Code Section Group

Corporations Code - CORP

TITLE 4. SECURITIES [25000 - 31516]

  ( Title 4 added by Stats. 1949, Ch. 384. )

DIVISION 1. CORPORATE SECURITIES LAW OF 1968 [25000 - 25707]

  ( Division 1 repealed and added by Stats. 1968, Ch. 88. )

PART 3. REGULATION AND NOTICE FILING REQUIREMENTS OF AGENTS, BROKER-DEALERS, INVESTMENT ADVISER REPRESENTATIVES, AND INVESTMENT ADVISERS [25200 - 25256]

  ( Heading of Part 3 amended by Stats. 1997, Ch. 391, Sec. 16. )

CHAPTER 1. Exemptions [25200 - 25209]
  ( Chapter 1 added by Stats. 1968, Ch. 88. )

25200.
  

A broker-dealer registered under the Securities Exchange Act of 1934, who has not previously had any certificate denied or revoked under this law or any predecessor statute, shall be exempted from the provisions of Section 25210 if he has no place of business in this state and he does not direct offers to sell or buy into this state in any manner to persons other than broker-dealers, banks, savings and loan associations, trust companies, insurance companies, investment companies registered under the Investment Company Act of 1940, pension or profit-sharing trusts (other than self-employed individual retirement plans), or other institutional investors or governmental agencies or instrumentalities designated by rule of the commissioner, or to more than 15 other customers (whether or not self-employed individual retirement plans) having an existing account with such broker-dealer prior to any offer made to them in this state, during any period of 12 consecutive months, whether or not the offeror or any of the offerees is then present in this state.

(Amended by Stats. 1978, Ch. 663.)

25202.
  

(a) An investment adviser shall not be subject to Section 25230 if (1) the investment adviser does not have a place of business in this state and (2) during the preceding 12-month period has had fewer than six clients who are residents of this state.

(b) For the purpose of this section only, “client” has the same meaning as the term “client” is defined by the Securities and Exchange Commission under the rule adopted pursuant to Section 222(d) of the Investment Advisers Act of 1940, as amended. Also, for the purpose of this section only, “client” does not mean other investment advisers, broker-dealers, banks, savings and loan associations, trust companies, insurance companies, investment companies registered under the Investment Company Act of 1940, pension and profit-sharing trusts (other than self-employed individual retirement plans), or other institutional investors or governmental agencies or instrumentalities designated by rule or order of the commissioner.

(Amended by Stats. 1998, Ch. 48, Sec. 5. Effective January 1, 1999.)

25203.
  

A person whose only clients are insurance companies shall be exempted from the provisions of Section 25230.

(Amended by Stats. 1997, Ch. 391, Sec. 19. Effective January 1, 1998.)

25204.
  

The commissioner may by such rules as he deems necessary or appropriate in the public interest or for the protection of investors, either unconditionally or upon specified terms and conditions or for specified periods, exempt from the provisions of Section 25210 or Section 25230 any class of persons specified in such rules.

(Added by Stats. 1968, Ch. 88.)

25206.
  

A broker licensed by the Real Estate Commissioner is exempt from the provisions of Section 25210 when engaged in transactions in any interest in any general or limited partnership, joint venture, unincorporated association, or similar organization (but not a corporation) owned beneficially by no more than 100 persons and formed for the sole purpose of, and engaged solely in, investment in or gain from an interest in real property, including, but not limited to, a sale, exchange, trade, or development. An interest held by spouses shall be considered held by one person for the purposes of this section.

(Amended by Stats. 2016, Ch. 50, Sec. 26. Effective January 1, 2017.)

25206.1.
  

(a) For purposes of this section, a “finder” is a natural person who, for direct or indirect compensation, introduces or refers one or more accredited investors, as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933 (17 C.F.R. 230.501(a)), to an issuer or an issuer to one or more accredited investors, solely for the purpose of a potential offer or sale of securities of the issuer in an issuer transaction in this state, and who does not do any of the following:

(1) Provide services to an issuer for a transaction or a series of related transactions for the offer or sale of securities of the issuer that exceeds a securities purchase price of fifteen million dollars ($15,000,000) in the aggregate.

(2) Participate in negotiating any of the terms of the offer or sale of the securities.

(3) Advise any party to the transaction regarding the value of the securities or the advisability of investing in, purchasing, or selling the securities.

(4) Conduct any due diligence on the part of any party to the transaction.

(5) Sell or offer for sale in connection with the issuer transaction any securities of the issuer that are owned, directly or indirectly, by the finder.

(6) Receive, directly or indirectly, possession or custody of any funds in connection with the issuer transaction.

(7) Knowingly receive compensation in connection with any offer or sale of securities unless the sale is qualified under this division or unless the security or the transaction is exempt or not otherwise subject to qualification.

(8) Make any disclosure to a potential purchaser other than the following:

(A) The name, address, and contact information of the issuer.

(B) The name, type, price, and aggregate amount of any securities being offered in the issuer transaction.

(C) The issuer’s industry, location, and years in business.

(b) A finder who satisfies all of the conditions set forth in subdivisions (c) to (f), inclusive, shall be exempt from the provisions of Section 25210.

(c) (1) The finder shall file with the commissioner before engaging in any activities described in subdivision (a), on a form prescribed by the commissioner, an initial statement of information that shall include both of the following:

(A) The name and complete business or residential address of the finder.

