State Codes and Statutes

Statutes > California > Fin > 17330-17350

FINANCIAL CODE
SECTION 17330-17350



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



17331.  (a) An applicant applying for licensure as an escrow agent
under this division is required to apply for a Fidelity Corporation
Certificate, prepared and issued by Fidelity Corporation, for each
proposed shareholder, officer, director, trustee, manager, or
employee who is to be directly or indirectly compensated by the
escrow agent, prior to licensure of the escrow agent by the
commissioner.
   (b) A shareholder, officer, director, trustee, manager, or
employee of an escrow agent, directly or indirectly compensated by an
escrow agent within this state, is required to complete and execute
a Fidelity Corporation Certificate application, prepared and issued
by Fidelity Corporation, as a condition of his or her employment or
entitlement to compensation, before the person may continue the
regular discharge of his or her duties, or have access to moneys or
negotiable securities belonging to or in the possession of the escrow
agent, or draw checks upon the escrow agent or the trust funds of
the escrow agent.
   (c) Fidelity Corporation Certificates may also be known as Escrow
Agent's Fidelity Corporation Certificates or EAFC Certificates. The
certificate at all times remains the property of Fidelity
Corporation, and is not transferable by either a member or employee.
The certificate is not a warranty or guarantee by Fidelity
Corporation of the integrity, veracity, or competence of the person.
   (d) An application for a Fidelity Corporation Certificate shall be
in writing and in the form prescribed by Fidelity Corporation. The
application may include (1) a fee not to exceed fifty dollars ($50),
(2) two passport-size photographs, and (3) a set of fingerprint
images and related information using the process established by the
Department of Justice for requesting state summary criminal history
information, plus the fee charged by the Department of Justice for
processing noncriminal applicant fingerprint images and related
information, in a manner established by the Department of Justice
pursuant to subdivision (l). The Department of Justice shall honor
the Fidelity Corporation report request form and issue a report to
Fidelity Corporation, notwithstanding any other provision of law or
regulation to the contrary. Fidelity Corporation is also entitled to
submit a set of fingerprint images and related information in the
Department of Justice specified noncriminal applicant fingerprint
format for the purpose of requesting and obtaining a report from the
Department of Justice, for the officers and employees of Fidelity
Corporation. A member shall cause the filing of applications for all
existing employees as required by this section within 30 days of
written notice by Fidelity Corporation to the member.
   (e) The application form shall include a provision for binding
arbitration to allow for arbitration of any appeal or dispute as to a
decision by Fidelity Corporation concerning the certificate, as
follows:

   A DISPUTE AS TO WHETHER THE DENIAL OF THIS CERTIFICATE APPLICATION
OR ANY SUBSEQUENT SUSPENSION OR REVOCATION OF THE CERTIFICATE IS
UNNECESSARY OR UNAUTHORIZED OR WAS IMPROPERLY, NEGLIGENTLY, OR
UNLAWFULLY RENDERED, MAY BE DETERMINED BY SUBMISSION TO ARBITRATION
AS PROVIDED BY CALIFORNIA LAW, AND NOT BY A LAWSUIT OR RESORT TO
COURT PROCESS EXCEPT AS CALIFORNIA LAW PROVIDES FOR JUDICIAL REVIEW
OF ARBITRATION PROCEEDINGS OR EXCEPT AS PROVIDED BY SECTION 17331.3
OF THE FINANCIAL CODE.  THE APPLICANT MAY, SUBJECT TO AGREEMENT,
SUBMIT ANY ISSUE ARISING FROM A DECISION BY FIDELITY CORPORATION TO
DENY THIS CERTIFICATE APPLICATION OR TO SUSPEND OR REVOKE THE
CERTIFICATE TO BE DECIDED BY BINDING NEUTRAL ARBITRATION.  UPON AN
AGREEMENT TO SUBMIT TO BINDING NEUTRAL ARBITRATION, THE APPLICANT HAS
NO RIGHT TO HAVE ANY DISPUTE CONCERNING THIS CERTIFICATE APPLICATION
LITIGATED IN A COURT OR JURY TRIAL NOR ANY JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, EXCEPT AS SPECIFICALLY PROVIDED IN THE ESCROW
LAW.  ARBITRATION MAY BE COMPELLED AS PROVIDED BY LAW.

