Chapter 4Investment Certificates

Section § 18315

Explanation

This law states that industrial loan companies in California can sell and issue investment certificates if they follow certain rules. The commissioner can set or change rules about these certificates to protect the company and the public. Changing the terms of these certificates is considered a new sale. If a company disagrees with an order from the commissioner, they can ask for a hearing, but the order stays in effect unless the commissioner says otherwise. All decisions by the commissioner can be reviewed by a court.

(a)CA Financial Code § 18315(a) When authorized to conduct business pursuant to this division, an industrial loan company may sell and issue its investment certificates subject to the provisions of this division. The commissioner may, by written order directed to a company or by rule or regulation, impose terms and conditions upon investment certificates and the sale or redemption thereof or the payment of interest thereon, as he or she deems reasonable and necessary or advisable for the protection of the company or the public, and he or she may from time to time in his or her discretion amend, alter or revoke any such order or regulation or any condition or provision thereof.
(b)CA Financial Code § 18315(b) Any change in the form, terms, or provisions of outstanding investment certificates or in the rights, privileges, or restrictions upon the holder or issuer thereof is deemed a sale and issuance of investment certificates.
(c)CA Financial Code § 18315(c) The company named in any order issued pursuant to subdivision (a) of this section may, within 15 days after receipt thereof, file with the commissioner its written request for hearing. The filing of the request shall not operate to postpone or suspend the effectiveness of any order issued by the commissioner unless otherwise directed by the commissioner. The commissioner shall, within 15 days after the receipt of the written request or at such later time as may be mutually agreed with the company, cause the matter to be heard and shall thereafter issue his final decision. The decision may be amended or set aside by the commissioner at any time.
(d)CA Financial Code § 18315(d) Every order or decision of the commissioner made pursuant to this section is subject to judicial review in accordance with law.
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(Amended by Stats. 1998, Ch. 827, Sec. 14. Effective January 1, 1999.)

Section § 18316

Explanation

This law section allows industrial loan companies to sell or negotiate investment certificates, which can be offered in paper or receipt book format. These certificates can be set up to pay out money at either planned or random times. Companies have the flexibility to accept payments in various ways, with the option of including interest on installment payments.

An industrial loan company may, in addition to the sale of installment investment certificates with loans, sell or negotiate investment certificates either in certificates, or in receipt book form. The certificates may provide for the payment of money at any time, either fixed or uncertain. The company may receive payments therefor in installments or otherwise, with or without an allowance of interest upon such installments.
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(Added by Stats. 1976, Ch. 964.)

Section § 18317

Explanation

This law limits the total amount of investment certificates a company can have with one person or related persons to 20% of the company's unimpaired capital stock and surplus that isn't available for dividends. This ensures companies don't have too much financial exposure to a single person or group.

No company may have investment certificates outstanding with a person or related persons in an aggregate amount in excess of 20 percent of the unimpaired capital stock and surplus of the company not available for dividends as provided in Section 18319.
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(Amended by Stats. 1989, Ch. 663, Sec. 10. Operative January 1, 1991, by Sec. 20 of Ch. 663.)

Section § 18318

Explanation

In California, investment or savings certificates can be issued directly to minors, meaning that the certificates are owned solely by the minor. The minor has the right to cash in the certificates either fully or partially. When the minor or someone on their behalf redeems them, it counts as a complete and valid transaction, releasing the company from further obligations related to that payment.

Investment or thrift certificates may be issued to or in the name of a minor and as such shall be for the exclusive right and benefit of such minor and may be redeemed in whole or part by said minor or his order and payment so made is a valid release and discharge to the company for such payment.
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(Added by Stats. 1976, Ch. 964.)

Section § 18318.5

Explanation

If you have an investment or thrift certificate with multiple people listed on the account, it will be managed according to specific rules found starting at Section 5100 in the Probate Code.

An investment or thrift certificate that is a multiple-party account as defined in Section 5132 of the Probate Code is governed by Part 2 (commencing with Section 5100) of Division 5 of the Probate Code.
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(Amended by Stats. 1990, Ch. 79, Sec. 11. Operative July 1, 1991, pursuant to Stats. 1990, Ch. 710, Sec. 46.)

Section § 18319

Explanation

This law states that an industrial loan company can't have more outstanding investment certificates than 20 times the amount of its paid-up and unimpaired capital, plus any specified part of its surplus that isn't meant for cash dividends. The commissioner can set rules or orders to further limit the amount of these certificates, as guided by Section 18315.

