Enforcement - Capital Access Companies - Corporations - CA

Section § 28700

This law section clarifies some key terms used in the chapter. It defines an "office with a licensee" as anyone in a director, officer, or employee role with a licensee or its subsidiary. A "subject person" is described as anyone who controls or is affiliated with the licensee, including any directors, officers, or employees, or anyone involved in the licensee's business activities.

For purposes of this chapter, unless the context otherwise requires:

(a) “Office with a licensee” means the position of director, officer, or employee of the licensee or of any subsidiary of the licensee.

(b) “Subject person,” when used with respect to a licensee, means any of the following:

(1) Any controlling person or affiliate of the licensee.

(2) Any director, officer, or employee of the licensee or of any of the persons specified in paragraph (1).

(3) Any other person who participates in the conduct of the business of the licensee.

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Section § 28701

This law allows a commissioner to take legal action if someone is breaking, or is likely to break, certain business-related rules. The commissioner can ask a court to stop the person or enforce compliance. If the court agrees, it can issue orders like restraining orders or injunctions, and even appoint a temporary manager to oversee the person's operations or assets. The commissioner doesn’t have to pay a bond to get these court orders.

Whenever it appears to the commissioner that any person has violated, or that there is reasonable cause to believe that any person may violate, any provision of this division or of any regulation or order issued under this division, the commissioner may bring an action in the name of the people of this state in the superior court to enjoin the violation or to enforce compliance with this division or with any regulation or order issued under this division. Upon a proper showing, a restraining order, preliminary or permanent injunction, or writ of mandate shall be granted, and a receiver or a conservator may be appointed for the defendant or the defendant’s assets. The court may not require the commissioner to post a bond.

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Section § 28702

If a person is thought to have broken a specific law, the commissioner can order them to stop until they get a proper license. If this order is issued, the person has 30 days to ask for a formal hearing. If the commissioner doesn't start the hearing within 15 business days (or longer if agreed), the order is canceled. When the hearing is done, the order can be confirmed, changed, or canceled. Additionally, even if the person skips the hearing, they can still challenge the order in court.

(a) If the commissioner finds that any person has violated, or that there is reasonable cause to believe that any person may violate, Section 28150, the commissioner may order the person to cease and desist from the violation unless and until the person is issued a license.

(b)

(1) Within 30 days after an order is issued pursuant to subdivision (a), the person to whom the order is directed may file with the commissioner an application for a hearing on the order. If the commissioner fails to commence a hearing within 15 business days after the application is filed with him or her (or within any longer period to which the person consents), the order shall be deemed rescinded. Upon the completion of the hearing, the commissioner shall affirm, modify, or rescind the order.

(2) The right of any person to whom an order is issued under subdivision (a) to petition for judicial review of the order shall not be affected by the failure of the person to apply to the commissioner for a hearing on the order pursuant to paragraph (1).

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Section § 28703

This law allows the commissioner to issue a cease and desist order if, after a notice and hearing, it's found that a business operator with a license has broken or is likely to break rules or laws. Additionally, the commissioner can step in if the licensee is involved, or might be, in any risky or irresponsible business actions.

The commissioner may issue a cease and desist order, including an order to take appropriate corrective action, if, after notice and a hearing, the commissioner finds either of the following:

(a) That any licensee or any subject person of a licensee has violated, is violating, or that there is reasonable cause to believe that any licensee or any subject person of a licensee may violate, any provision of this division or of any regulation or order issued under this division or any provision of any other applicable law.

(b) That any licensee or any subject person of a licensee has engaged or participated in, is engaging or participating in, or that there is reasonable cause to believe that any licensee or any subject person of a licensee may engage or participate in, any unsafe or unsound act with respect to the business of the licensee.

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Section § 28704

The commissioner can issue a cease and desist order to a licensee if they find evidence that the licensee is involved in activities that could harm their financial stability or the interests of investors. If this happens, the affected party has 30 days to request a hearing, but this doesn't pause the order. The commissioner must start this hearing within 15 business days, or the order will be canceled. After the hearing, the order can be confirmed, changed, or canceled. A licensee can seek a court review of the order, even if they didn't request an internal hearing.

(a) The commissioner may issue a cease and desist order, including an order to take appropriate corrective action, if the commissioner finds both of the following:

(1) That any of the factors set forth in Section 28703 is true with respect to any licensee or any subject person of a licensee.

(2) That the action or violation is likely to cause the insolvency of, or substantial dissipation of the assets or earnings of, the licensee, or is likely to seriously weaken the condition of the licensee or otherwise to seriously prejudice the interests of the licensee or the accredited investors of the licensee, prior to the completion of proceedings conducted pursuant to Section 28703.

