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.
Chapter 2License
Section § 30200
This law states that it's illegal for anyone to run a securities depository or persuade people in the state to use such a depository, inside or outside the state, unless it's a corporation officially licensed by the commissioner to do so.
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Section § 30201
This law specifies who can operate a securities depository. It must be run by a corporation where at least 90% of its stock is owned by regulated entities like banks, insurance companies, registered brokers, dealers, investment companies, or securities exchanges. No single entity outside of a securities exchange can own more than 20% of the stock.
The remaining stock can be owned by individuals, but only if they purchase it to qualify as directors of the corporation. This ensures that the people in control have relevant regulatory oversight or industry registration.
A securities depository shall only be operated by a corportion:
(a)CA Financial Code § 30201(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)CA Financial Code § 30201(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.
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Section § 30202
This section of the law outlines the fees that must be paid to the commissioner for matters related to securities depository licenses. First, applying for a securities depository license costs $2,500. Additionally, if a hearing is required as part of the application process, the applicant must cover the actual costs incurred. Finally, maintaining an active securities depository license requires a $2,500 fee each year, paid every two years by December 15th of odd-numbered years. If a license is issued in an even-numbered year, a $2,500 fee must be paid within 60 days of receiving the license.
The commisioner shall charge and collect the following fees:
(a)CA Financial Code § 30202(a) For filing an application for a securities depository license, two thousand five hundred dollars ($2,500).
(b)CA Financial Code § 30202(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)CA Financial Code § 30202(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).
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Section § 30203
This law states that any money collected by the commissioner must be deposited into the State Treasury and credited to the State Corporations Fund.
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.
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Section § 30204
If you're applying for a securities depository license, you need to fill out a form as per the commissioner's directives. The form should include details about the people involved, like the incorporators and officers, and explain their qualifications to run the depository. You must also show that your operations will protect investors.
Additionally, list everyone who owns stock in the corporation and their ownership percentages. Share the locations where your facilities will be, what they'll do there, and any other businesses operating on-site. Include your company's articles of incorporation, bylaws, and financial statements from the last three years, certified by an accountant. Finally, be ready to provide any extra information the commissioner might ask for.
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)CA Financial Code § 30204(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)CA Financial Code § 30204(b) A showing that the proposed method of operation of such securities depository will be adequate for the protection of investors.
(c)CA Financial Code § 30204(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)CA Financial Code § 30204(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)CA Financial Code § 30204(e) By way of exhibits, a copy of the articles of incorporation and a copy of the bylaws of the applicant.
(f)CA Financial Code § 30204(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)CA Financial Code § 30204(g) Such additional information as the commissioner may by rule prescribe.
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Section § 30205
When someone applies for a license, including payment of all fees, the commissioner must look into details about the applicant and their organization, such as stockholders and management, and how they plan to handle and safeguard securities. The commissioner might ask the applicant to attend a hearing, where anyone interested can speak for or against the application.
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.
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Section § 30206
This law states that the commissioner can deny a license application if certain negative conditions are found after an investigation and hearing. A license won't be issued if those applying, including incorporators and officers, lack the right character or experience, have inadequate security programs for investor protection, fail to meet stock ownership requirements, or if the applicant risks going bankrupt.
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)CA Financial Code § 30206(a) That the incorporators, directors, officers, or stockholders lack the character, experience, or general fitness to engage in such a business.
(b)CA Financial Code § 30206(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)CA Financial Code § 30206(c) That the requirements with respect to ownership of capital stock of Section 30201 are not met.
(d)CA Financial Code § 30206(d) That the applicant is, or is in danger of becoming, insolvent.
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Section § 30207
This law states that people or businesses with certain licenses can't ask to collect securities or run their business using fake, misleading, or deceptive statements. They also can't leave out important information or claim that they have been endorsed by the commissioner. If these rules are broken, the commissioner has the authority to stop the violator from continuing those actions.
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.
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Section § 30208
A securities depository license in California cannot be transferred or given to someone else. You also can't take over a license by buying stock in a company or using other methods unless you have the approval of the commissioner.
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.
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Section § 30209
If you run a securities depository or ask people to use one in California, you must ensure it has the proper license. Doing this without a license is a crime and could land you in jail for three to twelve months, cost you a fine ranging from $250 to $1,000, or both.
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.
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Section § 30210
This section requires anyone who runs securities depositories to maintain detailed and accurate records. These records must help the commissioner verify that their operations follow all relevant rules and regulations.
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.
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Section § 30211
If you are licensed under this division, the commissioner can inspect your business, accounts, and records at any time without warning.
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.
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Section § 30212
The law states that if someone is inspected or examined by the commissioner, they must pay for the cost of that inspection. If they don't pay, the commissioner can take legal action to recover those costs.
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.
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Section § 30213
This section requires people who are governed by this division to submit financial statements, following accepted accounting principles, to the commissioner. These statements must cover the calendar or fiscal year, and be submitted within 105 days after year-end. An independent accountant must verify these statements. Additionally, a month's end financial statement before the audited one must also be submitted. The audited financial statements should include key financial information like net worth and income. Audits must meet accepted standards, and the commissioner can set rules on audit details.
The second part requires these people to submit, at their own expense, additional reports about their financial condition, operations, or securities ownership as required by the commissioner, with a minimum notice of 10 days.
(a)CA Financial Code § 30213(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)CA Financial Code § 30213(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.
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Section § 30214
If someone who is supposed to follow this financial law doesn't provide a report that's required by the law or the commissioner, the commissioner will immediately conduct a detailed review of their financial records and activities. The commissioner can hire an independent accountant to help, and the person who failed to report has to pay for this service.
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.
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Section § 30215
This law says if the commissioner finds that a person running a securities depository is insolvent or operating unsafely, they can immediately order them to stop their activities. This order can require stopping the depository's operations or soliciting security holders in California. The order remains until the commissioner decides to change it.
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.
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Section § 30216
This law allows the commissioner to stop anyone from running a securities depository or asking people to use one without the proper license. If someone receives such an order and wants to dispute it, they can ask for a hearing. If the hearing doesn’t happen within 60 days, the order is canceled.
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.
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Section § 30217
This law allows a commissioner to make, change, or eliminate rules, forms, and orders needed to apply the law effectively. The commissioner can also define terms, as long as those definitions don't contradict existing laws. They can create different requirements for different groups or situations. The commissioner can waive certain rules if they believe it's not needed for public interest or investor protection. Any rules that affect the public must follow a specific legal process in the Government Code.
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.
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Section § 30218
This section makes it illegal for anyone to knowingly alter, destroy, or hide records or documents to interfere with the enforcement or management of financial regulations. It also prohibits making false statements to the commissioner with the intent to affect the administration or enforcement of these rules.
(a)CA Financial Code § 30218(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)CA Financial Code § 30218(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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