State Codes and Statutes

Statutes > California > Fin > 51000-51015

FINANCIAL CODE
SECTION 51000-51015



51000.  As used in this division, the following terms shall have the
following meanings:
   (a) "Client" means the taxpayer with whom the exchange facilitator
enters into an agreement described in subparagraph (A) of paragraph
(1) of subdivision (b).
   (b) (1) "Exchange facilitator" means a person that does any of the
following:
   (A) Facilitates, for a fee, as defined in subdivision (c), an
exchange of like-kind property by entering into an agreement with a
taxpayer by which the exchange facilitator acquires from the taxpayer
the contractual rights to sell the taxpayer's relinquished property
located in this state and transfers a replacement property to the
taxpayer as a qualified intermediary as that term is defined under
Treasury Regulation Section 1.1031(k)-1(g)(4), or enters into an
agreement with the taxpayer to take title to a property in this state
as an exchange accommodation titleholder (EAT) as that term is
defined in Internal Revenue Service Revenue Procedure 2000-37, or
enters into an agreement with a taxpayer to act as a qualified
trustee or qualified escrow holder as those terms are defined under
Treasury Regulation Section 1.1031(k)-1(g)(3), except as provided in
paragraph (2).
   (B) Maintains an office in this state for the purpose of
soliciting business as an exchange facilitator.
   (C) Holds himself, herself, or itself out as an exchange
facilitator by advertising any of the services listed in paragraph
(A) or soliciting clients in printed publications, direct mail,
television or radio advertisements, telephone calls, facsimile
transmissions, or other electronic communications directed to the
general public in this state for purposes of providing any of those
services.
   (2) "Exchange facilitator" does not include any of the following:
   (A) A taxpayer or a disqualified person, as that term is defined
under Treasury Regulation Section 1.1031(k)-1(k), seeking to qualify
for the nonrecognition provisions of Section 1031 of the Internal
Revenue Code of 1986, as amended.
   (B) A financial institution that is acting as a depository for
exchange funds or that is acting solely as a qualified escrow holder
or qualified trustee, as those terms are defined under Treasury
Regulation Section 1.1031(k)-1(g)(3), and that is not facilitating
exchanges.
   (C) A title insurance company, underwritten title company, or
escrow company that is acting solely as a qualified escrow holder or
qualified trustee, as those terms are defined under Treasury
Regulation Section 1.1031(k)-1(g)(3), and that is not facilitating
exchanges.
   (D) A person that advertises for and teaches seminars or classes,
or otherwise makes a presentation, to attorneys, accountants, real
estate professionals, tax professionals, or other professionals, when
the primary purpose is to teach the professionals about tax-deferred
exchanges or to train them to act as exchange facilitators.
   (E) A qualified intermediary, as that term is defined under
Treasury Regulation 1.1031(k)-1(g)(4), who holds exchange funds from
the disposition of relinquished property located outside this state.
   (F) An entity in which an exchange accommodation titleholder (EAT)
has a 100 percent interest and which is used by the EAT to take
title to property in this state.
   (c) "Fee" means compensation of any nature, direct or indirect,
monetary or in-kind, that is received by a person or related person
as defined in Section 267(b) or 707(b) of the Internal Revenue Code
for any services relating to or incidental to the exchange of
like-kind property.
   (d) "Financial institution" means a bank, credit union, savings
and loan association, savings bank, or trust company chartered under
the laws of this state or the United States whose accounts are
insured by the full faith and credit of the United States, the
Federal Deposit Insurance Corporation, the National Credit Union
Share Insurance Fund, or other similar or successor programs.
   (e) A person is "affiliated" with another specified person if the
person directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the
other specified person.
   (f) "Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a joint
stock company, a trust, or any other form of a legal entity, and
includes the agents and employees of that person.
   (g) "Prudent investor standard" means the prudent investor rule
described in Article 2.5 (commencing with Section 16045) of Chapter 1
of Part 4 of Division 9 of the Probate Code.



