General Provisions - Enforcement - Financial - CA

Section § 550

This section defines key terms related to businesses operating under certain financial licenses in California. It clarifies what constitutes an 'appropriate licensee business,' meaning the activities a licensed entity can legally perform. A 'customer' is identified as someone who holds a deposit in a bank or credit union. A 'holding company' is referenced by another law section. The term 'officer' includes high-ranking officials and employees involved in a subject institution, which encompasses licensed entities, their subsidiaries, and certain foreign banks or credit unions operating in California. A 'subject person' is anyone involved with a subject institution, including directors, agents, and independent contractors who may cause financial harm through illegal or unethical actions. Finally, a 'violation' refers to any act contributing to unlawful activities or breaches related to financial regulatory laws or agreements.

In this article:

(a) “Appropriate licensee business” means the business that a licensee may conduct in accordance with the charter or license that the commissioner has issued to that licensee.

(b) “Customer” means a depositor of a bank, a member of a credit union, or a customer of any other licensee.

(c) “Holding company” shall have the meaning set forth in Section 1280.

(d) “Officer of a subject institution” means any director, officer, official, or employee of the subject institution.

(e) “Person” means a subject institution or a subject person.

(f) “Subject institution” means any of the following:

(1) Licensee.

(2) Subsidiary of a licensee.

(3) Foreign (other state) or foreign (other nation) bank or credit union that maintains an office in this state, with respect to any such office other than a national bank or federal credit union.

(4) Any other person lawfully conducting the business of a bank or credit union in this state other than a national bank or federal credit union.

(g) “Subject person,” when used with respect to a subject institution, means any of the following:

(1) Director, officer, employee, or agent of the subject institution.

(2) Member, consultant, joint venture partner, or other person that participates in the affairs of a subject institution.

(3) Independent contractor, including any attorney, appraiser, or accountant, who knowingly or recklessly participates in any of the following acts if the act caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the subject institution:

(A) A violation of any applicable law, regulation, or order.

(B) A breach of fiduciary duty.

(C) An unsafe or unsound act.

(h) “Violation” includes any act performed, alone or with other persons, for or toward causing, bringing about, participating in, counseling, aiding, or abetting a violation of any applicable statute, regulation, provision of a written order issued by the commissioner, or provision of a written agreement made between the commissioner and a subject institution or subject person.

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Section § 551

If someone has the right to a hearing under this law, they can choose to give up that right whenever they want. By doing so, they also relieve the commissioner from needing to send out a formal notice about the hearing.

Any subject person who is entitled to a hearing pursuant to this article may waive that right at any time. A waiver under this section shall relieve the commissioner from having to issue a formal notice of hearing that would otherwise be required by this article.

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Section § 552

If you receive an order under certain sections, you have 30 days to request a hearing with the commissioner. If the hearing doesn't start within 15 business days after your request, the order is canceled unless you agree to wait longer.

After the hearing, the commissioner has 30 days to decide whether to uphold, change, or cancel the order. If the commissioner doesn't make a decision in time, the order is automatically canceled.

You can still seek a court review of the order even if you didn't request a hearing from the commissioner.

(a) Within 30 days after an order is issued pursuant to Section 567, 581, 582, 586, or 591, or subdivision (c) of Section 587, the person to whom the order is issued may file with the commissioner an application for a hearing on the order.

(b) If the commissioner fails to commence the hearing within 15 business days after the application is filed with the commissioner or within any longer period to which the person subject to the order consents, the order shall be deemed rescinded.

(c) Within 30 days after the hearing, or within any longer period to which the person consents, the commissioner shall affirm, modify, or rescind the order. If the commissioner fails to affirm, modify, or rescind the order within that time limit, the order shall be deemed rescinded.

(d) The right to petition for judicial review of the order shall not be affected by the failure of the person subject to the order to apply to the commissioner for a hearing on the order pursuant to subdivision (a).

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Section § 553

This law gives the commissioner the power to take various actions if a financial institution or holding company has violated certain rules or laws. These actions can include making the company pay back profits it gained unfairly, limiting how much the company can grow, selling off loans or other assets, fixing illegal activities, hiring qualified staff, and restricting the company's activities.

In addition to any other action or requirement the commissioner deems necessary or advisable, an order issued pursuant to Section 580, 581, 582, 585, 586, or 587 may require the person subject to the order to do any of the following:

(a) Make restitution or provide reimbursement, indemnification, or guarantee against loss, if the subject institution, subject person, or holding company was unjustly enriched by the action or violation or if the action or violation involved a reckless disregard for any provision of this division, of any regulation or order issued under this division, of any other applicable law, or of any agreement with the commissioner.

(b) Restrict the growth of the subject institution.

(c) Dispose of any loan or other asset.

(d) Correct violations of law.

(e) Employ qualified officers or employees, who may be subject to approval of the commissioner.

(f) Limit the activities or functions of the subject institution, subject person, or holding company.

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Section § 554

If the commissioner steps in to take control of an institution or acts against a person without warning, they must immediately provide a written explanation to the involved party. This document details the reasons for the commissioner's actions. If the commissioner takes over an institution, they need to have solid evidence to justify the takeover.

If the commissioner takes possession of a subject institution without a prior notice or hearing, or takes action against a subject person without prior notice or hearing, the commissioner shall, upon taking possession or taking that action, concurrently provide to the subject institution or subject person a written order. The order shall set forth the condition or conditions of the subject institution or action or actions of the subject person that constitute the basis or bases for the commissioner’s action. In any case where the commissioner takes possession of a subject institution, the commissioner shall establish, by clear evidence, the basis for his or her action.

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