   (f) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations, or any officer, agent, or employee of
the state or the Department of Corporations for statements made by
Fidelity Corporation in reports or recommendations made pursuant to
this division, or for reports or recommendations made pursuant to
this division to Fidelity Corporation by its members, directors,
officers, employees or agents, the State of California, the
Department of Corporations, or any officer, agent, or employee of the
state or the Department of Corporations, unless the information
provided is false and the party making the statement or providing the
false information does so with knowledge and malice. Reports or
recommendations made pursuant to this section, or Section 17331.1,
17331.2, or 17331.3, are not public documents.
   (g) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations, or an officer, agent, or employee of
the state or the Department of Corporations for the release of any
information furnished to Fidelity Corporation pursuant to this
section unless the information released is false and the party,
including Fidelity Corporation, its members, directors, officers,
employees, or agents, the state, the Department of Corporations, or
any officer, agent, or employee of the state or the Department of
Corporations, who releases the false information does so with
knowledge and malice.
   (h) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its directors,
officers, employees, or agents, for any decision to deny an
application for a certificate or to suspend or revoke the certificate
of any person or for the timing of any decision or the timing of any
notice to persons or members thereof, or for any failure to deny an
application under subdivision (a) of Section 17331.2. This
subdivision does not apply to acts performed in bad faith or with
malice.
   (i) Fidelity Corporation, any member of Fidelity Corporation, an
agent of Fidelity Corporation or of its members, or any person who
uses any information obtained under this section for any purpose not
authorized by this chapter is guilty of a misdemeanor.
   (j) Section 17331, 17331.1, or 17331.2 does not constitute a
restriction or limitation upon the obligation of Fidelity Corporation
to indemnify members against loss, as provided in Sections 17310 and
17314. The failure to obtain a certificate, the denial of an
application for a certificate, or the suspension, cancellation, or
revocation of a certificate does not limit the obligation of Fidelity
Corporation to indemnify a member against loss.
   (k) Notwithstanding Section 11105 of the Penal Code, Fidelity
Corporation is entitled to receive state summary criminal history
information and subsequent arrest notification from the Department of
Justice as a result of fingerprint images and related information
submitted to the Department of Justice by the Department of
Corporations, pursuant to subdivision (g) of Section 17209, Section
17212.1, and subdivision (d) of Section 17414.1, by or on behalf of
escrow agents, shareholders, officers, directors, trustees, managers,
or employees of an escrow agent, directly or indirectly compensated
by an escrow agent. The Department of Justice and Fidelity
Corporation shall enter into an agreement to implement this
subdivision. The Department of Corporations shall forward to Fidelity
Corporation, weekly, a list of names of individual fingerprints
submitted to the Department of Justice.
   (l) (1) The fingerprint images and related information required
pursuant to subdivision (d) shall be submitted by the Department of
Corporations to the Department of Justice, in a manner established by
the Department of Justice, for the purposes of obtaining information
as to the existence and content of a record of state or federal
convictions, state or federal arrests, and information as to the
existence of and content of a record of state or federal arrests for
which the Department of Justice establishes that the person is free
on bail or on his or her own recognizance pending trial or appeal.
   (2) Upon receipt, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary criminal
history information received pursuant to this section. The
Department of Justice shall review the information returned from the
Federal Bureau of Investigation and compile and disseminate a
response to the Department of Corporations and a fitness
determination to Fidelity Corporation pursuant to subdivision (p) of
Section 11105 of the Penal Code.
   (3) The Department of Justice shall charge a fee sufficient to
cover the costs of processing the requests pursuant to this
subdivision.


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



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



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



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



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


17334.  Whenever the commissioner has taken possession of the
property and business of Fidelity Corporation, Fidelity Corporation
within 10 business days after the taking, if it deems itself
aggrieved thereby, may apply to the superior court in the county in
which the head office of Fidelity Corporation is located to enjoin
further proceedings. The court, after citing the commissioner to show
cause why further proceedings should not be enjoined, and after a
hearing and a determination of the facts upon the merits, may dismiss
the application or enjoin the commissioner from further proceedings
and direct the commissioner to surrender the property and business to
Fidelity Corporation, or make a further order as may be just.




