Licensure - - CA Financial

Section § 3201

Starting July 1, 2026, if you want to do business involving digital financial assets with California residents, you need to be licensed by the state. There are a few exceptions: you can apply for a license by the deadline date and wait for a decision, or you might be exempt if you meet certain requirements. This law aims to regulate digital financial activities to ensure they are done legally and safely.

On or after July 1, 2026, a person shall not engage in digital financial asset business activity, or hold itself out as being able to engage in digital financial asset business activity, with or on behalf of a resident unless any of the following is true:

(a) The person is licensed in this state by the department under Section 3203.

(b) The person submits an application on or before July 1, 2026, and is awaiting approval or denial of that application.

(c) The person is exempt from licensure under this division pursuant to Section 3103.

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(Amended by Stats. 2024, Ch. 945, Sec. 1. (AB 1934) Effective January 1, 2025.)

Section § 3203

This law outlines the requirements for applying for a license to conduct digital financial asset business activities. The application must include detailed information about the applicant, such as legal names, addresses, business history, financial standings, and past legal issues. It also requires the applicant to provide proof of financial stability and insurance coverage.

The department will investigate the applicant's ability to responsibly conduct such business, and applicants need to pay a nonrefundable fee. The decision regarding the application can involve approval, conditional approval, or denial. An applicant must acknowledge any conditions set by the department within 31 days, or the application will be considered withdrawn.

Once approved, the license is valid only after fulfilling certain conditions, including providing security as stated in Section 3207. Additional costs related to the department's investigation must also be covered by the applicant. Information provided by the applicant is protected under the Government Code. A complete application includes the fee, required information, and any additional data mandated by the commissioner.

(a) An application for a license under this division shall meet all of the following requirements:

(1) The application shall be in a form and medium prescribed by the department.

(2) Except as otherwise provided in subdivision (b), the application shall provide all of the following information relevant to the applicant’s proposed digital financial asset business activity:

(A) The legal name of the applicant, any current or proposed business United States Postal Service mailing address of the applicant, and any fictitious or trade name the applicant uses or plans to use in conducting the applicant’s digital financial asset business activity with or on behalf of a resident.

(B) The legal name, any former or fictitious name, and the residential and business United States Postal Service mailing address of any executive officer and responsible individual of the applicant and any person that has control of the applicant.

(C) A description of the current and former business of the applicant for the five years before the application is submitted, or, if the business has operated for less than five years, for the time the business has operated, including its products and services, associated internet website addresses and social media pages, principal place of business, projected user base, and specific marketing targets.

(D) A list of all of the following:

(i) Any financial regulatory license the applicant holds in another state.

(ii) The date the license described in clause (i) expires.

(iii) Any license revocation, license suspension, or other disciplinary action taken against the licensee in any state and any license applications rejected by any state.

(E) A list of any criminal conviction, deferred prosecution agreement, and pending criminal proceeding in any jurisdiction against all of the following:

(i) The applicant.

(ii) Any executive officer of the applicant.

(iii) Any responsible individual of the applicant.

(iv) Any person that has control over the applicant.

(v) Any person over which the applicant has control.

(F) A list of any litigation, arbitration, or administrative proceeding in any jurisdiction in which the applicant or an executive officer or a responsible individual of the applicant has been a party for the 10 years before the application is submitted determined to be material in accordance with generally accepted accounting principles and, to the extent the applicant would be required to disclose the litigation, arbitration, or administrative proceeding in the applicant’s audited financial statements, reports to equity owners and similar statements or reports.

(G) A list of any bankruptcy or receivership proceeding in any jurisdiction for the 10 years before the application is submitted in which any of the following was a debtor:

(i) The applicant.

(ii) An executive officer of the applicant.

(iii) A responsible individual of the applicant.

(iv) A person that has control over the applicant.

(v) A person over which the applicant has control.

(H) The name and United States Postal Service mailing address of any bank in which the applicant plans to deposit funds obtained by its digital financial asset business activity.

(I) The source of funds and credit to be used by the applicant to conduct digital financial asset business activity with, or on behalf of, a resident.