(B) The mailing address of the finder, if different from the business or residential address.

(2) A filing fee of three hundred dollars ($300) shall be submitted to the Department of Business Oversight along with the initial statement of information required by this subdivision.

(d) (1) In addition, the finder shall file with the commissioner within 30 days of the anniversary of the finder’s initial statement of information required by subdivision (c), and annually thereafter, on a form prescribed by the commissioner, a renewal statement of information that includes all of the following:

(A) The following affirmative representations by the finder:

(i) The finder has complied and will continue to comply with the conditions of subdivision (a).

(ii) The finder has not performed any acts or satisfied any circumstances prohibited by Section 25212 or by Rule 506(d) of Regulation D under the Securities Act of 1933 (17 C.F.R. 230.506(d)), and the finder has not been sanctioned by the commissioner pursuant to Section 25212.

(iii) The finder has obtained the written agreement described in subdivision (e) with respect to each transaction in which the finder has participated in the prior 12 months.

(B) An indication by the finder as to whether the finder has received transaction-based compensation that is subject to the actual sale of securities by the issuer in any transaction in which the finder has participated in the prior 12 months.

(2) A filing fee in the amount of two hundred seventy-five dollars ($275) shall accompany each renewal statement of information.

(e) (1) Concurrently with each introduction, the finder shall obtain the informed, written consent of each person introduced or referred by the finder to an issuer, in a written agreement signed by the finder, the issuer, and the person introduced or referred, disclosing the following:

(A) The type and amount of compensation that has been or will be paid to the finder in connection with the introduction or referral and the conditions for payment of that compensation.

(B) That the finder is not providing advice to the issuer or any person introduced or referred by the finder to an issuer as to the value of the securities or as to the advisability of investing in, purchasing, or selling the securities.

(C) Whether the finder is also an owner, directly or indirectly, of the securities being offered or sold.

(D) Any actual and potential conflict of interest in connection with the finder’s activities related to the issuer transaction.

(E) That the parties to the agreement shall have the right to pursue any available remedies at law or otherwise for any breach of the agreement.

(2) To satisfy the requirements of this subdivision, the agreement shall also include a representation by the person introduced or referred by the finder to the issuer that the person is an accredited investor, as that term is defined in Rule 501(a) of Regulation D under the Securities Exchange Act of 1933 (17 C.F.R. 230.501(a)), and that the person knowingly consents to the payment of the compensation described therein.

(f) The finder shall maintain and preserve, for a period of five years from the date of filing of the notice prescribed in subdivision (d), a copy of the notice, the written agreement required in subdivision (e), and all other records relating to any offer or sale of securities in connection with which the finder receives compensation, as the commissioner may by rule require. The finder, upon written request of the commissioner, shall furnish to the commissioner any records required to be maintained and preserved under this subdivision.

(g) (1) A natural person who is engaged in the business of effecting transactions in securities and is not otherwise exempt from Section 25210 shall be subject to the requirements of Section 25210, if the individual fails to meet the definition of “finder” set forth in subdivision (a), or does not satisfy all the conditions set forth in subdivisions (c) to (f), inclusive.

(2) In the event a natural person does not meet the definition of “finder” set forth in subdivision (a) or does not satisfy all the conditions set forth in subdivisions (c) to (f), inclusive, any person introduced or referred by that natural person to an issuer, who purchases securities of that issuer in an issuer transaction following that introduction or referral, shall have the right to pursue any applicable remedy afforded under state law, including, without limitation, any applicable remedies pursuant to Section 25501.5.

(h) 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 section, including rules and forms governing applications and reports, and 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 purpose of rules and forms, the commissioner may classify securities, persons, and matters within his or her jurisdiction, and may prescribe different requirements for different classes.

(Added by Stats. 2015, Ch. 743, Sec. 1. Effective January 1, 2016.)

25207.
  

A financial institution that undertakes activities with respect to an investment company pursuant to the provisions of Section 1514, 6524, 14652.5, or 18022.5 of the Financial Code shall not be subject to Section 25210 or 25230 in connection with such activities but shall be subject to Sections 25218, 25234, 25235, and 25237 and to subdivisions (a), (b), and (d) of Section 25216, and such rules thereunder as the commissioner may specify by rule. Nothing in this section shall affect the status of such a financial institution as a broker-dealer or investment adviser, or the employees of such persons, when engaged in the activities authorized by the provisions of the Financial Code specified above.

(Amended by Stats. 2015, Ch. 190, Sec. 15. Effective January 1, 2016.)

25208.
  

A person licensed as a capital access company under Division 3 (commencing with Section 28000) of Title 4 is exempt from the provisions of Section 25210 when engaged in the transaction of business pursuant to the requirements of the Capital Access Company Law and the regulations promulgated thereunder.

(Added by Stats. 1998, Ch. 668, Sec. 2. Effective January 1, 1999. Operative July 1, 1999, by Sec. 4 of Ch. 668.)

25209.
  

Section 25210 shall not apply to an agent of an issuer when engaged in transactions exempted by subdivision (q) of Section 25102, provided that the agent is a life agent licensed in California or in the state of domicile of the purchaser.

(Added by Stats. 2000, Ch. 705, Sec. 5. Effective January 1, 2001.)

CORPCorporations Code - CORP