(b)

(1) Within 30 days after an order is issued pursuant to subdivision (a), any licensee or subject person of a licensee to whom the order is directed may file with the commissioner an application for a hearing on the order. The filing of an application for a hearing shall not stay the effectiveness of the order. If the commissioner fails to commence a hearing within 15 business days after the application is filed (or within any longer period to which the licensee or subject person consents), the order shall be deemed rescinded. Upon the completion of the hearing, the commissioner shall affirm, modify, or rescind the order.

(2) The right of any licensee or subject person of a licensee to whom an order is issued under subdivision (a) to petition for judicial review of the order shall not be affected by the failure of the licensee or subject person to apply to the commissioner for a hearing on the order pursuant to paragraph (1).

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Section § 28705

This law allows a commissioner to remove someone from their position with a company and ban them from participating in the company's business if, after a notice and hearing, it's proven they broke the law, acted unsafely, or mismanaged their duties. The actions must have caused or could cause substantial financial loss or prejudice to the company or its investors, or resulted in financial gain for the person. The inappropriate actions must involve dishonesty or display gross negligence or disregard for the company's wellbeing.

The commissioner may issue an order removing a subject person from that person’s office with the licensee, if any, and prohibiting that person from further participating in any manner in the conduct of the business of the licensee, if, after notice and a hearing, the commissioner finds all of the following:

(a)

(1) That the subject person of a licensee has violated a provision of this division or of any regulation or order issued under this division or any provision of any other applicable law;

(2) That the subject person of a licensee has engaged or participated in any unsafe or unsound act with respect to the business of the licensee; or

(3) That the subject person of a licensee has engaged or participated in any act which constitutes a breach of his or her fiduciary duty as a subject person.

(b)

(1) That the act, violation, or breach of fiduciary duty has caused or is likely to cause substantial financial loss or other damage to the licensee or the accredited investors of the licensee; or

(2) That the act, violation, or breach of fiduciary duty has seriously prejudiced or is likely to seriously prejudice the interests of the licensee or the accredited investors of the licensee; or

(3) That the subject person has received financial gain by reason of the act, violation, or breach of fiduciary duty.

(c) That the act, violation, or breach of fiduciary duty either involves dishonesty on the part of the subject person or demonstrates the subject person’s gross negligence with respect to the business of the licensee or a willful disregard for the safety and soundness of the licensee.

commissioner removal from office unsafe practices ...

Section § 28706

This law allows a commissioner to remove someone from their position in a business and stop them from being involved in the business if they have caused significant financial losses or damage. To do this, the commissioner must hold a hearing and find that the person has shown dishonesty or knowingly ignored the safety of the business.

The commissioner may issue an order removing a subject person from his or her office, if any, with the licensee and prohibiting him or her from further participating in any manner in the conduct of the business of the licensee, except with the prior consent of the commissioner, if the commissioner finds, after notice and a hearing, that the subject person of a licensee has, by engaging or participating in any act with respect to any financial or other business institution which resulted in substantial financial loss or other damage, demonstrated either of the following:

(a) Dishonesty.

(b) Willful or continuing disregard for the safety and soundness of the financial or other business institution.

commissioner removal order business misconduct financial institution damage ...

Section § 28707

If a person involved with a licensed business has issues that concern the business's or public's interests, the commissioner can temporarily suspend them and stop them from participating in the business. This happens only if certain conditions are met. The suspended person can apply for a hearing within 30 days, but the suspension remains in place during this time. If a hearing does not start within 15 business days, the suspension is canceled. Additionally, the person can seek a court review whether or not they asked for a hearing.

(a) The commissioner may issue an order suspending a subject person from his or her office, if any, with the licensee and prohibiting him or her from further participating in any manner in the conduct of the business of the licensee, except with the consent of the commissioner, if the commissioner finds both of the following:

(1) That the factors set forth in subdivisions (a), (b), and (c) of Section 28705 or the factors set forth in subdivision (a) of Section 28706 are true with respect to the subject person of a licensee.

(2) That it is necessary for the protection of the interests of the licensee or the accredited investors of the licensee, or for the protection of the public interest that the commissioner immediately suspend the subject person from his or her office, if any, with the licensee and prohibit him or her from further participating in any manner in the conduct of the business of the licensee.

