This law section explains specific terms related to buying and selling securities. When the law mentions an "offer" or "offer to sell," it means trying to sell or asking someone to buy a security. "Sale" or "sell" includes any agreement to sell or trade securities or any change to the terms of existing securities.
"Security" refers to financial instruments like stocks and bonds, and also includes options to purchase them. However, this definition does not cover certain stock dividends given by banks to common stockholders if specific conditions are met.
Unless the context otherwise requires, in this chapter:
(a)CA Financial Code § 1200(a) “Offer” or “offer to sell” includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security for value.
(b)CA Financial Code § 1200(b) “Sale” or “sell” includes every contract of sale of, contract to sell, or disposition of, a security for value. “Sale” or “sell” includes any exchange of securities and
any change in the rights, preferences, privileges, or restrictions of or on outstanding securities.
(c)CA Financial Code § 1200(c) “Security” means any stock, capital note, or debenture, or any warrant, right, or option to subscribe to or purchase any of the foregoing.
(d)CA Financial Code § 1200(d) The terms defined in subdivisions (a) and (b) do not include any stock dividend payable with respect to common stock of a bank solely (except for any cash or scrip paid for fractional shares) in shares of such common stock, if such bank has no other class of voting stock outstanding, provided that shares issued in any such dividend shall be subject to any conditions previously imposed by the commissioner applicable to the shares with respect to which they are issued.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
Banks in California must get a permit from the commissioner before they can sell any securities they issue.
No bank organized under the laws of this state shall offer or sell any security issued by it unless the commissioner has issued a permit authorizing such sale.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law explains situations where certain bank transactions involving securities don't have to follow the usual regulations in Section 1201. First, a bank can offer (not sell) its securities in a private, limited way without immediate payment or issuance, as long as it follows specific rules about who it can offer to. These people must either know someone at the bank or have enough experience to understand the deal. Second, if a bank does a stock split according to approved documents, this can also be exempt unless the commissioner decides otherwise. Lastly, a bank can sell securities to a particular person with an approved plan by the commissioner or if a regulation says the transaction is exempt, unless again, the commissioner decides otherwise.
The following transactions are exempt from Section 1201:
(a)Copy CA Financial Code § 1202(a)
(1)Copy CA Financial Code § 1202(a)(1) Any offer (but not a sale) not involving a public offering by a bank organized under the laws of this state of its securities and the execution and delivery of any agreement for the sale of the securities pursuant to the offer if no part of the consideration for the securities is paid to or received by the bank and none of the securities
are issued until the sale of the securities is authorized by the commissioner or exempted from authorization.
(2)CA Financial Code § 1202(a)(2) For purposes of paragraph (1), an offer does not involve any public offering if the offers are not made to more than 25 persons and any agreement for the sale of the securities is not entered into with more than 10 of those 25 persons, and if all of the offerees either have a preexisting personal or business relationship with the bank or its officers, directors, or controlling persons, or by reason of their business or financial experience the offerees could be reasonably assumed to have the capacity to protect their own interests in connection with the transaction.
(b)CA Financial Code § 1202(b) Any stock split by a bank organized under the laws of this state that is effected pursuant to an amendment to its articles, an agreement of merger, or a certificate of ownership that has been approved
by the commissioner, unless this exemption is withheld by order of the commissioner.
(c)CA Financial Code § 1202(c) Any offer or sale of securities by a bank organized under the laws of this state that is either (1) to a person actually approved by the commissioner pursuant to Section 1253 to acquire control of the bank if all of the material terms and conditions of the offer and sale of securities are disclosed in the application for approval specified in Section 1253 and the offer and sale of securities is in accordance with the terms and subject to the conditions of the approval to acquire control or (2) in a transaction exempted from the approval requirement of Section 1251 by a regulation or an order of the commissioner, unless this exemption is withheld by order of the commissioner.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
If you want to apply for a permit, you must fill out the application in the format and with the details required by the commissioner in charge of the permits.
An application for a permit shall be in such form and contain such information as the commissioner may prescribe.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This section outlines the fees that must be paid for different types of permits related to securities in California. The fee for a negotiating permit is $50. Similarly, getting a permit to exchange a security or change its aspects, like rights or privileges, also costs $50. If you need a permit to sell securities in any other case, it costs $100 plus 0.1% of the total value of the securities being sold, capped at $1,750.
The commissioner shall charge and collect fees for applications filed under this chapter as fixed in this section.
(a)CA Financial Code § 1204(a) The fee for a negotiating permit shall be fifty dollars ($50).
(b)CA Financial Code § 1204(b) The fee for a permit to exchange a security or to make any change in the rights, preferences, privileges, or restrictions of or on outstanding securities shall be fifty dollars
($50).
(c)CA Financial Code § 1204(c) The fee for any permit to sell securities other than as specified in subdivision (b) shall be one hundred dollars ($100) plus one-tenth of one percent (0.1%) of the aggregate value of the securities sought to be sold, up to a maximum aggregate fee of one thousand seven hundred fifty dollars ($1,750).