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



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



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



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


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



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



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


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



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


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



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



17346.  (a) Fidelity Corporation and its members shall not
advertise, print, display, publish, distribute, or broadcast, or
cause or permit to be advertised, printed, displayed, published,
distributed, or broadcast, in any manner any statement or
representation with regard to a guarantee of trust obligations in
their advertisements that is false or misleading or calculated to
deceive or misinform the public. Any statement or representation with
regard to a guarantee of trust obligations, except the statement set
forth in subdivision (b), shall be reviewed and approved by the
commissioner prior to its use.
   (b) Any advertising referring to Fidelity Corporation shall state
in a clear and conspicuous manner, the following statement:

   "MEMBER OF ESCROW AGENTS' FIDELITY CORPORATION (EAFC). EAFC
PROVIDES FIDELITY COVERAGE TO ITS MEMBERS. EAFC IS NOT A GOVERNMENT
AGENCY, AND THERE IS NO GUARANTEE OF A PAYMENT OF ANY CLAIM BY THE
STATE OF CALIFORNIA."

   (c) Neither Fidelity Corporation nor its members shall advertise
that trust obligations of escrow agents are "protected," "guaranteed,"
"insured," or use words to that effect.



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




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




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



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


State Codes and Statutes

Statutes > California > Fin > 17330-17350

FINANCIAL CODE
SECTION 17330-17350



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



17331.  (a) An applicant applying for licensure as an escrow agent
under this division is required to apply for a Fidelity Corporation
Certificate, prepared and issued by Fidelity Corporation, for each
proposed shareholder, officer, director, trustee, manager, or
employee who is to be directly or indirectly compensated by the
escrow agent, prior to licensure of the escrow agent by the
commissioner.
   (b) A shareholder, officer, director, trustee, manager, or
employee of an escrow agent, directly or indirectly compensated by an
escrow agent within this state, is required to complete and execute
a Fidelity Corporation Certificate application, prepared and issued
by Fidelity Corporation, as a condition of his or her employment or
entitlement to compensation, before the person may continue the
regular discharge of his or her duties, or have access to moneys or
negotiable securities belonging to or in the possession of the escrow
agent, or draw checks upon the escrow agent or the trust funds of
the escrow agent.
   (c) Fidelity Corporation Certificates may also be known as Escrow
Agent's Fidelity Corporation Certificates or EAFC Certificates. The
certificate at all times remains the property of Fidelity
Corporation, and is not transferable by either a member or employee.
The certificate is not a warranty or guarantee by Fidelity
Corporation of the integrity, veracity, or competence of the person.
   (d) An application for a Fidelity Corporation Certificate shall be
in writing and in the form prescribed by Fidelity Corporation. The
application may include (1) a fee not to exceed fifty dollars ($50),
(2) two passport-size photographs, and (3) a set of fingerprint
images and related information using the process established by the
Department of Justice for requesting state summary criminal history
information, plus the fee charged by the Department of Justice for
processing noncriminal applicant fingerprint images and related
information, in a manner established by the Department of Justice
pursuant to subdivision (l). The Department of Justice shall honor
the Fidelity Corporation report request form and issue a report to
Fidelity Corporation, notwithstanding any other provision of law or
regulation to the contrary. Fidelity Corporation is also entitled to
submit a set of fingerprint images and related information in the
Department of Justice specified noncriminal applicant fingerprint
format for the purpose of requesting and obtaining a report from the
Department of Justice, for the officers and employees of Fidelity
Corporation. A member shall cause the filing of applications for all
existing employees as required by this section within 30 days of
written notice by Fidelity Corporation to the member.
   (e) The application form shall include a provision for binding
arbitration to allow for arbitration of any appeal or dispute as to a
decision by Fidelity Corporation concerning the certificate, as
follows:

