Code Section Group

Financial Code - FIN

DIVISION 6. ESCROW AGENTS [17000 - 17703]

  ( Division 6 enacted by Stats. 1951, Ch. 364. )

CHAPTER 3. Escrow Regulations [17400 - 17425]
  ( Chapter 3 enacted by Stats. 1951, Ch. 364. )

17400.
  

The commissioner may from time to time make, amend, and rescind the rules, forms, and orders that are necessary to carry out the provisions of this division, and define any terms, whether or not used in this division, insofar as the definitions are not inconsistent with the provisions of this division. For the purpose of rules and forms, the commissioner may, among other things, classify persons and matters within the commissioner’s jurisdiction and may prescribe different requirements for different classes. The commissioner may, in the commissioner’s discretion, waive any requirement of any rule or form in situations where in his or her opinion the requirement is not necessary in the public interest or for the protection of the public.

(Amended by Stats. 1999, Ch. 441, Sec. 8. Effective January 1, 2000.)

17402.
  

No person subject to this division or any officer thereof shall advertise in any manner or publish any statement of its capital, other than amounts fully paid in and accumulated surplus.

(Amended by Stats. 1961, Ch. 475.)

17403.
  

(a) No person subject to this division shall issue, circulate, or publish any advertisement by any means of communication, or make use of or circulate any letterheads, billheads, blank notes, blank receipts, blank escrow instructions, certificates, circulars, or any written, printed, partially written or printed paper containing any fictitious or corporate name or other words indicating that the person is in the escrow business, unless the person is a licensed escrow agent.

(b) If, in the opinion of the commissioner, any person has violated this section, the commissioner may order that person to desist and refrain from that violation. If, within 30 days after the order is served, a request for hearing is filed in writing and the hearing is not held within 60 days thereafter, the order is rescinded.

(Amended by Stats. 1987, Ch. 564, Sec. 1.)

17403.1.
  

No person subject to this division shall describe as an escrow, whether orally, in writing, or electronically, any transaction that is not defined as such in Section 17003.

(Amended by Stats. 1999, Ch. 441, Sec. 10. Effective January 1, 2000.)

17403.2.
  

(a) No person subject to this division shall solicit or accept an escrow instruction or amended or supplemental escrow instruction containing any blank to be filled in after signing or initialing of the escrow instruction or amended or supplemental escrow instruction, nor permit any person to make any addition to, deletion from, or alteration of an escrow instruction or amended or supplemental escrow instruction, unless the addition, deletion or alteration is signed or initialed by all persons who had signed or initialed the escrow instruction or amended or supplemental escrow instruction prior to the addition, deletion or alteration.

(b) In addition to subdivision (a), no Internet escrow agent subject to this division shall solicit or accept electronically over the Internet an escrow instruction or amended or supplemental escrow instruction containing any blank to be filled in after executing that escrow instruction or amended or supplemental escrow instruction, nor permit any person to electronically, over the Internet, make any addition to, deletion from, or alteration of an escrow instruction or amended or supplemental escrow instruction, unless that addition, deletion or alteration is executed by all persons who had executed the escrow instruction or amended or supplemental escrow instruction prior to the addition, deletion, or alteration.

(Amended by Stats. 1999, Ch. 441, Sec. 11. Effective January 1, 2000.)

17403.3.
  

(a) At the time of execution a copy of each escrow instruction or amended or supplemental escrow instruction shall be delivered to all persons executing the same.

(b) Internet escrow agents shall deliver electronically over the Internet a copy of each executed escrow instruction or amended or supplemental escrow instruction to all persons executing the same. In the event a person is not able to electronically receive the instructions, the Internet escrow agent shall mail a true and correct copy of the instructions to the person within 24 hours of execution.

(Amended by Stats. 1999, Ch. 441, Sec. 12. Effective January 1, 2000.)

17403.4.
  

All written escrow instructions and all escrow instructions transmitted electronically over the Internet executed by a buyer or seller, whether prepared by a person subject to this division or by a person exempt from this division under Section 17006, shall contain a statement in not less than 10-point type which shall include the license name and the name of the department issuing the license or authority under which the person is operating. This section shall not apply to supplemental escrow instructions or modifications to escrow instructions.

This section shall become operative on July 1, 1993.

(Amended by Stats. 1999, Ch. 441, Sec. 13. Effective January 1, 2000.)

17403.5.
  

(a) All records required by this chapter may be retained by an Internet escrow agent and provided to the commissioner in electronic format.

(b) All transfers by an Internet escrow agent between trust accounts and interest-bearing accounts, and between escrow accounts, may be made electronically.

(c) A statement of account may be delivered by an Internet escrow agent to a customer by electronic mail or via the Internet, unless otherwise requested by the customer.

(Added by Stats. 2000, Ch. 437, Sec. 5. Effective January 1, 2001.)

17404.
  

Every person subject to this division shall keep and use in its business, books, accounts, and records which will properly enable the commissioner to determine whether the escrow functions performed by such person comply with the provisions of this division and with all rules made by the commissioner under this division.