51001.  (a) A person who engages in business as an exchange
facilitator shall notify all existing exchange clients whose
relinquished property is located in this state, or whose replacement
property held under a qualified exchange accommodation agreement is
located in this state, of any change in control of the exchange
facilitator. That notification shall be provided within 10 business
days of the effective date of the change in control by hand delivery,
facsimile, electronic mail, overnight mail, or first-class mail, and
shall be posted on the exchange facilitator's Internet Web site for
at least 90 days following the change in control. The notification
shall set forth the name, address, and other contact information of
the transferees.
   (b) For purposes of this section, "change in control" means any
transfer of more than 50 percent of the assets or ownership
interests, directly or indirectly, of the exchange facilitator.



51003.  (a) A person who engages in business as an exchange
facilitator shall at all times comply with one or more of the
following:
   (1) Maintain a fidelity bond or bonds in an amount not less than
one million dollars ($1,000,000), executed by an insurer authorized
to do business in this state or an eligible surplus line insurer that
is on the list of eligible surplus line insurers maintained by the
Insurance Commissioner pursuant to subdivision (f) of Section 1765.1
of the Insurance Code.
   (2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than one million dollars
($1,000,000) in an interest-bearing deposit account or a money market
account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
   (3) Deposit all exchange funds in a qualified escrow account or
qualified trust, as those terms are defined under Treasury Regulation
1.1031(k)-1(g)(3), with a financial institution and provide that any
withdrawals from that escrow account or trust require that person's
and the client's written authorization.
   (b) A person who engages in business as an exchange facilitator
may maintain a bond or bonds or deposit an amount of cash or
securities or irrevocable letters of credit in excess of the minimum
required amounts.
   (c) If the person engaging in business as an exchange facilitator
is listed as a named insured on one or more fidelity bonds that total
at least one million dollars ($1,000,000), the requirements of this
section shall be deemed satisfied.


51005.  Any person claiming to have sustained damage by reason of
the failure of a person engaging in business as an exchange
facilitator to comply with this division may file a claim on the
bonds, deposits, or letters of credit described in Section 51003 to
recover the damages subject to the terms and conditions of the bonds,
deposits, or letters of credit. The amounts of the bonds, deposits,
or letters of credit shall be reduced to the extent of any payment
made.


51007.  (a)  A person who engages in business as an exchange
facilitator shall at all times comply with either of the following:
   (1) Maintain a policy of errors and omissions insurance in an
amount not less than two hundred fifty thousand dollars ($250,000),
executed by an insurer authorized to do business in this state or an
eligible surplus line insurer that is on the list of eligible surplus
line insurers maintained by the Insurance Commissioner pursuant to
subdivision (f) of Section 1765.1 of the Insurance Code.
   (2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than two hundred fifty thousand
dollars ($250,000) in an interest-bearing deposit account or a money
market account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
   (b) A person who engages in business as an exchange facilitator
may maintain insurance or deposit an amount of cash or securities or
irrevocable letters of credit in excess of the minimum required
amounts.
   (c) If the person engaging in business as an exchange facilitator
is listed as a named insured on an errors and omissions policy of at
least two hundred fifty thousand dollars ($250,000), the requirements
of this section shall be deemed satisfied.



51009.  (a) A person who engages in business as an exchange
facilitator shall have the responsibility to act as a custodian for
all exchange funds, including, but not limited to, money, property,
other consideration, or instruments received by the person from, or
on behalf of, a client, except funds received as the person's
compensation. A person who engages in business as an exchange
facilitator shall invest those exchange funds in investments that
meet a prudent investor standard and that satisfy the investment
goals of liquidity and preservation of principal. For purposes of
this section, a prudent investor standard is violated if any of the
following occurs:
   (1) Exchange funds are knowingly commingled by the exchange
facilitator with the operating accounts of the exchange facilitator.
   (2) Exchange funds are loaned or otherwise transferred to any
person or entity, other than a financial institution, that is
affiliated with or related to the exchange facilitator. This
paragraph does not apply to the transfer of funds from an exchange
facilitator to an exchange accommodation titleholder in accordance
with an exchange contract.
   (3) Exchange funds are invested in a manner that does not provide
sufficient liquidity to meet the exchange facilitator's contractual
obligations to its clients and does not preserve the principal of the
exchange funds.
   (b) Exchange funds shall not be subject to execution or attachment
on any claim against the exchange facilitator. An exchange
facilitator shall not knowingly keep, or cause to be kept, any money
in any bank, credit union, or other financial institution under a
name designating the money as belonging to the client of any exchange
facilitator, unless that money belongs to that client and was
actually entrusted to the exchange facilitator by that client.