   A DISPUTE AS TO WHETHER THE DENIAL OF THIS CERTIFICATE APPLICATION
OR ANY SUBSEQUENT SUSPENSION OR REVOCATION OF THE CERTIFICATE IS
UNNECESSARY OR UNAUTHORIZED OR WAS IMPROPERLY, NEGLIGENTLY, OR
UNLAWFULLY RENDERED, MAY BE DETERMINED BY SUBMISSION TO ARBITRATION
AS PROVIDED BY CALIFORNIA LAW, AND NOT BY A LAWSUIT OR RESORT TO
COURT PROCESS EXCEPT AS CALIFORNIA LAW PROVIDES FOR JUDICIAL REVIEW
OF ARBITRATION PROCEEDINGS OR EXCEPT AS PROVIDED BY SECTION 17331.3
OF THE FINANCIAL CODE.  THE APPLICANT MAY, SUBJECT TO AGREEMENT,
SUBMIT ANY ISSUE ARISING FROM A DECISION BY FIDELITY CORPORATION TO
DENY THIS CERTIFICATE APPLICATION OR TO SUSPEND OR REVOKE THE
CERTIFICATE TO BE DECIDED BY BINDING NEUTRAL ARBITRATION.  UPON AN
AGREEMENT TO SUBMIT TO BINDING NEUTRAL ARBITRATION, THE APPLICANT HAS
NO RIGHT TO HAVE ANY DISPUTE CONCERNING THIS CERTIFICATE APPLICATION
LITIGATED IN A COURT OR JURY TRIAL NOR ANY JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, EXCEPT AS SPECIFICALLY PROVIDED IN THE ESCROW
LAW.  ARBITRATION MAY BE COMPELLED AS PROVIDED BY LAW.

   (f) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations, or any officer, agent, or employee of
the state or the Department of Corporations for statements made by
Fidelity Corporation in reports or recommendations made pursuant to
this division, or for reports or recommendations made pursuant to
this division to Fidelity Corporation by its members, directors,
officers, employees or agents, the State of California, the
Department of Corporations, or any officer, agent, or employee of the
state or the Department of Corporations, unless the information
provided is false and the party making the statement or providing the
false information does so with knowledge and malice. Reports or
recommendations made pursuant to this section, or Section 17331.1,
17331.2, or 17331.3, are not public documents.
   (g) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations, or an officer, agent, or employee of
the state or the Department of Corporations for the release of any
information furnished to Fidelity Corporation pursuant to this
section unless the information released is false and the party,
including Fidelity Corporation, its members, directors, officers,
employees, or agents, the state, the Department of Corporations, or
any officer, agent, or employee of the state or the Department of
Corporations, who releases the false information does so with
knowledge and malice.
   (h) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its directors,
officers, employees, or agents, for any decision to deny an
application for a certificate or to suspend or revoke the certificate
of any person or for the timing of any decision or the timing of any
notice to persons or members thereof, or for any failure to deny an
application under subdivision (a) of Section 17331.2. This
subdivision does not apply to acts performed in bad faith or with
malice.
   (i) Fidelity Corporation, any member of Fidelity Corporation, an
agent of Fidelity Corporation or of its members, or any person who
uses any information obtained under this section for any purpose not
authorized by this chapter is guilty of a misdemeanor.
   (j) Section 17331, 17331.1, or 17331.2 does not constitute a
restriction or limitation upon the obligation of Fidelity Corporation
to indemnify members against loss, as provided in Sections 17310 and
17314. The failure to obtain a certificate, the denial of an
application for a certificate, or the suspension, cancellation, or
revocation of a certificate does not limit the obligation of Fidelity
Corporation to indemnify a member against loss.
   (k) Notwithstanding Section 11105 of the Penal Code, Fidelity
Corporation is entitled to receive state summary criminal history
information and subsequent arrest notification from the Department of
Justice as a result of fingerprint images and related information
submitted to the Department of Justice by the Department of
Corporations, pursuant to subdivision (g) of Section 17209, Section
17212.1, and subdivision (d) of Section 17414.1, by or on behalf of
escrow agents, shareholders, officers, directors, trustees, managers,
or employees of an escrow agent, directly or indirectly compensated
by an escrow agent. The Department of Justice and Fidelity
Corporation shall enter into an agreement to implement this
subdivision. The Department of Corporations shall forward to Fidelity
Corporation, weekly, a list of names of individual fingerprints
submitted to the Department of Justice.
   (l) (1) The fingerprint images and related information required
pursuant to subdivision (d) shall be submitted by the Department of
Corporations to the Department of Justice, in a manner established by
the Department of Justice, for the purposes of obtaining information
as to the existence and content of a record of state or federal
convictions, state or federal arrests, and information as to the
existence of and content of a record of state or federal arrests for
which the Department of Justice establishes that the person is free
on bail or on his or her own recognizance pending trial or appeal.
   (2) Upon receipt, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary criminal
history information received pursuant to this section. The
Department of Justice shall review the information returned from the
Federal Bureau of Investigation and compile and disseminate a
response to the Department of Corporations and a fitness
determination to Fidelity Corporation pursuant to subdivision (p) of
Section 11105 of the Penal Code.
   (3) The Department of Justice shall charge a fee sufficient to
cover the costs of processing the requests pursuant to this
subdivision.


