CHAPTER 2. License [30200 - 30218]
( Chapter 2 added by Stats. 1972, Ch. 1057. )
It shall be unlawful for any person to operate a securities depository within this state, or to solicit holders of securities within this state to place their securities into a securities depository located within this state or outside this state, except by means of a corporation licensed by the commissioner as a securities depository.
(Added by Stats. 1972, Ch. 1057.)
A securities depository shall only be operated by a corportion:
(a) At least 90 percent of the capital stock of which is held by or for one or more persons (other than individuals), each of whom, (i) is subject to supervision or regulation pursuant to the provisions of federal or state banking laws or state insurance laws, or (ii) is a broker or dealer or investment company registered under the Securities Exchange Act of 1934 or the Investment Company Act of 1940, or (iii) is a national securities exchange or association registered under the Securities Exchange Act of 1934, and none of whom, other than a
national securities exchange or association, holds in excess of 20 percent of the capital stock of such corporation; and
(b) Any remaining capital stock of which is held by individuals who have purchased such capital stock at or prior to the time of their taking office as directors of such corporation and who have purchased only so much of such capital stock as may be necessary to permit them to qualify as such directors.
(Added by Stats. 1972, Ch. 1057.)
The commisioner shall charge and collect the following fees:
(a) For filing an application for a securities depository license, two thousand five hundred dollars ($2,500).
(b) For holding a hearing in connection with the application, as set forth under Section 30205, the actual costs experienced in each particular instance.
(c) For continuing a license as a securities depository in effect, a fee of two thousand five hundred dollars ($2,500) per annum, payable biennially on the 15th
day of December of each odd-numbered calendar year. If a license is issued during an even-numbered calendar year, the securities depository shall pay to the commissioner, within 60 days after the issuance of its license, an additional annual fee of two thousand five hundred dollars ($2,500).
(Added by Stats. 1972, Ch. 1057.)
All money received by the commissioner shall be paid by him or her into the State Treasury to the credit of the State Corporations Fund.
(Amended by Stats. 1992, Ch. 427, Sec. 41. Effective January 1, 1993.)
An application for a securities depository license shall be signed and verified by an authorized officer of the applicant, and shall set forth in such form as the commissioner may prescribe:
(a) The names and addresses of the incorporators, directors, and officers, with a statement of their character, experience, and general fitness to operate a securities depository.
(b) A showing that the proposed method of operation of such securities depository will be adequate for the protection of investors.
(c) The names of every person who holds or is to hold capital stock in the securities depository corporation together with a statement of the percentage interest attributable to each. The commissioner may require disclosure of such additional information as may be necessary to determine the individuals controlling such corporation.
(d) The addresses at which facilities of the applicant will be located and a description of each such facility and the functions there performed, and a description of any other business or operations which will be conducted on such premises.
(e) By way of exhibits, a copy of the articles of incorporation and a copy of the bylaws of the applicant.
(f) By way of exhibits, financial statements of the applicant, which shall include at least a balance sheet and profit and loss
statement certified by an independent public accountant or certified public accountant, and if such certified statements are prepared as of a date more than 60 days prior to the filing of the application, a balance sheet and profit and loss statement, which need not be certified, prepared as of a date within such 60-day period, together with profit and loss statements covering at least three years of its operations, or such lesser period as the applicant may have operated, to the date of such certified balance sheet.
(g) Such additional information as the commissioner may by rule prescribe.
(Added by Stats. 1972, Ch. 1057.)
Upon the receipt of a proper and complete application for license, and all required fees, the commissioner shall immediately examine and investigate all facts connected with the proposed licensee, including but not limited to its stockholders, directors, officers and managers, and its proposed safeguards with respect to custody, handling, recordkeeping, insurance, and auditing of securities on deposit. The commissioner may or may not require the applicant to submit to an appropriate hearing. At such hearing any interested person may show cause either in favor of, or opposed to, the application.
(Added by Stats. 1972, Ch. 1057.)
The commissioner may refuse to issue any license being applied for, and shall refuse to issue any license being applied for if upon his examination and investigation, and after appropriate hearing, he finds any of the following:
(a) That the incorporators, directors, officers, or stockholders lack the character, experience, or general fitness to engage in such a business.
(b) That the proposed licensee’s program of safeguards with respect to custody, handling, recordkeeping, insurance, and auditing of securities on deposit is inadequate for the
protection of investors.
(c) That the requirements with respect to ownership of capital stock of Section 30201 are not met.
(d) That the applicant is, or is in danger of becoming, insolvent.
(Added by Stats. 1972, Ch. 1057.)
No licensee, or any other person, shall solicit deposits of securities or otherwise conduct the business of a licensee, by means of any statement or representation which is false, misleading, or deceptive, or which omits to state material information, or which infers that such licensee has been sponsored, recommended or approved or that his abilities or qualifications have in any respect been passed upon by the commisioner. The commissioner may order a licensee or other person to desist from any conduct which he shall find to be a violation of this section.
(Added by Stats. 1972, Ch. 1057.)
A securities depository license is not transferable or assignable. Further, no license may be acquired, either in whole or in part, through stock purchase or other devices without the consent of the commissioner.