51011.  A person engaged in business as an exchange facilitator
shall not do any of the following:
   (a) Make any material misrepresentations concerning any like-kind
exchange transaction that are intended to mislead.
   (b) Pursue a continued or flagrant course of misrepresentation, or
make false statements through advertising or otherwise.
   (c) Fail, within a reasonable time, to account for any moneys or
property belonging to others that may be in the possession of, or
under control of, the person.
   (d) Engage in any conduct constituting fraudulent or dishonest
dealings.
   (e) Commit any crime involving fraud, misrepresentation, deceit,
embezzlement, misappropriation of funds, robbery, or theft.
   (f) Materially fail to fulfill its contractual duties to a client
to deliver property or funds to the client, unless that failure is
due to circumstances beyond the control of the person engaging in
business as an exchange facilitator.


51013.  A person who violates this division is subject to civil suit
in a court of competent jurisdiction.



51015.  This division shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before that date, deletes or extends that
date.

State Codes and Statutes

Statutes > California > Fin > 51000-51015

FINANCIAL CODE
SECTION 51000-51015



51000.  As used in this division, the following terms shall have the
following meanings:
   (a) "Client" means the taxpayer with whom the exchange facilitator
enters into an agreement described in subparagraph (A) of paragraph
(1) of subdivision (b).
   (b) (1) "Exchange facilitator" means a person that does any of the
following:
   (A) Facilitates, for a fee, as defined in subdivision (c), an
exchange of like-kind property by entering into an agreement with a
taxpayer by which the exchange facilitator acquires from the taxpayer
the contractual rights to sell the taxpayer's relinquished property
located in this state and transfers a replacement property to the
taxpayer as a qualified intermediary as that term is defined under
Treasury Regulation Section 1.1031(k)-1(g)(4), or enters into an
agreement with the taxpayer to take title to a property in this state
as an exchange accommodation titleholder (EAT) as that term is
defined in Internal Revenue Service Revenue Procedure 2000-37, or
enters into an agreement with a taxpayer to act as a qualified
trustee or qualified escrow holder as those terms are defined under
Treasury Regulation Section 1.1031(k)-1(g)(3), except as provided in
paragraph (2).
   (B) Maintains an office in this state for the purpose of
soliciting business as an exchange facilitator.
   (C) Holds himself, herself, or itself out as an exchange
facilitator by advertising any of the services listed in paragraph
(A) or soliciting clients in printed publications, direct mail,
television or radio advertisements, telephone calls, facsimile
transmissions, or other electronic communications directed to the
general public in this state for purposes of providing any of those
services.
   (2) "Exchange facilitator" does not include any of the following:
   (A) A taxpayer or a disqualified person, as that term is defined
under Treasury Regulation Section 1.1031(k)-1(k), seeking to qualify
for the nonrecognition provisions of Section 1031 of the Internal
Revenue Code of 1986, as amended.
   (B) A financial institution that is acting as a depository for
exchange funds or that is acting solely as a qualified escrow holder
or qualified trustee, as those terms are defined under Treasury
Regulation Section 1.1031(k)-1(g)(3), and that is not facilitating
exchanges.
   (C) A title insurance company, underwritten title company, or
escrow company that is acting solely as a qualified escrow holder or
qualified trustee, as those terms are defined under Treasury
Regulation Section 1.1031(k)-1(g)(3), and that is not facilitating
exchanges.
   (D) A person that advertises for and teaches seminars or classes,
or otherwise makes a presentation, to attorneys, accountants, real
estate professionals, tax professionals, or other professionals, when
the primary purpose is to teach the professionals about tax-deferred
exchanges or to train them to act as exchange facilitators.
   (E) A qualified intermediary, as that term is defined under
Treasury Regulation 1.1031(k)-1(g)(4), who holds exchange funds from
the disposition of relinquished property located outside this state.
   (F) An entity in which an exchange accommodation titleholder (EAT)
has a 100 percent interest and which is used by the EAT to take
title to property in this state.
   (c) "Fee" means compensation of any nature, direct or indirect,
monetary or in-kind, that is received by a person or related person
as defined in Section 267(b) or 707(b) of the Internal Revenue Code
for any services relating to or incidental to the exchange of
like-kind property.
   (d) "Financial institution" means a bank, credit union, savings
and loan association, savings bank, or trust company chartered under
the laws of this state or the United States whose accounts are
insured by the full faith and credit of the United States, the
Federal Deposit Insurance Corporation, the National Credit Union
Share Insurance Fund, or other similar or successor programs.
   (e) A person is "affiliated" with another specified person if the
person directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the
other specified person.
   (f) "Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a joint
stock company, a trust, or any other form of a legal entity, and
includes the agents and employees of that person.
   (g) "Prudent investor standard" means the prudent investor rule
described in Article 2.5 (commencing with Section 16045) of Chapter 1
of Part 4 of Division 9 of the Probate Code.