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



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



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



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



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


17334.  Whenever the commissioner has taken possession of the
property and business of Fidelity Corporation, Fidelity Corporation
within 10 business days after the taking, if it deems itself
aggrieved thereby, may apply to the superior court in the county in
which the head office of Fidelity Corporation is located to enjoin
further proceedings. The court, after citing the commissioner to show
cause why further proceedings should not be enjoined, and after a
hearing and a determination of the facts upon the merits, may dismiss
the application or enjoin the commissioner from further proceedings
and direct the commissioner to surrender the property and business to
Fidelity Corporation, or make a further order as may be just.




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



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



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



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


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



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



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


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



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


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



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



17346.  (a) Fidelity Corporation and its members shall not
advertise, print, display, publish, distribute, or broadcast, or
cause or permit to be advertised, printed, displayed, published,
distributed, or broadcast, in any manner any statement or
representation with regard to a guarantee of trust obligations in
their advertisements that is false or misleading or calculated to
deceive or misinform the public. Any statement or representation with
regard to a guarantee of trust obligations, except the statement set
forth in subdivision (b), shall be reviewed and approved by the
commissioner prior to its use.
   (b) Any advertising referring to Fidelity Corporation shall state
in a clear and conspicuous manner, the following statement:

   "MEMBER OF ESCROW AGENTS' FIDELITY CORPORATION (EAFC). EAFC
PROVIDES FIDELITY COVERAGE TO ITS MEMBERS. EAFC IS NOT A GOVERNMENT
AGENCY, AND THERE IS NO GUARANTEE OF A PAYMENT OF ANY CLAIM BY THE
STATE OF CALIFORNIA."

   (c) Neither Fidelity Corporation nor its members shall advertise
that trust obligations of escrow agents are "protected," "guaranteed,"
"insured," or use words to that effect.



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




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




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



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



State Codes and Statutes

State Codes and Statutes

Statutes > California > Fin > 17330-17350

FINANCIAL CODE
SECTION 17330-17350



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



17331.  (a) An applicant applying for licensure as an escrow agent
under this division is required to apply for a Fidelity Corporation
Certificate, prepared and issued by Fidelity Corporation, for each
proposed shareholder, officer, director, trustee, manager, or
employee who is to be directly or indirectly compensated by the
escrow agent, prior to licensure of the escrow agent by the
commissioner.
   (b) A shareholder, officer, director, trustee, manager, or
employee of an escrow agent, directly or indirectly compensated by an
escrow agent within this state, is required to complete and execute
a Fidelity Corporation Certificate application, prepared and issued
by Fidelity Corporation, as a condition of his or her employment or
entitlement to compensation, before the person may continue the
regular discharge of his or her duties, or have access to moneys or
negotiable securities belonging to or in the possession of the escrow
agent, or draw checks upon the escrow agent or the trust funds of
the escrow agent.
   (c) Fidelity Corporation Certificates may also be known as Escrow
Agent's Fidelity Corporation Certificates or EAFC Certificates. The
certificate at all times remains the property of Fidelity
Corporation, and is not transferable by either a member or employee.
The certificate is not a warranty or guarantee by Fidelity
Corporation of the integrity, veracity, or competence of the person.
   (d) An application for a Fidelity Corporation Certificate shall be
in writing and in the form prescribed by Fidelity Corporation. The
application may include (1) a fee not to exceed fifty dollars ($50),
(2) two passport-size photographs, and (3) a set of fingerprint
images and related information using the process established by the
Department of Justice for requesting state summary criminal history
information, plus the fee charged by the Department of Justice for
processing noncriminal applicant fingerprint images and related
information, in a manner established by the Department of Justice
pursuant to subdivision (l). The Department of Justice shall honor
the Fidelity Corporation report request form and issue a report to
Fidelity Corporation, notwithstanding any other provision of law or
regulation to the contrary. Fidelity Corporation is also entitled to
submit a set of fingerprint images and related information in the
Department of Justice specified noncriminal applicant fingerprint
format for the purpose of requesting and obtaining a report from the
Department of Justice, for the officers and employees of Fidelity
Corporation. A member shall cause the filing of applications for all
existing employees as required by this section within 30 days of
written notice by Fidelity Corporation to the member.
   (e) The application form shall include a provision for binding
arbitration to allow for arbitration of any appeal or dispute as to a
decision by Fidelity Corporation concerning the certificate, as
follows:

