Code Section Group

Financial Code - FIN

DIVISION 1.2. MONEY TRANSMISSION ACT [2000 - 2176]

  ( Division 1.2 added by Stats. 2011, Ch. 243, Sec. 4. )

CHAPTER 3. Licenses [2030 - 2043]
  ( Chapter 3 added by Stats. 2011, Ch. 243, Sec. 4. )

2030.
  

(a) A person shall not engage in the business of money transmission in this state, or advertise, solicit, or hold itself out as providing money transmission in this state, unless the person is licensed or exempt from licensure under this division or is an agent of a person licensed or exempt from licensure under this division.

(b) A license under this division is not transferable or assignable.

(Amended by Stats. 2012, Ch. 356, Sec. 6. Effective January 1, 2013.)

2031.
  

Only the following persons may apply for or be issued a license:

(a) A corporation or limited liability company organized under the laws of this state.

(b) A corporation, other than a corporation organized under the laws of this state, that is qualified to transact intrastate business in this state under Chapter 21 (commencing with Section 2100) of Division 1 of Title 1 of the Corporations Code.

(c) A limited liability company, other than a limited liability company organized under the laws of this state, that is qualified to transact intrastate business in this state under Article 8 (commencing with Section 17708.01) of the Corporations Code, except a limited liability company that is organized outside the United States shall not be issued a license.

(Amended by Stats. 2014, Ch. 499, Sec. 4. Effective January 1, 2015.)

2032.
  

(a) An applicant for licensure under this division shall pay to the commissioner a nonrefundable fee of five thousand dollars ($5,000).

(b) An applicant for a license under this division shall do so in a form and in a medium prescribed by the commissioner by order or regulation. The application shall state or contain all of the following:

(1) The legal name and residential business address of the applicant and any fictitious or trade name used by the applicant in conducting its business.

(2) A list of any criminal convictions of the applicant and any material litigation in which the applicant has been involved in the 10-year period next preceding the submission of the application.

(3) A description of any money transmission services previously provided by the applicant and the money transmission services that the applicant seeks to provide in this state.

(4) A list of the applicant’s proposed agents and the locations in this state where the applicant and its agents propose to engage in money transmission.

(5) A list of other states in which the applicant is licensed to engage in money transmission and any license revocations, suspensions, or other disciplinary action taken against the applicant in another state.

(6) Information concerning any bankruptcy or receivership proceedings affecting the licensee.

(7) A sample form of payment instrument or instrument upon which stored value is recorded, if applicable.

(8) A sample form of receipt for transactions that involve money received for transmission.

(9) The name and address of any bank through which the applicant’s payment instruments and stored value will be paid.

(10) A description of the source of money and credit to be used by the applicant to provide money transmission services.

(11) The date of the applicant’s incorporation or formation and the state or country of incorporation or formation.

(12) A certificate of good standing from the state or country in which the applicant is incorporated or formed.

(13) A description of the structure or organization of the applicant, including any parent or subsidiary of the applicant, and whether any parent or subsidiary is publicly traded.

(14) The legal name, any fictitious or trade name, all business and residential addresses, and the employment, in the 10-year period next preceding the submission of the application, of each executive officer, manager, director, or person that has control, of the applicant, and the educational background for each person.

(15) A list of any criminal convictions and material litigation in which any executive officer, manager, director, or person in control, of the applicant has been involved in the 10-year period next preceding the submission of the application.

(16) A copy of the applicant’s audited financial statements for the most recent fiscal year and, if available, for the two-year period next preceding the submission of the application.

(17) A copy of the applicant’s unconsolidated financial statements for the current fiscal year, whether audited or not, and, if available, for the two-year period next preceding the submission of the application.

(18) If the applicant is publicly traded, a copy of the most recent report filed with the United States Securities and Exchange Commission under Section 13 of the federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78m).

(19) If the applicant is a wholly owned subsidiary of:

(A) A corporation publicly traded in the United States, a copy of audited financial statements for the parent corporation for the most recent fiscal year or a copy of the parent corporation’s most recent report filed under Section 13 of the federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78m) and, if available, for the two-year period next preceding the submission of the application.

(B) A corporation publicly traded outside the United States, a copy of similar documentation filed with the regulator of the parent corporation’s domicile outside the United States.

(20) The name and address of the applicant’s registered agent in this state.

(21) The applicant’s plan for engaging in money transmission business, including without limitation three years of pro forma financial statements.

(22) Any other information the commissioner requires with respect to the applicant.

(c) The commissioner may waive any of the information required under subdivision (b) or permit an applicant to submit other information instead of the required information.