51001.  (a) A person who engages in business as an exchange
facilitator shall notify all existing exchange clients whose
relinquished property is located in this state, or whose replacement
property held under a qualified exchange accommodation agreement is
located in this state, of any change in control of the exchange
facilitator. That notification shall be provided within 10 business
days of the effective date of the change in control by hand delivery,
facsimile, electronic mail, overnight mail, or first-class mail, and
shall be posted on the exchange facilitator's Internet Web site for
at least 90 days following the change in control. The notification
shall set forth the name, address, and other contact information of
the transferees.
   (b) For purposes of this section, "change in control" means any
transfer of more than 50 percent of the assets or ownership
interests, directly or indirectly, of the exchange facilitator.



51003.  (a) A person who engages in business as an exchange
facilitator shall at all times comply with one or more of the
following:
   (1) Maintain a fidelity bond or bonds in an amount not less than
one million dollars ($1,000,000), executed by an insurer authorized
to do business in this state or an eligible surplus line insurer that
is on the list of eligible surplus line insurers maintained by the
Insurance Commissioner pursuant to subdivision (f) of Section 1765.1
of the Insurance Code.
   (2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than one million dollars
($1,000,000) in an interest-bearing deposit account or a money market
account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
   (3) Deposit all exchange funds in a qualified escrow account or
qualified trust, as those terms are defined under Treasury Regulation
1.1031(k)-1(g)(3), with a financial institution and provide that any
withdrawals from that escrow account or trust require that person's
and the client's written authorization.
   (b) A person who engages in business as an exchange facilitator
may maintain a bond or bonds or deposit an amount of cash or
securities or irrevocable letters of credit in excess of the minimum
required amounts.
   (c) If the person engaging in business as an exchange facilitator
is listed as a named insured on one or more fidelity bonds that total
at least one million dollars ($1,000,000), the requirements of this
section shall be deemed satisfied.


51005.  Any person claiming to have sustained damage by reason of
the failure of a person engaging in business as an exchange
facilitator to comply with this division may file a claim on the
bonds, deposits, or letters of credit described in Section 51003 to
recover the damages subject to the terms and conditions of the bonds,
deposits, or letters of credit. The amounts of the bonds, deposits,
or letters of credit shall be reduced to the extent of any payment
made.


51007.  (a)  A person who engages in business as an exchange
facilitator shall at all times comply with either of the following:
   (1) Maintain a policy of errors and omissions insurance in an
amount not less than two hundred fifty thousand dollars ($250,000),
executed by an insurer authorized to do business in this state or an
eligible surplus line insurer that is on the list of eligible surplus
line insurers maintained by the Insurance Commissioner pursuant to
subdivision (f) of Section 1765.1 of the Insurance Code.
   (2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than two hundred fifty thousand
dollars ($250,000) in an interest-bearing deposit account or a money
market account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
   (b) A person who engages in business as an exchange facilitator
may maintain insurance or deposit an amount of cash or securities or
irrevocable letters of credit in excess of the minimum required
amounts.
   (c) If the person engaging in business as an exchange facilitator
is listed as a named insured on an errors and omissions policy of at
least two hundred fifty thousand dollars ($250,000), the requirements
of this section shall be deemed satisfied.