(J) Documentation demonstrating that the applicant has the capital and liquidity required by Section 3207. Documentation shall include, but is not limited to, both of the following:

(i) A copy of the applicant’s audited financial statements for the most recent fiscal year and for the two-year period next preceding the submission of the application, if available.

(ii) A copy of the applicant’s unconsolidated financial statements for the current fiscal year, whether audited or not, and, if available, for the two-year period next preceding the submission of the application.

(K) The United States Postal Service mailing address and email address to which communications from the department can be sent.

(L) The name, United States Postal Service mailing address, and email address of the registered agent of the applicant in this state.

(M) A copy of the certificate, or a detailed summary acceptable to the department, of coverage for any liability, casualty, business interruption, or cybersecurity insurance policy maintained by the applicant for itself, an executive officer, a responsible individual, or the applicant’s users.

(N) If applicable, the date on which and the state in which the applicant is formed and a copy of a current certificate of good standing issued by that state.

(O) If a person has control of the applicant and the person’s equity interests are publicly traded in the United States, a copy of the audited financial statement of the person for the most recent fiscal year or most recent report of the person filed under Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78m).

(P) If a person has control of the applicant and the person’s equity interests are publicly traded outside the United States, a copy of the audited financial statement of the person for the most recent fiscal year of the person or a copy of the most recent documentation similar to that required in subparagraph (N) filed with the foreign regulator in the domicile of the person.

(Q) If the applicant is a partnership or a member-managed limited liability company, the names and United States Postal Service mailing addresses of any general partner or member.

(R) If the applicant is required to register with the Financial Crimes Enforcement Network of the United States Department of the Treasury as a money service business, evidence of the registration.

(S) A set of fingerprints for each executive officer and responsible individual of the applicant.

(T) If available, for any executive officer and responsible individual of the applicant, for the 10 years before the application is submitted, employment history and history of any investigation of the individual or legal proceeding to which the individual was a party.

(U) The plans through which the applicant will meet its obligations under Chapter 7 (commencing with Section 3701).

(V) The number of residents with whom, or on behalf of, the applicant engaged in digital financial asset business activity in the month preceding the month in which the applicant submits an application for a license under this division to the department.

(W) An estimate of the anticipated number of residents with whom, or on behalf of, the applicant will engage in digital financial asset business activity by October 1 of the year following the year in which the applicant submits an application for a license under this division to the department.

(X) Any other information the department reasonably requires by rule.

(3) The application shall be accompanied by a nonrefundable fee in the amount determined by the department to cover the reasonable costs of application review.

(b)

(1) On receipt of a completed application, the department shall investigate whether each of the following criterion is satisfied:

(A) The applicant has the sound financial condition, competence, and responsibility to engage in digital financial business activity.

(B) The applicant has relevant financial and business experience, good character, and general fitness.

(C) Each executive officer, responsible individual, and person that has control of the applicant has competence, experience, good character, and general fitness.

(D) The applicant has complied with Chapter 5 (commencing with Section 3501) and Chapter 6 (commencing with Section 3601).

(E) The applicant has a reasonable promise of success in engaging in digital financial business activity.

(F) It is reasonable to believe that the applicant, if licensed, will engage in digital financial business activity in compliance with all applicable provisions of this division and any regulation or order issued pursuant to this division.

(2) On receipt of a completed application, the department may investigate the business premises of an applicant.

(c) After completing the investigation required by subdivision (b), the department shall send the applicant notice of its decision to approve, conditionally approve, or deny the application. If the department does not receive written notice from the applicant that the applicant accepts conditions specified by the department within 31 days following the department’s notice of the conditions, or if the applicant does not request a hearing on the conditions specified by the department within 31 days after the department’s notice of the conditions, the application shall be deemed withdrawn.

(d) A license issued pursuant to this division shall take effect on the later of the following:

(1) The date the department issues the license.

(2) The date the licensee provides the security required by Section 3207.