(Amended by Stats. 2014, Ch. 499, Sec. 5. Effective January 1, 2015.)

2033.
  

(a) The commissioner may conduct an examination of the applicant and the applicant shall pay the reasonable cost of the examination.

(b) If the commissioner finds all of the following with respect to an application for a license, the commissioner shall approve the application:

(1) The applicant has adequate tangible shareholders’ equity, as specified in Section 2040 to engage in the business of money transmission and the financial condition of the applicant is otherwise such that it will be safe and sound for the applicant to engage in the business of money transmission.

(2) The applicant, the directors and officers of the applicant, any person that controls the applicant, and the directors and officers of any person that controls the applicant are of good character and sound financial standing.

(3) The applicant is competent to engage in the business of money transmission.

(4) The applicant’s plan for engaging in the business of money transmission affords reasonable promise of successful operation.

(5) It is reasonable to believe that the applicant, if licensed, will engage in the business of money transmission and will comply with all applicable provisions of this division and of any regulation or order issued under this division.

(c) The commissioner shall deny an application for a license if he or she finds, after notice and a hearing, that the requirements of subdivision (b) have not been satisfied.

(Amended by Stats. 2012, Ch. 356, Sec. 8. Effective January 1, 2013.)

2034.
  

(a) Before any corporation or limited liability company is issued a license, the corporation or limited liability company shall file with the commissioner, in such form as the commissioner may by regulation or order require, an appointment irrevocably appointing the commissioner to be the corporation’s or limited liability company’s attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against the corporation or limited liability company, or any of its successors, that arises under this division or under any regulation or order issued under this division after such appointment has been filed, with the same force and validity as if served personally on the corporation or limited liability company or its successor, as the case may be.

(b) Service may be made by leaving a copy of the process at any office of the commissioner, but that service is not effective unless (1) the party making that service, who may be the commissioner, sends notice of service and a copy of the process by registered or certified mail to the party served at its last address on file with the commissioner, and (2) an affidavit of compliance with this section by the party making service is filed in the case on or before the return date, if any, or within such further time as the court, in the case of a judicial proceeding, or the administrative agency, in the case of an administrative proceeding, allows.

(c) The provisions of this section are in addition to, and not in limitation of, other provisions of law relating to service of process.

(Amended by Stats. 2012, Ch. 356, Sec. 9. Effective January 1, 2013.)

2035.
  

(a) No person shall, directly or indirectly, acquire control of a licensee unless the commissioner has first approved, in writing, the acquisition of control. An application to acquire control of a licensee shall be in writing, under oath, and in a form prescribed by the commissioner. The application shall contain that information which the commissioner may require.

(b) The commissioner shall not approve the application unless the commissioner finds all of the following:

(1) The applicant and all of the officers and directors of the applicant are of good character and sound financial standing.

(2) The applicant is competent to engage in the business of money transmission.

(3) It is reasonable to believe that, if the applicant acquires control of the licensee, the applicant and the licensee will comply with all applicable provisions of this division and any regulation or order issued under this division.

(4) The applicant’s plans, if any, to make any major change in the business, corporate structure, or management of the licensee are not detrimental to the safety and soundness of the licensee.

(c) For the purposes of subdivision (b), the commissioner may find an applicant’s plan to make major changes in the management of a licensee is detrimental to the licensee if the plan provides for a person who is not of good character to become a director or officer of the licensee. The grounds specified in this subdivision shall not be deemed to be the only grounds upon which the commissioner may find, for the purposes of subdivision (b), that an applicant’s plan to make a major change in the management of a licensee is detrimental to the licensee.

(d) If it appears to the commissioner that any person is violating or failing to comply with this section, the commissioner may direct the person to comply with this section by an order issued over the commissioner’s official seal.

(e) Whenever it appears to the commissioner that any person has committed or is about to commit a violation of any provision of this section or of any regulation or order of the commissioner issued pursuant to this section, the commissioner may apply to the superior court for an order enjoining the person from violating or continuing to violate this section or that regulation or order, and for other equitable relief as the nature of the case or interests of the licensee, the controlling person, the creditors or shareholders of the licensee or controlling person or the public may require.

(f) The commissioner may, for good cause, amend, alter, suspend, or revoke any approval of a proposal to acquire control of a licensee issued pursuant to this section.

(g) There shall be exempted from the provisions of this section any transaction which the commissioner by regulation or order exempts as not being comprehended within the purposes of this section and the regulation of which he or she finds is not necessary or appropriate in the public interest or for the protection of a licensee or the customers of a licensee.

(h) The commissioner may conduct an examination of the applicant and the applicant shall pay the reasonable cost of the examination.