51009.  (a) A person who engages in business as an exchange
facilitator shall have the responsibility to act as a custodian for
all exchange funds, including, but not limited to, money, property,
other consideration, or instruments received by the person from, or
on behalf of, a client, except funds received as the person's
compensation. A person who engages in business as an exchange
facilitator shall invest those exchange funds in investments that
meet a prudent investor standard and that satisfy the investment
goals of liquidity and preservation of principal. For purposes of
this section, a prudent investor standard is violated if any of the
following occurs:
   (1) Exchange funds are knowingly commingled by the exchange
facilitator with the operating accounts of the exchange facilitator.
   (2) Exchange funds are loaned or otherwise transferred to any
person or entity, other than a financial institution, that is
affiliated with or related to the exchange facilitator. This
paragraph does not apply to the transfer of funds from an exchange
facilitator to an exchange accommodation titleholder in accordance
with an exchange contract.
   (3) Exchange funds are invested in a manner that does not provide
sufficient liquidity to meet the exchange facilitator's contractual
obligations to its clients and does not preserve the principal of the
exchange funds.
   (b) Exchange funds shall not be subject to execution or attachment
on any claim against the exchange facilitator. An exchange
facilitator shall not knowingly keep, or cause to be kept, any money
in any bank, credit union, or other financial institution under a
name designating the money as belonging to the client of any exchange
facilitator, unless that money belongs to that client and was
actually entrusted to the exchange facilitator by that client.



51011.  A person engaged in business as an exchange facilitator
shall not do any of the following:
   (a) Make any material misrepresentations concerning any like-kind
exchange transaction that are intended to mislead.
   (b) Pursue a continued or flagrant course of misrepresentation, or
make false statements through advertising or otherwise.
   (c) Fail, within a reasonable time, to account for any moneys or
property belonging to others that may be in the possession of, or
under control of, the person.
   (d) Engage in any conduct constituting fraudulent or dishonest
dealings.
   (e) Commit any crime involving fraud, misrepresentation, deceit,
embezzlement, misappropriation of funds, robbery, or theft.
   (f) Materially fail to fulfill its contractual duties to a client
to deliver property or funds to the client, unless that failure is
due to circumstances beyond the control of the person engaging in
business as an exchange facilitator.


51013.  A person who violates this division is subject to civil suit
in a court of competent jurisdiction.



51015.  This division shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before that date, deletes or extends that
date.