(Amended by Stats. 1973, Ch. 705.)

17405.
  

(a) The business, accounts and records of every person performing as an escrow agent, whether required to be licensed under this division or not, are subject to inspection and examination by the commissioner at any time without prior notice. The provisions of this section shall not apply to persons specified in Section 17006.

(b) Any person subject to this division shall, upon request, exhibit and allow inspection and copying of any books and records by the commissioner or his or her authorized representative.

(c) (1) The commissioner shall conduct an examination of each licensed escrow agent as described in subdivision (a) as often as the commissioner deems necessary and appropriate, but not less than once every 48 months.

(2) The examination shall be conducted for the 12-month period immediately preceding the date that the examination is commenced unless the commissioner finds, based on information uncovered in the examination or in the most recent independent audit report, that the examination should be extended beyond the 12-month period.

(3) In determining how often an examination shall be conducted, the commissioner may consider each licensed escrow agent’s compliance with the requirements set forth in this division and other factors the commissioner may by rule or order designate.

(4) This subdivision shall apply only to examinations commenced after the effective date established by the rule or order of the commissioner for the factors described in paragraph (3).

(d) Notwithstanding subdivision (c), the commissioner may conduct an indoctrination or preliminary examination, or both, under this section of any new licensee within one year of the issuance of the license under this division, and an examination described in subdivision (a) within two years of the issuance of the license under this division.

(Amended by Stats. 2001, Ch. 499, Sec. 3. Effective January 1, 2002.)

17405.1.
  

The cost of every inspection and examination of a licensee or other person subject to this division shall be paid to the commissioner by the licensee or person examined, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost of an inspection or examination, the commissioner may use the estimated average hourly cost for all persons performing inspections or examinations of licensees or other persons subject to this division for the fiscal year.

For the purposes of this section only, no person other than a licensee shall be deemed to be a person subject to this division unless and until the person is determined to be a person subject to this division by an administrative hearing in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code or by a judicial hearing in any court of competent jurisdiction.

(Amended by Stats. 1981, Ch. 946, Sec. 3.)

17406.
  

(a) Each licensee shall submit to the commissioner, at the licensee’s own expense, an audit report containing audited financial statements covering the calendar year or, if the licensee has an established fiscal year, then for that fiscal year, within 105 days after the close of the calendar or fiscal year, as applicable. At that time, each licensee shall also file additional relevant information as the commissioner may require.

(b) Within 30 days after receipt of a request from the commissioner, a licensee or other person subject to this division shall submit to the commissioner, at the person’s own expense, an audit report containing audited financial statements covering the 12 calendar months next preceding the month of receipt of the request, or for another period as the commissioner may require. Unless the public interest shall otherwise require, the commissioner shall exempt a licensee from the provisions of subdivision (a) in whole or in part if the licensee has complied with a request pursuant to this subdivision as of a date within the calendar or fiscal year for which the exemption is granted.

(c) A licensee whose license has been revoked shall submit to the commissioner, at its own expense, on or before 105 days after the effective date of the revocation, a closing audit report as of that effective date, or for another period as the commissioner may specify. The report shall include the information specified by the commissioner. A licensee who has complied with this subdivision is exempt from subdivision (a) of this section.

(d) The reports and financial statements referred to in subdivisions (a) and (b) shall include at least a balance sheet and a statement of income for the year ended on the balance sheet date together with other relevant information as the commissioner may require. The reports and financial statements referred to in subdivisions (a), (b), and (c) shall be prepared in accordance with generally accepted accounting principles, and shall be accompanied by a report, certificate, or opinion of, an independent certified public accountant or independent public accountant. The audits shall be conducted in accordance with generally accepted auditing standards and the rules of the commissioner.

(e) A licensee shall make other special reports to the commissioner as the commissioner may from time to time require.

(f) For good cause and upon written request, the commissioner may extend the time for compliance with subdivisions (a) and (b).

(g) A licensee shall, when requested by the commissioner, submit its unaudited financial statements, prepared in accordance with generally accepted accounting principles and consisting of at least a balance sheet and statement of income and expense as of the date and for the period specified by the commissioner. The commissioner may require the submission of these reports on a monthly or other periodic basis.

(h) If the report, certificate, or opinion of the independent accountant referred to in subdivision (d) is in any way qualified, the commissioner may require the licensee to take action as he or she deems appropriate to permit an independent accountant to remove the qualifications from the report, certificate, or opinion.

(i) The commissioner may reject any financial statement, report, certificate, or opinion by notifying the licensee or other person required to make the filing of its rejection and the cause of the rejection. Within 30 days after the receipt of the notice, the licensee or other person shall correct the deficiency and the failure so to do shall be deemed a violation of this division. The commissioner shall retain a copy of all rejected filings.

(j) The commissioner may make rules specifying the form and content of the reports and financial statements referred to in this section, and may require that those reports and financial statements be verified by the licensee in the manner as he or she may prescribe.