(e) In addition to the fee required by paragraph (3) of subdivision (a), an applicant shall pay the reasonable costs of the department’s investigation under subdivision (b).

(f) Information provided pursuant to this section is covered by subdivision (a) of Section 7929.000 of the Government Code.

(g) For purposes of this section, “completed application” means an application that contains the nonrefundable fee required by paragraph (3) of subdivision (a), the information specified in paragraph (2) of subdivision (a), and any additional information required by any regulations of the commissioner.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3205

This law allows the California commissioner to issue a temporary or conditional license to an applicant wanting to conduct virtual currency business. If the applicant has a valid license or charter from New York granted before 2023, and pays any applicable fees and meets requirements, they are eligible.

Additionally, a conditional license can be granted if the applicant is in the process of meeting certain criteria, such as submitting fingerprints, meeting other licensing requirements, but delays in criminal history checks occur.

Such a conditional license will expire when either a full license is granted or denied, or if the applicant's New York credentials are revoked.

(a) The commissioner may issue a conditional license to an applicant who holds or maintains a license to conduct virtual currency business activity in the state of New York pursuant to Part 200 of Title 23 of the New York Code of Rules and Regulations or a charter as a New York State limited purpose trust company with approval to conduct a virtual currency business under New York law, provided the license was issued or approved no later than January 1, 2023, and the applicant pays all appropriate fees and complies with the requirements of this division.

(b) The commissioner may issue a conditional license to an applicant pending compliance with the requirements of Section 3219 if all of the following conditions are met:

(1) The applicant has supplied all fingerprints required under Section 3219.

(2) The applicant meets all other requirements for licensure.

(3) Notwithstanding the commissioner’s reasonable efforts, the commissioner has been unable to complete the criminal history investigations required by Section 3219 with reasonable speed.

(c) A conditional license issued pursuant to this section shall expire at the earliest of the following:

(1) Upon issuance of an unconditional license.

(2) Upon denial of a license application.

(3) Upon revocation of a license issued pursuant to Part 200 of Title 23 of the New York Code of Rules and Regulations or disapproval or revocation of a charter as a New York State limited purpose trust company with approval to conduct a virtual currency business under New York law.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3207

This law section outlines the financial requirements for businesses dealing with digital financial assets in California. First, these companies, known as licensees, must have a surety bond or trust account in U.S. dollars, approved by the department. This is to protect residents engaging in digital financial activities with them. If a trust account is used, it must be kept with an approved local bank or credit union. If needed, the department can demand the company increase this security within 30 days. Only the department can draw from this security, distributing funds to claimants per their rules.

Additionally, licensees must maintain enough capital and liquidity to ensure their financial stability, based on their specific risks. The department will assess various factors like the company's asset and liability makeup, business volume, and customer protection plans. Companies must have liquid assets in cash, certain digital financial assets, or high-quality, liquid assets in specific amounts set by the department. If required, the department may order an increase in capital or liquidity, and the company must prove compliance within 30 days of notice.

(a)

(1) (A) A licensee shall maintain a surety bond or trust account in United States dollars in a form and amount as determined by the department for the protection of residents that engage in digital financial asset business activity with the licensee.

(B) If a licensee maintains a trust account pursuant to this section, that trust account shall be maintained with a bank, trust company, credit union, or federal credit union in the state, subject to the prior approval of the department.

(2) Security deposited under this section shall be payable to this state for the benefit of a claim against the licensee on account of the licensee’s digital financial asset business activity with, or on behalf of, a resident.

(3) Security deposited under this section shall cover claims for a period determined by the department for the protection of residents with whom a licensee engages in digital financial business activity, including for an additional period the department specifies after the licensee ceases to engage in digital financial asset business activity with or on behalf of a resident.

(4) The department may require the licensee to increase the amount of security deposited under this section, and the licensee shall deposit the additional security not later than 30 days after the licensee receives notice in a record of the required increase.

(5) The department may permit a licensee to substitute or deposit an alternate form of security satisfactory to the department if the licensee at all times complies with this section.

(6) A claimant does not have a direct right to recover against security deposited under this section.