(Added by Stats. 1972, Ch. 1057.)
Any person who operates a securities depository, or solicits holders of securities within this state to place securities in a securities depository, either directly as principal or indirectly as agent, employee, manager, fiduciary representative, or in any other capacity, unless such securities depository has applied for and received the license required by this division, is guilty of a misdemeanor punishable by imprisonment in a county jail for not less than three months and not exceeding 12 months, or by a fine of not less than two hundred fifty dollars ($250) and not exceeding one thousand dollars ($1,000), or by both such fine and imprisonment.
(Added by Stats. 1972, Ch. 1057.)
Every person subject to this division shall keep and use in its business, books, accounts, and records which will properly enable the commissioner to determine whether the operation of a securities depository by such person complies with the provisions of this division and with all rules and regulations made by the commissioner under this division.
(Added by Stats. 1972, Ch. 1057.)
The business, accounts and records of every person licensed under this division are subject to inspection and examination by the commissioner at any time without prior notice.
(Added by Stats. 1972, Ch. 1057.)
The actual cost of every inspection and examination shall be paid to the commissioner by the person examined and the commissioner may maintain an action for the recovery of such costs in any court of competent jurisdiction.
(Added by Stats. 1972, Ch. 1057.)
(a) Every person subject to this division shall submit to the commissioner, at such person’s own expense, financial statements prepared in accordance with generally accepted accounting principles covering the calendar year or, if such person has an established fiscal year, then for such fiscal year, within 105 days after the close of the calendar year or fiscal year. Such financial statements shall be covered by a report or certificate of an independent certified public accountant or independent public accountant. In addition financial statements, which may be unaudited, as of the end of the calendar month next preceding the date of submission of the
audited financial statements shall also be filed concurrently with such audited financial statements. All audits referred to in this section shall be by independent certified public accountants or independent public accountants acceptable to the commissioner. The audits shall be conducted in accordance with generally accepted auditing standards. The audited financial statements shall include at least an audited balance sheet showing the person’s net worth and a statement of income and expenses for the year ended on the balance sheet date. The commissioner may by rule prescribe the matters to be covered in the report or certification of the auditor.
(b) Within such period as the commissioner shall prescribe, which shall not be less than 10 days, a person subject to this division shall submit to the commissioner, at such person’s own expense, a report containing such information regarding its financial condition, operations, or the ownership of
its outstanding securities as the commissioner may require.
(Added by Stats. 1972, Ch. 1057.)
If any person subject to this division fails to make any report required by law or by the commissioner, the commissioner shall immediately cause the books, records, papers, and affairs of said person to be thoroughly examined. The commissioner may, in carrying out his responsibilities under this section, employ an independent public accountant or certified public accountant the cost of whose services shall be borne by such person in accordance with Section 30212.
(Added by Stats. 1972, Ch. 1057.)
If the commissioner, as a result of any examination or from any report made to him, shall find that any person subject to this division is in an insolvent condition, or is operating a securities depository in such an unsafe or injurious manner as to render further operations hazardous to the public or to depositors the commissioner may forthwith, by an order addressed to and served by registered mail on such person, direct discontinuance of the operation of a securities depository within the State of California or direct discontinuance of the solicitation of security holders within the State of California by such securities depository, or otherwise limit the conduct of the
business of such depository as may be necessary for the safety of security holders. The order shall remain in effect until set aside by the commissioner in whole or in part.
(Added by Stats. 1972, Ch. 1057.)
Whenever in the opinion of the commissioner any person required by this division to be licensed is engaged in operating a securities depository or in soliciting securities holders within this state to place securities in a securities depository, without a license from the commissioner, the commissioner may order said person to desist and to refrain from engaging in such business. If, after such an order is made, a request for a hearing is filed in writing and the hearing is not held within 60 days thereafter, the order is rescinded.
(Added by Stats. 1972, Ch. 1057.)
The commissioner may from time to time make, amend, and rescind such rules, forms, and orders as are necessary to carry out the provisions of this law, including rules defining any terms, whether or not used in this law, insofar as the definitions are not inconsistent with the provisions of this law. For the purposes of rules and forms, the commissioner may classify persons and matters within the commissioner’s jurisdiction and may prescribe different requirements for different classes. The commissioner may in the commissioner’s discretion waive any requirement of any rule or form in situations where in the commissioner’s opinion such requirement is not necessary in the public interest or for the protection of investors. All rules of the commissioner other than those relating solely to the internal administration of the Department of Financial
Protection and Innovation shall be made, amended, or rescinded in accordance with the provisions of Chapter 4.5 (commencing with Section 11371) of Part 1 of Division 3 of Title 2 of the Government Code.
(Amended by Stats. 2022, Ch. 452, Sec. 156. (SB 1498) Effective January 1, 2023.)
(a) It is unlawful for any person to knowingly alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the administration or enforcement of this division.
(b) It is unlawful for any person to knowingly make an untrue statement to the commissioner during the course of licensing, investigation, or examination, with the intent to impede, obstruct, or influence the
administration or enforcement of any provision of this division.
(Added by Stats. 2007, Ch. 101, Sec. 26. Effective January 1, 2008.)