   A DISPUTE AS TO WHETHER THE DENIAL OF THIS CERTIFICATE APPLICATION
OR ANY SUBSEQUENT SUSPENSION OR REVOCATION OF THE CERTIFICATE IS
UNNECESSARY OR UNAUTHORIZED OR WAS IMPROPERLY, NEGLIGENTLY, OR
UNLAWFULLY RENDERED, MAY BE DETERMINED BY SUBMISSION TO ARBITRATION
AS PROVIDED BY CALIFORNIA LAW, AND NOT BY A LAWSUIT OR RESORT TO
COURT PROCESS EXCEPT AS CALIFORNIA LAW PROVIDES FOR JUDICIAL REVIEW
OF ARBITRATION PROCEEDINGS OR EXCEPT AS PROVIDED BY SECTION 17331.3
OF THE FINANCIAL CODE.  THE APPLICANT MAY, SUBJECT TO AGREEMENT,
SUBMIT ANY ISSUE ARISING FROM A DECISION BY FIDELITY CORPORATION TO
DENY THIS CERTIFICATE APPLICATION OR TO SUSPEND OR REVOKE THE
CERTIFICATE TO BE DECIDED BY BINDING NEUTRAL ARBITRATION.  UPON AN
AGREEMENT TO SUBMIT TO BINDING NEUTRAL ARBITRATION, THE APPLICANT HAS
NO RIGHT TO HAVE ANY DISPUTE CONCERNING THIS CERTIFICATE APPLICATION
LITIGATED IN A COURT OR JURY TRIAL NOR ANY JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, EXCEPT AS SPECIFICALLY PROVIDED IN THE ESCROW
LAW.  ARBITRATION MAY BE COMPELLED AS PROVIDED BY LAW.

