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AB-412 Escrow agents: asset requirements. (2019-2020)

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Date Published: 02/07/2019 09:00 PM
AB412:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill No. 412


Introduced by Assembly Member Quirk-Silva
(Coauthor: Assembly Member Mullin)
(Coauthor: Senator Moorlach)

February 07, 2019


An act to amend Section 17210 of the Financial Code, relating to escrow agents.


LEGISLATIVE COUNSEL'S DIGEST


AB 412, as introduced, Quirk-Silva. Escrow agents: asset requirements.
(1) Existing law, the Escrow Law, requires people engaging in business as escrow agents to be organized as corporations for that purpose, as specified, and appropriately licensed by the Commissioner of Business Oversight. Existing law requires an escrow agent licensed on or after January 1, 1986, to maintain a tangible net worth of $50,000, including liquid assets of at least $25,000 in excess of current liabilities. Existing law requires an escrow agent licensed before January 1, 1986, to maintain a tangible net worth pursuant to a prescribed schedule, the amounts of which, in 1993, matched those required for escrow agents licensed on and after that date. Existing law provides criminal penalties for willful violations of the Escrow Law.
This bill would delete the tangible net worth schedule for escrow agents licensed before January 1, 1986, as described above and eliminate distinctions based on when an agent was licensed in this context. The bill would define “current liabilities” for purposes of calculating the liquid asset requirements for escrow agents. The bill would provide that the definition includes those liabilities that are due within one year after the date that the balance sheet referring to the liability is prepared and those liabilities due to an officer, director, stockholder, or affiliated company, regardless of due date, subject to a specified exception, a portion of which would require commissioner approval. The bill would generally except a liability derived from a lease obligation from the definition of current liabilities. By broadening the definition of a crime, this bill would impose a state-mandated local program.
(2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 17210 of the Financial Code is amended to read:

17210.
 (a) An escrow agent licensed on or after January 1, 1986, shall maintain at all times a tangible net worth of fifty thousand dollars ($50,000), including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities.

(b)An escrow agent licensed prior to January 1, 1986, shall maintain at all times a tangible net worth according to the following schedule:

(1)Ten thousand dollars ($10,000) from January 1, 1986, through June 30, 1986, including liquid assets of at least ten thousand dollars ($10,000) in excess of current liabilities.

(2)Fifteen thousand dollars ($15,000) as of July 1, 1986, including liquid assets of at least fifteen thousand dollars ($15,000) in excess of current liabilities.

(3)Twenty thousand dollars ($20,000) as of July 1, 1987, including liquid assets of at least twenty thousand dollars ($20,000) in excess of current liabilities.

(4)Twenty-five thousand dollars ($25,000) as of July 1, 1988, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities.

(5) Thirty thousand dollars ($30,000) as of July 1, 1989, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities.

(6) Thirty-five thousand dollars ($35,000) as of July 1, 1990, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities.

(7) Forty thousand dollars ($40,000) as of July 1, 1991, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities.

(8)Forty-five thousand dollars ($45,000) as of July 1, 1992, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities.

(9)Fifty thousand dollars ($50,000) as of July 1, 1993, and thereafter, including liquid assets of at least twenty-five thousand dollars ($25,000) in excess of current liabilities.

(c)

(b) The commissioner may determine by rule as to which assets constitute liquid assets and may also determine in an individual case by a specific written ruling whether a particular asset is a liquid asset within the meaning of this section.
(c) (1) Except as described in paragraph (2), for purposes of this section, “current liabilities” means:
(A) A liability that is due within one year after the date that the balance sheet making reference to the liability is prepared.
(B) A liability that is due to an officer, director, stockholder, or affiliated company, regardless of its due date, except a liability that is not due within the one-year period described in subparagraph (A), if the liability is subject to an agreement executed by the creditor that subordinates the liability to the claims of all other creditors for a period of not less than the one-year period, and the commissioner has approved the agreement. The subordination agreement shall provide that it may be rescinded or amended only upon 30 days prior notice to the commissioner. If the agreement is rescinded, the liability at issue is subject to this subparagraph. If the agreement is amended, it shall again be subject to approval by the commissioner.
(2) “Current liabilities” does not include a liability derived from a lease obligation.
(d) In the case of a licensed branch office, a tangible net worth in addition to that required by subdivision (a) shall be maintained at an amount equal to 50 percent of the tangible net worth required by subdivision (a), except that licensees operating or applying for more than one branch office shall maintain an additional tangible net worth of at least 25 percent of the amount required by subdivision (a) for each branch office licensed after the first branch office location.

SEC. 2.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.