State Codes and Statutes

State Codes and Statutes

Statutes > California > Fin > 51000-51015

FINANCIAL CODE
SECTION 51000-51015



51000.  As used in this division, the following terms shall have the
following meanings:
   (a) "Client" means the taxpayer with whom the exchange facilitator
enters into an agreement described in subparagraph (A) of paragraph
(1) of subdivision (b).
   (b) (1) "Exchange facilitator" means a person that does any of the
following:
   (A) Facilitates, for a fee, as defined in subdivision (c), an
exchange of like-kind property by entering into an agreement with a
taxpayer by which the exchange facilitator acquires from the taxpayer
the contractual rights to sell the taxpayer's relinquished property
located in this state and transfers a replacement property to the
taxpayer as a qualified intermediary as that term is defined under
Treasury Regulation Section 1.1031(k)-1(g)(4), or enters into an
agreement with the taxpayer to take title to a property in this state
as an exchange accommodation titleholder (EAT) as that term is
defined in Internal Revenue Service Revenue Procedure 2000-37, or
enters into an agreement with a taxpayer to act as a qualified
trustee or qualified escrow holder as those terms are defined under
Treasury Regulation Section 1.1031(k)-1(g)(3), except as provided in
paragraph (2).
   (B) Maintains an office in this state for the purpose of
soliciting business as an exchange facilitator.
   (C) Holds himself, herself, or itself out as an exchange
facilitator by advertising any of the services listed in paragraph
(A) or soliciting clients in printed publications, direct mail,
television or radio advertisements, telephone calls, facsimile
transmissions, or other electronic communications directed to the
general public in this state for purposes of providing any of those
services.
   (2) "Exchange facilitator" does not include any of the following:
   (A) A taxpayer or a disqualified person, as that term is defined
under Treasury Regulation Section 1.1031(k)-1(k), seeking to qualify
for the nonrecognition provisions of Section 1031 of the Internal
Revenue Code of 1986, as amended.
   (B) A financial institution that is acting as a depository for
exchange funds or that is acting solely as a qualified escrow holder
or qualified trustee, as those terms are defined under Treasury
Regulation Section 1.1031(k)-1(g)(3), and that is not facilitating
exchanges.
   (C) A title insurance company, underwritten title company, or
escrow company that is acting solely as a qualified escrow holder or
qualified trustee, as those terms are defined under Treasury
Regulation Section 1.1031(k)-1(g)(3), and that is not facilitating
exchanges.
   (D) A person that advertises for and teaches seminars or classes,
or otherwise makes a presentation, to attorneys, accountants, real
estate professionals, tax professionals, or other professionals, when
the primary purpose is to teach the professionals about tax-deferred
exchanges or to train them to act as exchange facilitators.
   (E) A qualified intermediary, as that term is defined under
Treasury Regulation 1.1031(k)-1(g)(4), who holds exchange funds from
the disposition of relinquished property located outside this state.
   (F) An entity in which an exchange accommodation titleholder (EAT)
has a 100 percent interest and which is used by the EAT to take
title to property in this state.
   (c) "Fee" means compensation of any nature, direct or indirect,
monetary or in-kind, that is received by a person or related person
as defined in Section 267(b) or 707(b) of the Internal Revenue Code
for any services relating to or incidental to the exchange of
like-kind property.
   (d) "Financial institution" means a bank, credit union, savings
and loan association, savings bank, or trust company chartered under
the laws of this state or the United States whose accounts are
insured by the full faith and credit of the United States, the
Federal Deposit Insurance Corporation, the National Credit Union
Share Insurance Fund, or other similar or successor programs.
   (e) A person is "affiliated" with another specified person if the
person directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the
other specified person.
   (f) "Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a joint
stock company, a trust, or any other form of a legal entity, and
includes the agents and employees of that person.
   (g) "Prudent investor standard" means the prudent investor rule
described in Article 2.5 (commencing with Section 16045) of Chapter 1
of Part 4 of Division 9 of the Probate Code.



51001.  (a) A person who engages in business as an exchange
facilitator shall notify all existing exchange clients whose
relinquished property is located in this state, or whose replacement
property held under a qualified exchange accommodation agreement is
located in this state, of any change in control of the exchange
facilitator. That notification shall be provided within 10 business
days of the effective date of the change in control by hand delivery,
facsimile, electronic mail, overnight mail, or first-class mail, and
shall be posted on the exchange facilitator's Internet Web site for
at least 90 days following the change in control. The notification
shall set forth the name, address, and other contact information of
the transferees.
   (b) For purposes of this section, "change in control" means any
transfer of more than 50 percent of the assets or ownership
interests, directly or indirectly, of the exchange facilitator.



51003.  (a) A person who engages in business as an exchange
facilitator shall at all times comply with one or more of the
following:
   (1) Maintain a fidelity bond or bonds in an amount not less than
one million dollars ($1,000,000), executed by an insurer authorized
to do business in this state or an eligible surplus line insurer that
is on the list of eligible surplus line insurers maintained by the
Insurance Commissioner pursuant to subdivision (f) of Section 1765.1
of the Insurance Code.
   (2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than one million dollars
($1,000,000) in an interest-bearing deposit account or a money market
account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
   (3) Deposit all exchange funds in a qualified escrow account or
qualified trust, as those terms are defined under Treasury Regulation
1.1031(k)-1(g)(3), with a financial institution and provide that any
withdrawals from that escrow account or trust require that person's
and the client's written authorization.
   (b) A person who engages in business as an exchange facilitator
may maintain a bond or bonds or deposit an amount of cash or
securities or irrevocable letters of credit in excess of the minimum
required amounts.
   (c) If the person engaging in business as an exchange facilitator
is listed as a named insured on one or more fidelity bonds that total
at least one million dollars ($1,000,000), the requirements of this
section shall be deemed satisfied.