(7) Only the department may recover against the security, and the department may retain the recovery for no longer than five years and may process claims and distribute recoveries to claimants in accordance with rules adopted by the commissioner.

(b) In addition to the security required under subdivision (a), a licensee shall maintain at all times capital and liquidity in an amount and form as the department determines is sufficient to ensure the financial integrity of the licensee and its ongoing operations based on an assessment of the specific risks applicable to the licensee. In determining the minimum amount of capital and liquidity that shall be maintained by a licensee, the department may consider factors, including, but not limited to, all of the following:

(1) The composition of the licensee’s total assets, including the position, size, quality, liquidity, risk exposure, and price volatility of each type of asset.

(2) The composition of the licensee’s total liabilities, including the size and repayment timing of each type of liability.

(3) The actual and expected volume of the licensee’s digital financial asset business activity.

(4) The amount of leverage employed by the licensee.

(5) The liquidity position of the licensee.

(6) The financial protection that the licensee provides pursuant to subdivision (a).

(7) The types of entities to be serviced by the licensee.

(8) The types of products or services to be offered by the licensee.

(9) Arrangements adopted by the licensee for the protection of its customers in the event of the licensee’s insolvency.

(c) A licensee shall hold liquid assets required to be maintained in accordance with this section in the form of cash, digital financial assets other than digital financial assets over which it has control for a resident entitled to the protections of Section 3503, or high-quality, liquid assets as defined in subdivision (a) of Section 249.20 of Title 12 of the Code of Federal Regulations in proportions determined by the department.

(d) The department may require a licensee to increase the capital or liquidity required under this section. A licensee shall submit evidence satisfactory to the department that the licensee has additional capital or liquidity required pursuant to this subdivision not later than 30 days after the licensee receives notice in a record of the required increase.

surety bond trust account digital financial assets claim protection capital requirements liquidity requirements risk assessment asset composition liability composition financial stability customer protection department approval liquid assets security increase asset volatility

(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3209

This law explains the requirements for issuing a license to an applicant. To qualify, the applicant needs to meet certain conditions: the commissioner's criteria must be satisfied, the applicant must comply with the relevant chapter, and they must pay the costs of both the investigation and the initial license fee.

If the department denies the application, the applicant has the right to appeal under the Administrative Procedure Act, but must do so within 30 days after receiving a denial notice.

(a) The department shall issue a license to an applicant if all of the following conditions are satisfied:

(1) The commissioner finds that all of the criteria described in paragraph (1) of subdivision (b) of Section 3203 are satisfied.

(2) The applicant has complied with this chapter.

(3) The applicant has paid the costs of the investigation under subdivision (e) of Section 3203.

(4) The applicant has paid the initial license fee under paragraph (3) of subdivision (a) of Section 3203.

(b) An applicant may appeal a denial of its application under Section 3203 pursuant to the Administrative Procedure Act, as described in Section 11370 of the Government Code, not later than 30 days after the department notifies the applicant that the application at an address specified under subparagraph (K) of paragraph (2) of subdivision (a) of Section 3203 has been denied or deemed denied.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3211

This law requires digital financial asset businesses in California to submit an annual report between October 1 and November 1. The report should include financial statements, details of material changes or investigations, data security breaches, and business activity statistics. Businesses must also pay a share of administration costs by February 28. Failure to comply can result in license suspension or revocation, but businesses can appeal or correct non-compliance to restore their license. The department may adjust deadlines or requirements, but suspension doesn't affect asset transfers or liability.

(a) Subject to subdivision (h), between October 1 and November 1 of each year, a licensee shall submit to the department an annual report under subdivision (b).

(b) The annual report required by subdivision (a) shall be submitted in a form and medium prescribed by the department. The report shall contain all of the following:

(1) Either a copy of the licensee’s most recent reviewed annual financial statement, if the gross revenue generated by the licensee’s digital financial asset business activity in this state was not more than two million dollars ($2,000,000) for the fiscal year ending before the anniversary date of issuance of its license under this division, or a copy of the licensee’s most recent audited annual financial statement, if the licensee’s digital financial asset business activity in this state amounted to more than two million dollars ($2,000,000), for the fiscal year ending before the anniversary date.