(Amended by Stats. 2012, Ch. 356, Sec. 10. Effective January 1, 2013.)

2036.
  

The commissioner may impose on any authorization, approval, license, or order issued pursuant to this division any conditions that are necessary for the safety and soundness of the licensee, or reasonable or necessary to maintain or enhance consumer protection.

(Amended by Stats. 2014, Ch. 499, Sec. 6. Effective January 1, 2015.)

2037.
  

(a) As security, each licensee shall deposit and thereafter maintain on deposit with the Treasurer cash in an amount not less than, or securities having a market value not less than, such amount as the commissioner may find and order from time to time as necessary to secure the faithful performance of the obligations of the licensee with respect to money transmission in California. These securities shall be subject to the approval of the commissioner and shall consist of interest-bearing bonds, notes, or other obligations of the United States or any agency or instrumentality thereof, or of the State of California, or of any city, county, or city and county, political subdivision or district of the State of California, or that are guaranteed by the United States or the State of California.

(b) So long as a licensee that maintains securities on deposit with the Treasurer pursuant to this section is solvent, that licensee shall be entitled to receive any interest paid on the securities.

(c) In lieu of the deposit of cash or securities pursuant to subdivision (a), a licensee may deliver to the commissioner the bond of a surety company, in form and written by a company satisfactory to the commissioner, in an amount not less than the amount of the deposit of cash or securities required of the licensee, conditioned upon the faithful performance of the obligations of the licensee with respect to money transmission in California. The commissioner shall deposit such bond with the Treasurer.

(d) A licensee that sells or issues payment instruments or stored value shall maintain securities on deposit or a bond of a surety company in an amount of no less than five hundred thousand dollars ($500,000) or 50 percent of the average daily outstanding payment instrument and stored value obligations in California, whichever is greater; provided that such amount shall not be more than two million dollars ($2,000,000).

(e) A licensee that engages in receiving money for transmission shall maintain securities on deposit or a bond of a surety company in an amount greater than the average daily outstanding obligations for money received for transmission in California, provided that such amount shall not be less than two hundred fifty thousand dollars ($250,000) nor more than seven million dollars ($7,000,000).

(f) The amount of securities on deposit or a bond of a surety company required to be maintained by subdivisions (d) and (e) are cumulative.

(g) The money and securities deposited with the Treasurer pursuant to this section and the proceeds of any bond held by the Treasurer pursuant to this section shall constitute a trust fund for the benefit of persons in California who purchased payment instruments or stored value from the licensee or its agent, or persons in California who delivered to any licensee or its agent money or monetary value for money transmission. Suit to recover on any bond may be brought by any party aggrieved in a court of competent jurisdiction of any county in which the licensee has an agent.

(h) Securities on deposit or a bond shall cover claims for so long as the commissioner specifies, but for at least four years after the licensee ceases to provide services under this division in this state. However, the commissioner may permit the amount of the security to be reduced or eliminated before the expiration of that time to the extent the amount of the licensee’s payment instruments or stored value obligations outstanding, or outstanding money or monetary value received for money transmission, is less than the deposit or bond. The commissioner may permit a licensee to substitute another form of security acceptable to the commissioner for the security effective at the time the licensee ceases to provide money transmissions in this state.

(Amended by Stats. 2012, Ch. 356, Sec. 12. Effective January 1, 2013.)

2038.
  

Fees shall be paid to, and collected by, the commissioner, as follows:

(a) The fee for filing an application for a license is five thousand dollars ($5,000), as provided in subdivision (a) of Section 2032.

(b) The fee for filing an application for approval to acquire control of a licensee is three thousand five hundred dollars ($3,500).

(c) A licensee shall pay annually on or before July 1, a licensee fee of two thousand five hundred dollars ($2,500).

(d) A licensee shall pay annually on or before July 1, one hundred twenty-five dollars ($125) for each licensee branch office in this state.

(e) A licensee shall pay annually on or before July 1, twenty-five dollars ($25) for each agent branch office in this state.

(f) Whenever the commissioner examines a licensee or any agent of a licensee, the licensee shall pay, within 10 days after receipt of a statement from the commissioner, a fee of seventy-five dollars ($75) per hour for each examiner engaged in the examination plus, if it is necessary for any examiner engaged in the examination to travel outside this state, the travel expenses of the examiner.

(g) Whenever the commissioner examines an applicant, the applicant shall pay, within 10 days after receipt of a statement from the commissioner, a fee of seventy-five dollars ($75) per hour for each examiner engaged in the examination plus, if it is necessary for any examiner engaged in the examination to travel outside this state, the travel expenses of the examiner.