In no event shall an industrial loan company have outstanding at any time its investment certificates (exclusive of those hypothecated with the company issuing them) in an aggregate sum in excess of 20 times the aggregate amount of its paid-up and unimpaired capital and such of its unimpaired surplus as is declared by a bylaw of the company to be not available for cash dividends. The commissioner by rule or by order issued pursuant to Section 18315, may limit the amount of outstanding investment certificates of an industrial loan company.
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(Amended by Stats. 1983, Ch. 858, Sec. 29.)

Section § 18320

Explanation

This law section outlines the rules for how much investment an industrial loan company in California can hold in relation to its available capital during different stages of its operation. In the first year, a company can't exceed investments that are six times its capital. After the first year, it can apply for permission to increase this to eight times its capital. After two years, it can apply for permission to increase to 12 times, and after three years, potentially more, contingent on compliance with Federal Deposit Insurance Corporation (FDIC) requirements. More increases are possible after four years, under certain conditions, such as maintaining sufficient cash reserves and having strong capital stock and surplus. The commissioner has the authority to impose stricter limits to protect the public. Applications must be approved by the commissioner within 60 days, or the company can request a hearing.

Notwithstanding Section 18319, an industrial loan company shall in no event:
(a)CA Financial Code § 18320(a) Have outstanding at any time during its first 12 months of operation as an industrial loan company under this division, its investment certificates (exclusive of those hypothecated with the company issuing them) in an aggregate sum in excess of six times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319.
(b)CA Financial Code § 18320(b) After 12 months of operation as an industrial loan company under this division and during the next 12 months of operation the industrial loan company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which (exclusive of those investment certificates hypothecated with the company issuing them) in no event shall exceed eight times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319.
(c)CA Financial Code § 18320(c) After 24 months of operation as an industrial loan company under this division and during the next 24 months of operation the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which (exclusive of those investment certificates hypothecated with the company issuing them) in no event shall exceed 12 times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319.
(d)CA Financial Code § 18320(d) If after 36 months of operation as an industrial loan company under this division the outstanding investment certificates of a company are insured by the Federal Deposit Insurance Corporation, the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which it may have outstanding to the extent authorized by the capital-adequacy requirements of the federal Deposit Insurance Corporation. An industrial loan company that is authorized to increase the aggregate sum of its investment certificates to the extent authorized by the capital-adequacy requirements of the Federal Deposit Insurance Corporation also shall meet the requirements of subdivisions (e) and (f).
(e)CA Financial Code § 18320(e) After 48 months of operation as an industrial loan company under this division and during the next 12 months of operation the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which, exclusive of those investment certificates hypothecated with the company issuing them, in no event shall exceed 15 times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319, only if both of the following requirements are met:
(1)CA Financial Code § 18320(e)(1) A company shall maintain a liquidity reserve in cash, or cash equivalent, equal to 11/2 percent of its total investment certificates outstanding. “Cash equivalent” means investments legal for commercial banks under the laws of this state, with a maturity of not more than 12 months.
(2)CA Financial Code § 18320(e)(2) In addition to the reserve for losses required by the commissioner pursuant to Section 18343, a company shall establish and maintain such special reserves for losses as the commissioner, by rule or order, may require.
(f)CA Financial Code § 18320(f) After 60 months of operation as an industrial loan company under this division, the company may file an application with the commissioner seeking authority to increase the aggregate sum of its investment certificates which it may have outstanding, which, exclusive of those investment certificates hypothecated with the company issuing them, in no event shall exceed 20 times the aggregate amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319, and which may exceed 15 times the amount of its paid-up and unimpaired capital and unimpaired surplus not available for dividends pursuant to Section 18319 only if the requirements of subdivision (e) are met and the capital stock is not less than one million two hundred fifty thousand dollars ($1,250,000) and the unimpaired paid-in surplus is not less than seven hundred fifty thousand dollars ($750,000).
(g)CA Financial Code § 18320(g) Whenever the commissioner deems it reasonable and necessary or advisable for the protection of the public (including the fact that an industrial loan company is not a member of the Federal Deposit Insurance Corporation), the commissioner may at any time by order authorize said industrial loan company to have its investment certificates outstanding in either a lesser aggregate sum than the maximum aggregate amounts permitted by subdivision (a), (b), (c), (d), (e), or (f), or none at all.
(h)CA Financial Code § 18320(h) The request for authority filed with the commissioner pursuant to subdivisions (b), (c), (d), (e), and (f) shall be set forth in an application in such form and containing such information as the commissioner may require.
(i)CA Financial Code § 18320(i) The commissioner shall by rule or regulation set forth the criteria that must be met before an industrial loan company can be granted authority to increase the aggregate sum of its outstanding investment certificates.
(j)CA Financial Code § 18320(j) If the commissioner does not within 60 days of the filing of an application grant a request by an industrial loan company operating under this division, for authority to increase the aggregate sum of its outstanding investment certificates to the requested amount, or issues an order pursuant to subdivision (g), the company may file with the commissioner its written request for hearing in accordance with subdivisions (c) and (d) of Section 18315.
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(Amended by Stats. 1987, Ch. 787, Sec. 3.)