51005.  Any person claiming to have sustained damage by reason of
the failure of a person engaging in business as an exchange
facilitator to comply with this division may file a claim on the
bonds, deposits, or letters of credit described in Section 51003 to
recover the damages subject to the terms and conditions of the bonds,
deposits, or letters of credit. The amounts of the bonds, deposits,
or letters of credit shall be reduced to the extent of any payment
made.


51007.  (a)  A person who engages in business as an exchange
facilitator shall at all times comply with either of the following:
   (1) Maintain a policy of errors and omissions insurance in an
amount not less than two hundred fifty thousand dollars ($250,000),
executed by an insurer authorized to do business in this state or an
eligible surplus line insurer that is on the list of eligible surplus
line insurers maintained by the Insurance Commissioner pursuant to
subdivision (f) of Section 1765.1 of the Insurance Code.
   (2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than two hundred fifty thousand
dollars ($250,000) in an interest-bearing deposit account or a money
market account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
   (b) A person who engages in business as an exchange facilitator
may maintain insurance or deposit an amount of cash or securities or
irrevocable letters of credit in excess of the minimum required
amounts.
   (c) If the person engaging in business as an exchange facilitator
is listed as a named insured on an errors and omissions policy of at
least two hundred fifty thousand dollars ($250,000), the requirements
of this section shall be deemed satisfied.



51009.  (a) A person who engages in business as an exchange
facilitator shall have the responsibility to act as a custodian for
all exchange funds, including, but not limited to, money, property,
other consideration, or instruments received by the person from, or
on behalf of, a client, except funds received as the person's
compensation. A person who engages in business as an exchange
facilitator shall invest those exchange funds in investments that
meet a prudent investor standard and that satisfy the investment
goals of liquidity and preservation of principal. For purposes of
this section, a prudent investor standard is violated if any of the
following occurs:
   (1) Exchange funds are knowingly commingled by the exchange
facilitator with the operating accounts of the exchange facilitator.
   (2) Exchange funds are loaned or otherwise transferred to any
person or entity, other than a financial institution, that is
affiliated with or related to the exchange facilitator. This
paragraph does not apply to the transfer of funds from an exchange
facilitator to an exchange accommodation titleholder in accordance
with an exchange contract.
   (3) Exchange funds are invested in a manner that does not provide
sufficient liquidity to meet the exchange facilitator's contractual
obligations to its clients and does not preserve the principal of the
exchange funds.
   (b) Exchange funds shall not be subject to execution or attachment
on any claim against the exchange facilitator. An exchange
facilitator shall not knowingly keep, or cause to be kept, any money
in any bank, credit union, or other financial institution under a
name designating the money as belonging to the client of any exchange
facilitator, unless that money belongs to that client and was
actually entrusted to the exchange facilitator by that client.



51011.  A person engaged in business as an exchange facilitator
shall not do any of the following:
   (a) Make any material misrepresentations concerning any like-kind
exchange transaction that are intended to mislead.
   (b) Pursue a continued or flagrant course of misrepresentation, or
make false statements through advertising or otherwise.
   (c) Fail, within a reasonable time, to account for any moneys or
property belonging to others that may be in the possession of, or
under control of, the person.
   (d) Engage in any conduct constituting fraudulent or dishonest
dealings.
   (e) Commit any crime involving fraud, misrepresentation, deceit,
embezzlement, misappropriation of funds, robbery, or theft.
   (f) Materially fail to fulfill its contractual duties to a client
to deliver property or funds to the client, unless that failure is
due to circumstances beyond the control of the person engaging in
business as an exchange facilitator.


51013.  A person who violates this division is subject to civil suit
in a court of competent jurisdiction.



51015.  This division shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before that date, deletes or extends that
date.

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