(b)

(1) Within 30 days after an order is issued pursuant to subdivision (a), any subject person of a licensee to whom the order is directed may file with the commissioner an application for a hearing on the order. The filing of an application for a hearing shall not stay the effectiveness of the order. If the commissioner fails to begin a hearing within 15 business days after the application is filed (or within any longer period to which the subject person consents), the order shall be deemed rescinded. Upon the completion of the hearing, the commissioner shall affirm, modify, or rescind the order.

(2) The right of any subject person of a licensee to whom an order is issued under subdivision (a) to petition for judicial review of the order shall not be affected by the failure of the subject person to apply to the commissioner for a hearing on the order pursuant to paragraph (1).

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Section § 28708

This law allows the commissioner to suspend someone from their role in a licensed business if they're indicted for a crime involving dishonesty or breach of trust, or if their continued role could harm the business or public trust. If the person is eventually convicted of such a crime, the commissioner can remove them from their position. The affected person can request a hearing within 30 days to challenge the decision. Lack of a final conviction doesn't stop the commissioner from applying other legal actions.

(a) The commissioner may issue an order suspending a subject person from his or her office, if any, with the licensee and prohibiting him or her from further participating in any manner in the conduct of the business of the licensee, except with the consent of the commissioner, if the commissioner finds both of the following:

(1) That the subject person of a licensee has been indicted by a grand jury for, or held to answer by a magistrate for, a crime involving dishonesty or breach of trust.

(2) That the continuation of that person as a subject person of the licensee may threaten the interests of the licensee or the accredited investors of the licensee, or may threaten to impair public confidence in the licensee.

(b) The commissioner may issue an order suspending or removing the subject person or former subject person from his or her office, if any, with the licensee and prohibiting him or her from further participating in any manner in the conduct of the business of the licensee, except with the prior consent of the commissioner, if the commissioner finds both of the following:

(1) That the subject person or former subject person of a licensee to whom an order was issued pursuant to subdivision (a) or any other subject person of a licensee has been finally convicted of a crime which is punishable by imprisonment for a term exceeding one year and which involves dishonesty or breach of trust.

(2) That the continuation or resumption by that person as a subject person of the licensee may threaten the interests of the licensee or the accredited investors of the licensee, or may threaten to impair public confidence in the licensee.

(c)

(1) Within 30 days after an order is issued pursuant to subdivision (a) or (b), any subject person of a licensee to whom the order is directed may file with the commissioner an application for a hearing on the order. If the commissioner fails to commence a hearing within 15 business days after the application is filed (or within any longer period to which the subject person consents), the order shall be deemed rescinded. Upon the completion of the hearing, the commissioner shall affirm, modify, or rescind the order.

(2) The right of any subject person or former subject person of a licensee to whom an order is issued under subdivision (a) or (b) to petition for judicial review of the order shall not be affected by the failure of the person to apply to the commissioner for a hearing on the order pursuant to paragraph (1).

(d) The fact that any subject person of a licensee charged with a crime involving dishonesty or breach of trust is not finally convicted of the crime shall not preclude the commissioner from issuing an order to the subject person pursuant to any other section of this division.

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Section § 28709

If someone receives an order under certain sections, they can ask the commissioner to change or cancel it. However, the commissioner will only agree if it's in the public interest and there's a good reason to believe the person will follow all relevant rules and regulations if they become involved with a licensed company.

Any person to whom an order is issued under Section 28705, 28706, 28707, or 28708 may apply to the commissioner to modify or rescind the order. The commissioner shall not grant the application unless the commissioner finds that it is in the public interest to do so and that it is reasonable to believe that the person will, if and when he or she becomes a subject person of a licensee, comply with all applicable provisions of this division and of any regulation or order issued under this division.

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Section § 28710

This law allows a commissioner to suspend or revoke a company's license if certain issues arise after giving notice and holding a hearing. These include breaking laws or regulations, running the business poorly or unsafely, stopping business operations, being bankrupt or unable to pay debts, and any other reason that would have led to the license being denied in the first place.

The commissioner may issue an order suspending or revoking the license of a licensee, if, after notice and a hearing, the commissioner finds any of the following:

(a) That the licensee or any controlling person or affiliate of the licensee has violated any provision of this division or of any regulation or order issued under this division or any provision of any other applicable law.

(b) That the licensee is conducting its business in an unsafe and unsound manner.

(c) That the licensee is in a condition that it is unsafe or unsound for it to transact business.

(d) That the licensee has ceased to transact business as a capital access company.

(e) That the licensee is insolvent.

(f) That the licensee has suspended payment of its obligations, has made an assignment for the benefit of its creditors, or has admitted in writing its inability to pay its debts as they become due.