(h) Each fee for filing an application shall be paid at the time the application is filed with the commissioner. No fee for filing an application shall be refundable, regardless of whether the application is approved, denied, or withdrawn.

(Amended by Stats. 2014, Ch. 499, Sec. 7. Effective January 1, 2015.)

2039.
  

(a) The commissioner may by order or regulation grant exemptions from this section in cases where the commissioner finds that the requirements of this section are not necessary or may be duplicative.

(b) In addition to any other reports as may be required pursuant to Sections 453, 454, and 455, each licensee shall, within 90 days after the end of each fiscal year, or within any extended time as the commissioner may prescribe, file with the commissioner an audit report for the fiscal year that shall comply with all of the following provisions:

(1) The audit report shall contain audited financial statements of the licensee for or as of the end of the fiscal year prepared in accordance with United States generally accepted accounting principles and any other information as the commissioner may require.

(2) The audit report shall be based upon an audit of the licensee conducted in accordance with United States generally accepted auditing standards and any other requirements as the commissioner may prescribe.

(3) The audit report shall be prepared by an independent certified public accountant or independent public accountant who is not unsatisfactory to the commissioner.

(4) The audit report shall include or be accompanied by a certificate of opinion of the independent certified public accountant or independent public accountant that is satisfactory in form and content to the commissioner. If the certificate or opinion is qualified, the commissioner may order the licensee to take any action as the commissioner may find necessary to enable the independent or certified public accountant or independent public accountant to remove the qualification.

(c) Each licensee shall, not more than 45 days after the end of each calendar year quarter, or within a longer period as the commissioner may by regulation or order specify, file with the commissioner a report containing all of the following:

(1) Financial statements, including balance sheet, income statement, statement of changes in shareholders’ equity, and statement of cashflows, for, or as of the end of, that calendar year quarter, verified by two of the licensee’s principal officers. The verification shall state that each of the officers making the verification has a personal knowledge of the matters in the report and that each of them believes that each statement on the report is true.

(2) For issuers and sellers of payment instruments and stored value, a schedule of eligible securities owned by the licensee pursuant to Section 2081.

(3) Other information as the commissioner may by regulation or order require.

(d) Each licensee, not more than 45 days after the end of each calendar year quarter, shall file with the commissioner a report containing all of the following:

(1) The current address of each branch office of the licensee in this state. If a branch office was opened or closed during the calendar year quarter, the date it was opened or closed. If a branch office was relocated during the calendar year quarter, the addresses of the old and new locations and the date of relocation.

(2) The name of each person who acted as an agent in this state of the licensee during the calendar year quarter and the address for each agent branch office. If a person was appointed or terminated as an agent during the calendar year quarter, the date of appointment or termination. If an agent branch office relocated, the addresses for the old and new locations and the date of relocation.

(3) The total volume of activities, number of transactions conducted, and outstanding money transmission obligations in California under this division and in the United States in the calendar year quarter categorized by type of money transmission, and, if feasible whether the transmission was conducted via a mobile application or an Internet Web site. For money received for transmission, a report of the average daily outstanding transmission liabilities in California, and, if applicable, a schedule of each foreign country to which money was sent, along with the total amount of money sent to that foreign country in that calendar year quarter. For payment instruments and stored value, a report of the average daily outstanding payment instruments and stored value liabilities in California in that calendar year quarter.

(4) Other information as the commissioner may by regulation or order require.

(e) Each licensee shall file with the commissioner other reports as and when the commissioner may by regulation or order require.

(Amended by Stats. 2014, Ch. 499, Sec. 8. Effective January 1, 2015.)

2040.
  

(a) An applicant shall possess, and a licensee shall maintain at all times, tangible shareholder’s equity of two hundred fifty thousand dollars ($250,000) to five hundred thousand dollars ($500,000), depending on estimated or actual transaction volume, as determined by the commissioner based on the factors described in subdivision (c).

(b) The commissioner may increase the amount of net worth required of an applicant or licensee if the commissioner determines, with respect to the applicant or licensee, that a higher net worth is necessary to achieve the purposes of this division based on the factors described in subdivision (c).

(c) When making a determination pursuant to subdivision (a) or (b), the commissioner shall consider the following factors:

(1) The nature and volume of the projected or established business.

(2) The number of locations at or through which money transmission is or will be conducted.

(3) The amount, nature, quality, and liquidity of its assets.

(4) The amount and nature of its liabilities.

(5) The history of its operations and prospects for earning and retaining income.

(6) The quality of its operations.

(7) The quality of its management.

(8) The nature and quality of its principals.

(9) The nature and quality of the persons in control.

(10) The history of its compliance with applicable state and federal law.