(2) If a person other than an individual has control of the licensee, a copy of either of the following:

(A) The person’s most recent reviewed annual financial statement, if the person’s gross revenue was not more than two million dollars ($2,000,000) in the previous fiscal year measured as of the anniversary date of issuance of its license under this division.

(B) The person’s most recent audited consolidated annual financial statement, if the person’s gross revenue was more than two million dollars ($2,000,000) in the previous fiscal year measured as of the anniversary date of issuance of its license under this division.

(3) A description of any of the following:

(A) Any material change in the financial condition of the licensee.

(B) Any material litigation related to the licensee’s digital financial asset business activity and involving the licensee or an executive officer or responsible individual of the licensee.

(C) Any international, federal, state, or local investigation of the licensee, where permitted by applicable law.

(D)

(i) Any data security breach or cybersecurity event of the licensee.

(ii) A description of a data security breach pursuant to this subparagraph does not constitute disclosure or notification of a security breach for purposes of Section 1798.82 of the Civil Code.

(4) Information or records required by Section 3307 that the licensee has not reported to the department.

(5) The number of digital financial asset business activity transactions with, or on behalf of, residents for the period since, subject to subdivision (h), the later of the date the license was issued or the date the last annual report was submitted.

(6)

(A) The amount of United States dollar equivalent of digital financial asset in the control of the licensee at, subject to subdivision (h), the end of the last month that ends not later than 30 days before the date of the annual report.

(B) The total number of residents for whom the licensee had control of United States dollar equivalent of digital financial assets on that date.

(7) Evidence that the licensee is in compliance with Section 3503.

(8) Evidence that the licensee is in compliance with Section 3205.

(9) A list of all locations where the licensee engages in its digital financial asset business activity.

(10) The number of residents with whom, or on behalf of, the licensee engaged in digital financial asset business activity between September 30 of the preceding year and October 1 of the year in which the licensee is submitting the annual report.

(11) Any other information the department requires by rule.

(c)

(1) On or before February 28 of each year, a licensee and an applicant operating under this division without a license pursuant to subdivision (b) of Section 3201 shall pay its pro rata cost share of all costs and expenses reasonably incurred in the administration of this division, as estimated by the commissioner, for the ensuing year and any deficit actually incurred or anticipated in the administration of the program in both the year in which the assessment is made and the preceding year.

(2) The pro rata cost share described in paragraph (1) shall be the proportion of residents with whom, or on behalf of, a licensee or an applicant operating under this division without a license pursuant to subdivision (b) of Section 3201 engages in digital financial asset business activity bears to the aggregate residents with whom, or on behalf of, all licensees and applicants operating under this division without a license pursuant to subdivision (b) of Section 3201 engage in digital financial asset business activity, as determined by the commissioner, for the costs and expenses reasonably incurred in the administration of this division, not including any costs covered by the fees or cost recoveries under Section 3203 or cost recoveries under Section 3301.

(3) On or before January 31 of each year, the commissioner shall notify each licensee and applicant operating under this division without a license pursuant to subdivision (b) of Section 3201 of the amount assessed and levied against it.

(4) The commissioner may use funds obtained by the commissioner through the enforcement of this division, including, but not limited to, moneys received through fines, penalties, settlements, or judgements, for the administration of this division, which shall offset amounts assessed and levied against pursuant to this subdivision.

(5) The department may adopt rules that change the calculation of the pro rata cost share and the dates on which assessment notifications and payments are due pursuant to this subdivision, except that the amount of the pro rata cost share shall not exceed the costs and expenses reasonably incurred in the administration of this division.

(d)

(1) Following at least five business days’ notice to the licensee, the commissioner may by order summarily suspend or revoke the license of any licensee that fails to comply with subdivisions (a) to (c), inclusive, by March 31 of the year in which an assessment is made pursuant to subdivision (c).