(g) That the licensee is the subject of an order for relief in bankruptcy or has sought other similar relief under any other bankruptcy, reorganization, insolvency, or moratorium law, or that any person has applied for any of that relief under any of those laws against any licensee and the licensee has by any affirmative act approved of or consented to the action or the relief has been granted.

(h) That any fact or condition exists which, if it had existed at the time when any licensee applied for its license, would have been grounds for denying the application.

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Section § 28711

If the commissioner believes a licensee is involved in something that affects public interest, they can immediately suspend or revoke the license. The licensee can request a hearing within 30 days. A hearing must start within 15 business days of the request; otherwise, the suspension or revocation is canceled. After the hearing, the commissioner decides whether to keep, change, or cancel the order.

(a) If the commissioner finds that any of the factors set forth in Section 28710 is true with respect to any licensee and that it is necessary for the protection of the public interest that the commissioner immediately suspend or revoke the license of the licensee, the commissioner may issue an order suspending or revoking the license of the licensee.

(b) Within 30 days after an order is issued pursuant to subdivision (a), any licensee to whom the order is directed may file with the commissioner a request for a hearing on the order. If the commissioner fails to commence a hearing within 15 business days after the request is filed (or within any longer period to which the licensee consents), the order shall be deemed rescinded. Upon the completion of the hearing, the commissioner shall affirm, modify, or rescind the order.

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Section § 28712

If your license gets suspended or revoked, you must promptly give it back to the commissioner.

Any person whose license is suspended or revoked shall immediately deliver the license to the commissioner.

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Section § 28713

If someone receives a regulatory order under certain sections, they can ask the commissioner to change or cancel it. However, the commissioner will only agree if it's good for the public and they believe that person will follow all the rules if they get a license.

Any person to whom an order is issued under Section 28709 or 28710 may apply to the commissioner to modify or rescind the order.

The commissioner shall not grant the application unless the commissioner finds that it is in the public interest to do so and that it is reasonable to believe that the person will, if and when it becomes a licensee, comply with all applicable provisions of this division and of any regulation or order issued under this division.

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Section § 28714

If the commissioner finds a problem with a licensed business and thinks immediate action is needed to protect investors or the public, they can take over the business's operations and assets. The business can ask the commissioner's permission to reopen under certain conditions. If the commissioner takes control, the business has 10 days to ask a local court to stop them. The court can either dismiss the request or stop the commissioner, depending on what it decides is fair. If either side disagrees with the court's decision, they can appeal, which temporarily pauses the original court's judgment. If the commissioner takes over, they must either manage or sell off the business's assets.

(a) If the commissioner finds that any of the factors set forth in Section 28709 is true with respect to any licensee and that it is necessary for the protection of the interests of the licensee or the accredited investors of the licensee, or for the protection of the public interest that the commissioner take immediate possession of the property and business of the licensee, the commissioner may forthwith take possession of the property and business of the licensee and retain possession until the licensee resumes business or is finally liquidated. The licensee may, with the consent of the commissioner, resume business upon any conditions that the commissioner may prescribe.

(b) Whenever the commissioner takes possession of the property and business of a licensee pursuant to subdivision (a), the licensee may apply within 10 days to the superior court in the county in which the head office of the licensee 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, may dismiss the application or enjoin the commissioner from further proceedings and order the commissioner to surrender the property and business of the licensee to the licensee or make any further order that may be just.

(c) An appeal may be taken from the judgment of the superior court by the commissioner or by the licensee in the manner provided by law for appeals from the judgment of a superior court. An appeal from the judgment of the superior court shall operate as a stay of the judgment. No bond need be given if the appeal is taken by the commissioner, but if the appeal is taken by the licensee, a bond shall be given as required by the Code of Civil Procedure.

(d) Whenever the commissioner takes possession of the property and business of a licensee pursuant to subdivision (a), the commissioner shall conserve or liquidate the property and business of the licensee.

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Section § 28715

This section means that certain rules from the Government Code, specifically Sections 11041, 11042, and 11043, do not apply to the Commissioner of Financial Protection and Innovation. In simpler terms, the Commissioner has some exceptions to those standard rules.

Sections 11041, 11042, and 11043 of the Government Code do not apply to the Commissioner of Financial Protection and Innovation.

Commissioner of Financial Protection and Innovation Government Code exceptions Section 28715 ...

Section § 28716

This law makes it illegal for someone to intentionally change, destroy, hide, or fake any record or document to hinder enforcement actions. It also prohibits knowingly lying to the commissioner during license applications or investigations to cause obstruction.

(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.

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