
any investor.
(4) It refuses to submit its books, papers, and affairs to the
inspection of any examiner or investigator.
(5) It neglects or refuses to observe any order of the
commissioner made pursuant to this division that is or has been
necessary for the protection of any investor, within the time
specified therein, unless the enforcement of the order is restrained
in a proceeding brought by the broker-dealer or investment adviser.
(6) It has violated any provision of this division or any similar
regulatory scheme of this state or a foreign jurisdiction relating to
the protection of any investor.
(7) Any officer, director, stockholder, or partner of the
broker-dealer or investment adviser, or attorney-in-fact of the
broker-dealer or investment adviser has embezzled, misappropriated,
or willfully diverted the assets or client or trust funds of the
broker-dealer or investment adviser.
(8) It has permitted its capital to be lower than the minimum
required by law, including any rule or order adopted or issued
pursuant to this division.
(9) It has failed to comply with the bonding requirements of
Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing
with Section 25230) of this part.
(c) The broker-dealer or investment adviser shall be afforded a
reasonable opportunity to comply or otherwise effect those remedies
specified in the written notice or any other remedies that the
commissioner may deem acceptable. However, if the broker-dealer or
investment adviser fails 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
written notice is impossible, the commissioner may take possession of
the property and business of the broker-dealer or investment adviser
and retain possession until the broker-dealer or investment adviser,
subject to those conditions that the commissioner may prescribe,
resumes its business or its affairs are finally liquidated.
(d) Whenever the commissioner has taken possession of any
broker-dealer or investment adviser, the broker-dealer or investment
adviser, within 10 days after the taking, may apply to the superior
court to enjoin further proceedings in any California county or city
and county in which the California office or offices of the
broker-dealer or investment adviser is located. The court, after
ordering the commissioner to show cause why further proceedings
should not be enjoined and after a hearing and a determination of the
facts upon the merits, may dismiss the application or enjoin the
commissioner from further proceedings and direct the commissioner to
surrender the property and business to the broker-dealer or
investment adviser, or make any further order that may be just.
(e) If any facts occur that would entitle the commissioner under
subdivision (b) to take possession of the property, business, and
assets of a broker-dealer or investment adviser, the commissioner may
appoint a conservator of the broker-dealer or investment adviser and
require the conservator to post a bond. The conservator, under the
direction of the commissioner, shall take possession of the property,
business, and assets of the broker-dealer or investment adviser and
take any action that the conservator deems necessary to conserve the
assets of the broker-dealer or investment adviser pending further
disposition of its business. The conservator shall retain possession
until the property, business, and assets of the broker-dealer or
investment adviser are returned to the broker-dealer or investment
adviser or until further order of the commissioner.
(f) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a broker-dealer or investment adviser, 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 broker-dealer or investment adviser. During that time,
the rights of a broker-dealer or investment adviser and of all
persons with respect thereto, subject to the other provisions of this
section, are the same as if the commissioner had taken possession of
the property, business, and assets. A conservator, while in
possession of the property, business, and assets of a broker-dealer
or investment adviser shall have all the rights, powers, and
privileges of the broker-dealer or investment adviser, its officers
and directors or partners. All expenses of the conservatorship shall
be paid out of the assets of the broker-dealer or investment adviser
and shall be a lien thereon which shall be prior to any other lien.
(g) An investment adviser subject to Section 25230.1 is not
subject to this section, unless that investment adviser or persons
acting on behalf of that investment adviser committed any of the acts
of fraud or deceit set forth in paragraph (7) of subdivision (b).
25254. (a) If the commissioner determines it is in the public
interest, the commissioner may include in any administrative action
brought under this part 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 administrative law judge
shall have jurisdiction to award additional relief.
(b) In an administrative action brought under this part, the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include an amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations.
25255. The civil, criminal, and administrative remedies available
to the commissioner pursuant to this division are not exclusive, and
may be sought and employed in any combination deemed advisable by the
commissioner to enforce the provisions of this division.
25256. (a) For any broker-dealer or investment adviser, 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 precludes the commissioner from
applying a specific statutory provision in this division providing
for discipline against a broker-dealer or investment adviser, as a
result of disciplinary action taken against a broker-dealer or an
investment adviser, by the State of California, another state, an
agency of the federal government, or another country.