(2) The licensee may request a hearing on the order within 30 days of receipt of the notice.

(3) If the licensee timely requests a hearing on the order and a hearing is not held within 60 days of that request, the order shall be deemed rescinded as of the effective date of the order.

(e) If the department suspends or revokes a license under this division for noncompliance with subdivisions (a) to (c), inclusive, the department may end the suspension or rescind the revocation and notify the licensee of the action if, subject to subdivision (h), not later than 20 days after the license was suspended or revoked, the licensee files an annual report required by subdivision (a), a pro rata cost share required by subdivision (c), and pays any penalty assessed under Section 3407.

(f) The department shall give prompt notice to a licensee of the lifting of a suspension or rescission of a revocation after the licensee complies with subdivision (e).

(g) Suspension or revocation of a license under this section does not invalidate a transfer or exchange of digital financial assets for, or on behalf of, a resident made during the suspension or revocation and does not insulate the licensee from liability under this division.

(h) The department may extend a period under this section.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3213

Licenses governed by this law cannot be passed to another person or entity; they stay with the original holder.

A license under this division is not transferable or assignable.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3215

This section allows the department to create rules and offer informal guidance to those applying for a license. The commissioner must inform applicants about the minimum requirements for capital and liquidity based on their business plans, using factors outlined in another section.

The commissioner can prepare official documents like written decisions and opinion letters to help clarify the rules for applicants. Additionally, all such documents must be available on the department's website, although sensitive information may be redacted if necessary.

(a) The department may adopt rules necessary to implement this division and may offer informal guidance to any prospective applicant for a license under this division regarding the conditions of licensure that may be applied to that person. The commissioner shall inform any applicant that requests that guidance of the minimum capital and liquidity, and other licensing requirements, that will be required of that applicant, based on the information provided by the applicant concerning the applicant’s plan to conduct business under this division, and the factors used to make that determination as described in Section 3203.

(b)

(1) The commissioner may prepare written decisions, opinion letters, and other formal written guidance to be issued to persons seeking clarification regarding the requirements of this division.

(2) The commissioner shall make public on the commissioner’s internet website all written decisions, opinion letters, and other formal written guidance issued to persons seeking clarification regarding the requirements of this division. The commissioner may, at their discretion or upon request by an applicant or licensee, redact proprietary or other confidential information regarding an applicant or licensee from any decision, letter, or other written guidance issued in connection with an applicant or licensee.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3217

This section explains that the commissioner can work with the Nationwide Multistate Licensing System and Registry to manage records and fees for licensees. The commissioner has the authority to change or waive requirements to join this system. They can also use the system to exchange information with law enforcement agencies, like the Department of Justice and FBI, for certain purposes. Additionally, there must be a way for applicants and licensees to contest any information the commissioner puts into the system.

(a) The commissioner may establish relationships or contracts with the Nationwide Multistate Licensing System and Registry or other entities designated by the Nationwide Multistate Licensing System and Registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this division.

(b) For the purpose of participating in the Nationwide Multistate Licensing System and Registry, the commissioner may waive or modify, in whole or in part, by rule, regulation, or order, any or all of the requirements of this division and establish new requirements as reasonably necessary to participate in the Nationwide Multistate Licensing System and Registry.

(c) Notwithstanding any other provision of law, the commissioner may use the Nationwide Multistate Licensing System and Registry as a channeling agent between the United States Department of Justice and the commissioner for requesting information from, and distributing information to, the Department of Justice and the United States Department of Justice, including the Federal Bureau of Investigation pursuant to Section 5110 of the SAFE Act, any other governmental agency, or any other source, as directed by the commissioner.

(d) The commissioner shall establish a process through which applicants and licensees may challenge information entered into the Nationwide Multistate Licensing System and Registry by the commissioner.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3219

This section discusses the requirement for fingerprint submission from certain individuals related to a license applicant for the purpose of a criminal history check. The financial commissioner mandates that all applicants, relevant executives, and any controlling individuals submit fingerprints for an FBI background check. If a controlling entity is not a person, each executive or responsible individual associated must be checked. The commissioner utilizes a national application system for this process, bypassing certain state requirements. Additionally, state criminal background checks are conducted for applicants through coordinated fingerprint submission to the Department of Justice. Both FBI and state criminal history checks are part of the licensing process, and a fee is charged to cover processing costs. The system can also request ongoing arrest notification services for related individuals.