   (f) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations, or any officer, agent, or employee of
the state or the Department of Corporations for statements made by
Fidelity Corporation in reports or recommendations made pursuant to
this division, or for reports or recommendations made pursuant to
this division to Fidelity Corporation by its members, directors,
officers, employees or agents, the State of California, the
Department of Corporations, or any officer, agent, or employee of the
state or the Department of Corporations, unless the information
provided is false and the party making the statement or providing the
false information does so with knowledge and malice. Reports or
recommendations made pursuant to this section, or Section 17331.1,
17331.2, or 17331.3, are not public documents.
   (g) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its members,
directors, officers, employees, or agents, the State of California,
the Department of Corporations, or an officer, agent, or employee of
the state or the Department of Corporations for the release of any
information furnished to Fidelity Corporation pursuant to this
section unless the information released is false and the party,
including Fidelity Corporation, its members, directors, officers,
employees, or agents, the state, the Department of Corporations, or
any officer, agent, or employee of the state or the Department of
Corporations, who releases the false information does so with
knowledge and malice.
   (h) There is no liability on the part of and no cause of action of
any nature may arise against Fidelity Corporation or its directors,
officers, employees, or agents, for any decision to deny an
application for a certificate or to suspend or revoke the certificate
of any person or for the timing of any decision or the timing of any
notice to persons or members thereof, or for any failure to deny an
application under subdivision (a) of Section 17331.2. This
subdivision does not apply to acts performed in bad faith or with
malice.
   (i) Fidelity Corporation, any member of Fidelity Corporation, an
agent of Fidelity Corporation or of its members, or any person who
uses any information obtained under this section for any purpose not
authorized by this chapter is guilty of a misdemeanor.
   (j) Section 17331, 17331.1, or 17331.2 does not constitute a
restriction or limitation upon the obligation of Fidelity Corporation
to indemnify members against loss, as provided in Sections 17310 and
17314. The failure to obtain a certificate, the denial of an
application for a certificate, or the suspension, cancellation, or
revocation of a certificate does not limit the obligation of Fidelity
Corporation to indemnify a member against loss.
   (k) Notwithstanding Section 11105 of the Penal Code, Fidelity
Corporation is entitled to receive state summary criminal history
information and subsequent arrest notification from the Department of
Justice as a result of fingerprint images and related information
submitted to the Department of Justice by the Department of
Corporations, pursuant to subdivision (g) of Section 17209, Section
17212.1, and subdivision (d) of Section 17414.1, by or on behalf of
escrow agents, shareholders, officers, directors, trustees, managers,
or employees of an escrow agent, directly or indirectly compensated
by an escrow agent. The Department of Justice and Fidelity
Corporation shall enter into an agreement to implement this
subdivision. The Department of Corporations shall forward to Fidelity
Corporation, weekly, a list of names of individual fingerprints
submitted to the Department of Justice.
   (l) (1) The fingerprint images and related information required
pursuant to subdivision (d) shall be submitted by the Department of
Corporations to the Department of Justice, in a manner established by
the Department of Justice, for the purposes of obtaining information
as to the existence and content of a record of state or federal
convictions, state or federal arrests, and information as to the
existence of and content of a record of state or federal arrests for
which the Department of Justice establishes that the person is free
on bail or on his or her own recognizance pending trial or appeal.
   (2) Upon receipt, the Department of Justice shall forward to the
Federal Bureau of Investigation requests for federal summary criminal
history information received pursuant to this section. The
Department of Justice shall review the information returned from the
Federal Bureau of Investigation and compile and disseminate a
response to the Department of Corporations and a fitness
determination to Fidelity Corporation pursuant to subdivision (p) of
Section 11105 of the Penal Code.
   (3) The Department of Justice shall charge a fee sufficient to
cover the costs of processing the requests pursuant to this
subdivision.


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



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



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



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



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


17334.  Whenever the commissioner has taken possession of the
property and business of Fidelity Corporation, Fidelity Corporation
within 10 business days after the taking, if it deems itself
aggrieved thereby, may apply to the superior court in the county in
which the head office of Fidelity Corporation is located to enjoin
further proceedings. The court, after citing the commissioner to show
cause why further proceedings should not be enjoined, and after a
hearing and a determination of the facts upon the merits, may dismiss
the application or enjoin the commissioner from further proceedings
and direct the commissioner to surrender the property and business to
Fidelity Corporation, or make a further order as may be just.




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



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



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



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


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



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



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


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



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


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



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



17346.  (a) Fidelity Corporation and its members shall not
advertise, print, display, publish, distribute, or broadcast, or
cause or permit to be advertised, printed, displayed, published,
distributed, or broadcast, in any manner any statement or
representation with regard to a guarantee of trust obligations in
their advertisements that is false or misleading or calculated to
deceive or misinform the public. Any statement or representation with
regard to a guarantee of trust obligations, except the statement set
forth in subdivision (b), shall be reviewed and approved by the
commissioner prior to its use.
   (b) Any advertising referring to Fidelity Corporation shall state
in a clear and conspicuous manner, the following statement:

   "MEMBER OF ESCROW AGENTS' FIDELITY CORPORATION (EAFC). EAFC
PROVIDES FIDELITY COVERAGE TO ITS MEMBERS. EAFC IS NOT A GOVERNMENT
AGENCY, AND THERE IS NO GUARANTEE OF A PAYMENT OF ANY CLAIM BY THE
STATE OF CALIFORNIA."

   (c) Neither Fidelity Corporation nor its members shall advertise
that trust obligations of escrow agents are "protected," "guaranteed,"
"insured," or use words to that effect.



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




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




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



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


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