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law section says that if the commissioner determines that a planned sale of securities is fair and reasonable, they will grant a permit to the applicant, allowing them to sell the securities under specific terms. If the commissioner believes the sale is not fair, they will deny the permit application.
If the commissioner finds that the proposed sale of securities is fair, just, and equitable, he or she shall issue to the applicant a permit authorizing it to offer and sell the securities in such amount and upon such terms and conditions as he or she may provide in the permit. If the commissioner finds otherwise, he or she shall deny the application.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law allows the commissioner to set certain conditions on permits related to securities. These conditions can include requiring that securities are held in escrow, making them harder to transfer, controlling how money from their sale is handled, and capping expenses related to their sale. The law empowers the commissioner to ensure these measures are in place to protect the public interest.
The commissioner may impose conditions in any permit issued under Section 1205, requiring the deposit in escrow of securities, imposing a legend condition restricting the transferability thereof, impounding the proceeds from the sale thereof, limiting the expense in connection with the sale thereof, or such other conditions as he or she deems reasonable and necessary or advisable in the public interest.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law states that when a permit is given for selling certain securities, it should clearly say that the permit is just permission and not a stamp of approval or recommendation for the securities themselves.
Every permit issued pursuant to Section 1205 shall recite that it is permissive only and does not constitute a recommendation or endorsement of the securities permitted to be sold.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law allows a commissioner to change, pause, or cancel any permit that was given out according to another rule, Section 1205.
The commissioner may amend, alter, suspend, or revoke any permit issued pursuant to Section 1205.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law section explains that when a bank wants to issue a security or provide something of value in exchange for existing securities, claims, or property interests, the bank must obtain approval from a commissioner. The commissioner checks that the proposed terms are fair and may hold a hearing where those involved can participate. This applies even if the transaction is usually exempt from certain rules.
Whenever a bank applies for a permit to issue any security or to deliver any other consideration (whether or not such security or such transaction is exempt from, or not subject to, the provisions of Section 1202) in exchange for one or more bona fide outstanding securities (as defined in Section 25019 of the Corporations Code), claims, or property interests, or partly in such exchange and partly for cash, the commissioner is authorized to approve the terms and conditions of such issuance
and exchange or such delivery and exchange and the fairness of such terms and conditions and is authorized to hold a hearing on the fairness of such terms and conditions, at which all persons to whom it is proposed to issue any security or to deliver any other consideration in such exchange shall have the right to appear.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law allows certain financial transactions or securities to be exempt from the rules of Section 1201. The commissioner has the authority to decide which transactions or securities are exempt by regulation or order. This exemption is given if it's determined that regulating these transactions is not needed for public interest or investor protection.
There shall be exempted from the provisions of Section 1201 any transaction or security, including, without limitation, any type or class of transactions or securities, which the commissioner by regulation or order exempts as not being comprehended within the purposes of this chapter and the regulation of which he or she finds is not necessary or appropriate in the public interest or for the protection of investors.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This law allows a bank to issue, sell, or pledge its own special financial instruments known as capital notes or debentures, as long as its board approves it. These can have specified terms and interest rates and might be convertible into shares. If the bank goes under, it is important to know that creditors and depositors have first dibs on the bank's remaining assets before anything is paid back to holders of these notes or debentures. Only after these primary claims are settled can the notes or debentures be paid from whatever is left. The law also states that the bank can't repay the principal on these notes unless doing so maintains at least the initial level of financial strength as when they were first issued, unless the commissioner allows otherwise.
A bank at any time may, with the approval of its board, issue, sell or hypothecate its capital notes or debentures which may be payable upon such terms and may bear such rate of interest, if any, as may be provided therein or which may be convertible into shares. Such capital notes and debentures shall be subordinate to the claims of creditors and depositors and it shall be provided in any such capital notes or debentures that in the event of liquidation all depositors and other creditors
of the bank shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on such capital notes or debentures and it may be provided in any such capital notes or debentures that after payment in full of all sums owing to such depositors and creditors the holders of such capital notes or debentures shall be entitled to be paid from the remaining assets of the bank the unpaid principal amount of the capital notes or debentures plus accrued and unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any shares of the bank. It shall be provided in such capital notes or debentures that no payment shall at any time be made on account of the principal thereof, unless following such payment the aggregate of the shareholders’ equity and capital notes or debentures thereafter outstanding shall be the equal of such aggregate at the date of the original
issue of such capital notes or debentures, or as may be otherwise authorized by the commissioner.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
This section clarifies that the rules and regulations in this chapter do not change or impact the Corporate Securities Law of 1968, which begins at Section 25000 in the Corporations Code.
Nothing contained in this chapter shall affect the Corporate Securities Law of 1968, Division 1 (commencing with Section 25000) of Title 4 of the Corporations Code.
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(Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)