(a)

(1) The commissioner shall require the submission of fingerprints for each applicant if the applicant is a natural person, and of each executive officer and responsible individual associated with the applicant, for the purpose of conducting a criminal history search by means of a Federal Bureau of Investigation criminal history record check.

(2) The commissioner shall require the submission of fingerprints for any natural person that has control of the applicant for the purpose of conducting a criminal history search by means of a Federal Bureau of Investigation criminal history record check.

(3) If a person that has control of the applicant is not a natural person, the commissioner shall require a Federal Bureau of Investigation criminal history record check, including the submission of fingerprints, for each executive officer and responsible person associated with that person that has control of the applicant for the purpose of conducting a criminal history search by means of a Federal Bureau of Investigation criminal history record check.

(b) Section 461 of the Business and Professions Code shall not be applicable to the Department of Financial Protection and Innovation when using a national uniform application adopted or approved for use by the Nationwide Mortgage Licensing System and Registry in connection with this division.

(c) Notwithstanding any other provision of law, in connection with an application for a license under this division, the commissioner may require every applicant, at a minimum, to furnish to the Nationwide Mortgage Licensing System and Registry information described under subdivision (a) of this section.

(d) Notwithstanding any other provision of law, the commissioner may ask the Nationwide Mortgage Licensing System and Registry to obtain Federal Bureau of Investigation criminal history record check on individuals described in subdivision (a), pursuant to Section 5110 of the SAFE Act. For the purposes of this section, a Federal Bureau of Investigation criminal history record check shall include forwarding the individual’s fingerprints to the Federal Bureau of Investigation.

(e) Notwithstanding any other provision of law, the commissioner may ask the Nationwide Mortgage Licensing System and Registry to obtain state criminal history background check information on applicants described in subdivision (a) using the procedures set forth in subdivisions (f) and (h).

(f) If the Nationwide Mortgage Licensing System and Registry electronically submits fingerprint images and related information, as required by the Department of Justice, for an applicant under this division for the purposes of obtaining information as to the existence and content of a record of state convictions and state arrests and to the existence and content of a record of state arrests for which the Department of Justice establishes that the person is free on bail or on their recognizance pending trial or appeal, the Department of Justice shall provide an electronic response to the Nationwide Mortgage Licensing System and Registry pursuant to paragraph (1) of subdivision (p) of Section 11105 of the Penal Code, and shall provide the same electronic response to the commissioner.

(g) The Nationwide Mortgage Licensing System and Registry may request from the Department of Justice subsequent arrest notification service, as provided pursuant to Section 11105.2 of the Penal Code, for all individuals described in subdivision (a) of this section. The Department of Justice shall provide the same electronic response to the commissioner.

(h) The Department of Justice shall charge a fee sufficient to cover the reasonable costs of processing the requests described in this section.

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(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3221

This law says that if you're applying for a license, you can't be denied solely because of a criminal conviction if you've received a certificate of rehabilitation or a pardon. Similarly, if your conviction has been legally dismissed, it can't be used against you. Arrests that didn't lead to a conviction, including minor offenses or juvenile records, also can't be grounds for denial. If you're denied a license due to your past convictions, you must be informed in writing about the decision, how you can contest it, your right to appeal, and how to access and verify your conviction history.

(a) An applicant shall not be denied a license on the basis of a criminal conviction, or on the basis of acts underlying a criminal conviction, if the convicted person has obtained a certificate of rehabilitation under Chapter 3.5 (commencing with Section 4852.01) of Title 6 of Part 3 of the Penal Code or has been granted clemency or a pardon by a state or federal executive.