Section § 18321

Explanation

This section clarifies two important rules for industrial loan companies. First, these companies can't accept demand deposits, which are funds you can withdraw anytime, like a checking account. Second, if the company is part of the Federal Deposit Insurance Corporation (FDIC), it can call an investment certificate a 'certificate of deposit' under certain conditions: it can't be redeemed before it matures, and its interest rate can only change if it's a variable rate.

(a)CA Financial Code § 18321(a) Nothing in this division authorizes an industrial loan company to receive demand deposits.
(b)CA Financial Code § 18321(b) Subject to Section 18315, an industrial loan company that is a member of the Federal Deposit Insurance Corporation pursuant to Section 18521.5 may use the term “certificate of deposit” as defined in Section 18003.6 with respect to an investment certificate that does not authorize either of the following:
(1)CA Financial Code § 18321(b)(1) Redemption prior to its maturity.
(2)CA Financial Code § 18321(b)(2) Reduction of the interest rate payable thereon other than a variable interest rate.
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(Amended by Stats. 1999, Ch. 345, Sec. 3. Effective January 1, 2000.)

Section § 18322

Explanation

Before an industrial loan company can accept money in line with a specific rule (Section 17409), they need written permission from the commissioner. The commissioner can set or change rules related to the company's financial health, like liquidity and reserve requirements, to ensure the company's safety and soundness. If the company doesn't follow these rules or if continued acceptance of money is deemed risky, the commissioner's consent can be taken back.

An industrial loan company shall obtain the written consent of the commissioner prior to accepting any moneys pursuant to Section 17409. The commissioner may, by regulation or order, impose or revise limitations and requirements, including, but not limited to, liquidity and reserve requirements, as, in the opinion of the commissioner, are necessary for safety and soundness. The commissioner shall rescind that consent if, at any time, the industrial loan company exceeds the limitations or fails to adhere to the requirements imposed or, if in the opinion of the commissioner, the continued acceptance of those moneys would pose a threat to the safety and soundness of the company.
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(Added by Stats. 1990, Ch. 1306, Sec. 3.)

Section § 18325

Explanation

This law says that industrial loan companies can't charge fees to investors for not making planned regular investments, or for making them late, in accounts known as periodic investment or thrift certificates. The company must pay the same interest rate for these accounts, regardless of whether regular investments are made.

A periodic investment or thrift certificate is basically a type of account where the investor agrees to put in regular amounts of money. However, this doesn't include accounts set up to pay taxes, expenses, or loans related to real estate, or certain investment deals linked to another specific law.

(a)CA Financial Code § 18325(a) An industrial loan company shall not impose any charge on a periodic investment or thrift certificate, or on an investor in an account evidenced by such certificate, for the failure of an investor to invest, or for the late investment of, any agreed periodic installment investment into such an account. An industrial loan company shall pay interest on periodic investment or thrift certificates at the same rate of interest per annum as is paid on investment or thrift certificates as to which an investor has not agreed to make periodic installment investments.
(b)CA Financial Code § 18325(b) As used in this section “periodic investment or thrift certificate” means an investment arrangement under which an investor undertakes to make periodic investments of a specified amount into one account, except, however, a periodic investment or thrift certificate shall not mean an impound account established for the purposes of the payment of taxes or other expenses and obligations in connection with a loan secured by real property, or a certificate of investment issued in connection with a loan pursuant to Section 18322.
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(Added by Stats. 1976, Ch. 964.)