(11) Any other factor the commissioner considers relevant.

(d) The commissioner at any time may require a licensee to write down any asset held by it to a valuation that will represent its then fair market value. Any receivable or debt due to a licensee that is past due and unpaid for the period of one year shall be charged off, unless it is well secured or is in process of collection.

(e) The aggregate value of a licensee’s accounts receivable, excluding money transmission receivables, loans or extensions of credit to any one person, or that person’s affiliates, cannot exceed 50 percent of the licensee’s tangible shareholders’ equity without the advanced written approval of the commissioner. Whenever such amount equals or exceeds 20 percent of the licensee’s tangible shareholders’ equity, the licensee shall maintain records evidencing such amount and any security or other source of payment for the amount owed, and such other records as the commissioner may require by order or regulation.

(f) The commissioner shall adopt regulations to carry out and implement the factors described in subdivision (c).

(Amended by Stats. 2013, Ch. 533, Sec. 4. Effective January 1, 2014.)

2041.
  

(a) A licensee shall conduct money transmission in California under its true name unless it has complied with Chapter 5 (commencing with Section 17900) of Part 3 of Division 7 of the Business and Professions Code.

(b) A licensee may only conduct money transmission in California under its true name unless it has provided 30-day advance written notice to the commissioner. A licensee may also use a trade name or logo, so long as there is reasonable disclosure of its true name.

(Added by Stats. 2011, Ch. 243, Sec. 4. Effective January 1, 2012.)

2042.
  

(a) In addition to the fees provided in Section 2038, the commissioner shall levy an assessment each fiscal year, on a pro rata basis, on those licensees that at any time during the preceding calendar year engaged in the business of money transmission in California in an amount that is, in his or her judgment, sufficient to meet the commissioner’s expenses in administering the provisions of this division and to provide a reasonable reserve for contingencies.

(b) For licensees that sell or issue payment instruments or stored value, the amount of the annual assessment on any licensee shall not exceed the sum of the products determined by multiplying (1) increments of the aggregate face amount of payment instruments and stored value issued or sold in California by the licensee, directly or indirectly through agents, in the calendar year next preceding the date of such assessment, by (2) percentages of the base assessment rate, according to the following table:

Aggregate face amount of payment instruments and stored value sold (in millions)

Percentage of base assessment rate

First $1 ........................

100.0

Next $9 ........................

25.0

Next $40 ........................

12.5

Next $50 ........................

6.0

Next $400 ........................

3

Next $500 ........................

2

Excess over $1,000 ........................

1

The base assessment rate shall be fixed from time to time by the commissioner but shall not exceed one dollar ($1) per one thousand dollars ($1,000) face amount of payment instruments and stored value sold.

(c) For licensees receiving money for transmission, the basis of the apportionment of the assessment among the licensees assessed shall be the proportion that the total amount of money received for transmission by the licensee in California bears in relation to the total amount of money received for transmission by all licensees in California, as shown by the reports of licensees to the commissioner for the preceding calendar year. The assessment rate shall be fixed from time to time by the commissioner but shall not exceed one dollar ($1) per one thousand dollars ($1,000) of money received for transmission in California by the licensee.

(d) The commissioner shall notify each licensee by mail of the amount levied against it. The licensee shall pay the amount levied within 20 days. If payment is not made to the commissioner within that time, the commissioner shall assess and collect, in addition to the annual assessment, a penalty of 5 percent of the assessment for each month or part thereof that the payment is delinquent.

(Amended by Stats. 2012, Ch. 356, Sec. 15. Effective January 1, 2013.)

2043.
  

(a) On or before April 1, 2013, and annually thereafter, each licensee shall provide its agents under contract with training materials on recognizing elder or dependent adult financial abuse, and how to appropriately respond if the agent suspects that he or she is being asked to engage in money transmission for a fraudulent transaction involving an elder or dependent adult.

(b) To ensure that agents that are newly appointed by licensees pursuant to Section 2060 receive the training materials described in subdivision (a) in a timely manner, each licensee shall provide those materials to any newly appointed agent no later than one month following the appointment of that agent.

(c) This section shall not apply to licensees that are engaged solely in selling or issuing stored value pursuant to paragraph (2) of subdivision (q) of Section 2003. Licensees that engage in money transmission activities pursuant to paragraph (1) or (3) of that subdivision, shall be subject to this section only with respect to their agents under contract for activities described in those paragraphs. Additionally, this section shall not apply to licensees who exclusively offer their services via an Internet Web site, a mobile application, or both.

(Amended by Stats. 2014, Ch. 499, Sec. 9. Effective January 1, 2015.)

FINFinancial Code - FIN