(b) An applicant shall not be denied a license on the basis of a conviction that has been dismissed pursuant to Section 1203.4, 1203.4a, 1203.41, or 1203.425 of the Penal Code. An applicant who has a conviction that has been dismissed pursuant to Section 1203.4, 1203.4a, 1203.41, or 1203.425 of the Penal Code shall provide the commissioner with proof of the dismissal if it is not reflected in the applicant’s criminal history record report.

(c) An applicant shall not be denied a license on the basis of an arrest that resulted in a disposition other than a conviction, including an arrest that resulted in an infraction, citation, or juvenile adjudication.

(d) If an applicant is denied a license based solely or in part on conviction history, the applicant shall be notified in writing of all of the following:

(1) The denial or disqualification of licensure.

(2) The procedure for the applicant to challenge the decision or to request reconsideration.

(3) That the applicant has the right to appeal the decision.

(4) The processes to request a copy of the applicant’s complete conviction history and to question the accuracy or completeness of the record.

license application denial criminal conviction rehabilitation certificate of rehabilitation pardon or clemency dismissed conviction criminal history record challenge denial reconsideration procedure right to appeal arrest without conviction juvenile adjudication infraction or citation criminal history accuracy conviction history review denial notification process

(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3223

This law ensures that any private or confidential information given to the Nationwide Multistate Licensing System remains protected even after sharing with them. This means privacy rules stay in place and the information keeps its legal protections. Additionally, such confidential information is exempt from public disclosure laws, subpoenas, or being used as evidence in private lawsuits unless the person involved allows it. The law doesn't cover employment history or public disciplinary actions, which can be accessed by the public.

(a) Except as otherwise provided in Section 5111 of the SAFE Act, the requirements under any federal law or the Information Practices Act of 1977 (Chapter 1 (commencing with Section 1798) of Title 1.8 of Part 4 of Division 3 of the Civil Code) regarding the privacy or confidentiality of any information or material provided to the Nationwide Multistate Licensing System and Registry, and any privilege arising under federal or state law, including the rules of any state court, with respect to that information or material, shall continue to apply to the information or material after the information or material has been disclosed to the Nationwide Multistate Licensing System and Registry. The information and material may be shared with all state and federal regulatory officials with industry oversight authority without the loss of privilege or the loss of confidentiality protections provided by federal law or the Information Practices Act of 1977.

(b) Information or material that is subject to a privilege or confidentiality under subdivision (a) shall not be subject to either of the following:

(1) Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the state.

(2) Subpoena or discovery, or admission into evidence, in any private civil action or administrative process, unless with respect to any privilege held by the Nationwide Multistate Licensing System and Registry with respect to the information or material, the person to whom the information or material pertains waives, in whole or in part, in the discretion of that person, that privilege.

(c) This section shall not apply with respect to the information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions included in, the Nationwide Multistate Licensing System and Registry for access by the public.

privacy protection confidential information Nationwide Multistate Licensing System federal privacy laws state privacy laws Information Practices Act of 1977 information sharing regulatory officials legal privilege confidentiality public disclosure exemption subpoena exemption private civil action administrative process employment history disclosure

(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Section § 3225

The commissioner must report any violations and enforcement actions of this division, along with other relevant details, to the Nationwide Multistate Licensing System and Registry. However, this is only required for information that the public can access.

The commissioner shall regularly report violations of this division, enforcement actions under this division, and other relevant information to the Nationwide Multistate Licensing System and Registry, but only to the extent that the information is publicly available.

commissioner reporting violations reporting enforcement actions reporting Nationwide Multistate Licensing System Registry information publicly available information financial regulation regulatory compliance data sharing public access reporting obligations multistate licensing financial division enforcement regulatory violations licensing system updates

(Added by Stats. 2023, Ch. 792, Sec. 1. (AB 39) Effective January 1, 2024.)

Digital Financial Assets Businesses

Chapter 2Licensure

Section § 3201

Section § 3203

Section § 3205

Section § 3207

Section § 3209

Section § 3211

Section § 3213

Section § 3215

Section § 3217

Section § 3219

Section § 3221

Section § 3223

Section § 3225

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