(k) Upon completion of the reports and financial statements referred to in subdivisions (a), (b), and (c), the independent accountant shall submit to the commissioner complete copies of the reports and financial statements at the same time that copies of the reports and financial statements are submitted to the licensee.

(l) A licensee who engages an independent accountant or other third-party contractor to reconcile trust account records shall request the independent accountant or third-party contractor, at a minimum, to immediately notify the commissioner and Fidelity Corporation in the event of any of the following:

(1) The termination or voluntary withdrawal of the independent accountant or third-party contractor from the engagement.

(2) The discovery by the independent accountant or third-party contractor of an unreconcilable trust account debit balance. A debit balance exists if an escrow agent withdraws, pays out, or transfers money from an escrow account in excess of the amount to the credit of that account at the time of the withdrawal, payment, or transfer.

(3) The discovery by the independent accountant or third-party contractor that trust account reconciliations have not been performed for two months after the end of any calendar month.

(4) The discovery by the independent accountant or third-party contractor of exception items in trust account exception reports, that remain uncorrected for two months after the end of any calendar month.

Notification pursuant to this subdivision may be accomplished by transmitting to the commissioner and Fidelity Corporation, in either electronic or paper form, copies of trust account reconciliation exception reports. Nothing in this subdivision imposes any duty or obligation on an independent accountant or third-party contractor to Fidelity Corporation, members of Fidelity Corporation, or the commissioner.

(m) Nothing in this section shall be deemed to require a licensee to contract with a third party to reconcile trust account records.

(Amended by Stats. 2008, Ch. 285, Sec. 3. Effective January 1, 2009.)

17406.1.
  

(a) Whenever the reports and financial statements required pursuant to subdivision (a), (b), or (c) of Section 17406 are to be reported upon or certified by an accountant other than the accountant reporting upon or certifying the licensee’s most recent reports or financial statements, the licensee shall furnish the commissioner with a written notice stating whether there was any disagreement with the former accountant on any matter in connection with the preparation of the most recent reports or financial statements reported upon or certified by that former accountant. If there was any disagreement, the licensee’s written notice shall describe the reasons for the disagreement. The written notice shall be signed by the chief executive officer of the licensee. The licensee shall also request, in writing, that the former accountant furnish the licensee with a letter addressed to the commissioner stating whether the former accountant agrees with the statements contained in the licensee’s written notice. If the former accountant disagrees with any of the licensee’s statements, the former accountant’s letter shall explain the reasons for disagreeing with the licensee’s statements. The written notice of the licensee, along with the former accountant’s letter shall be filed with the commissioner no later than 30 days from the date of engagement of the new accountant.

(b) The written notice of the licensee required by subdivision (a) shall be considered a notice for purposes of Section 17702.

(Added by Stats. 1994, Ch. 496, Sec. 3. Effective January 1, 1995.)

17408.
  

(a) If any person subject to this division fails to make any report required by law or by the commissioner, the commissioner may immediately cause the books, records, papers, and affairs of said person to be thoroughly examined.

(b) The commissioner may impose, by order, a penalty on any person who fails, within the time specified in any written demand of the commissioner, (1) to make and file with the commissioner any report required by law or requested by the commissioner, or (2) to furnish any material information required by the commissioner to be included in the report. The amount of the penalty may not exceed one hundred dollars ($100) for each day for the first five days the report or information is overdue, and thereafter may not exceed five hundred dollars ($500) for each day the report or information is overdue.

(c) If, after an order has been made under subdivision (b), a request for hearing is filed in writing within 30 days of the date of service of the order by the person to whom the order was directed, a hearing shall be held in accordance with the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and the commissioner shall have all the powers granted under that chapter.

(d) If the person fails to file a written request for a hearing within 30 days of the date of service of the order, the order imposing the penalty shall be deemed a final order of the commissioner, and the penalty shall be paid within five business days.

(e) If a hearing is requested, the penalty shall be paid within five business days after the effective date of any decision in the case ordering payment to be made.

(Amended by Stats. 2005, Ch. 257, second Sec. 2. Effective January 1, 2006.)

17409.
  

(a) All moneys deposited in escrow to be delivered upon the close of the escrow or upon any other contingency shall be deposited and maintained in a noninterest-bearing demand or checking account in a bank, a state or federal savings bank, or a state or federal savings association or in a noninterest-bearing account subject to immediate withdrawal in an industrial loan company insured by the Federal Deposit Insurance Corporation and approved to receive those moneys by the commissioner. Thereafter, these moneys may be deposited in an interest-bearing account in a bank, a state or federal savings bank, a state or federal savings association, an industrial loan company approved to receive those moneys by the commissioner, or a state or federal credit union, if the depositor is qualified for membership under the bylaws of that credit union, and the moneys are maintained separate, distinct, and apart from funds belonging to the escrow agent. Those funds, when deposited, are to be designated as “trust funds,” “escrow accounts,” or under some other appropriate name indicating that the funds are not the funds of the escrow agent.

Upon request of the commissioner, a licensee shall furnish to the commissioner an authorization for examination of financial records of any trust funds or escrow accounts, maintained in a financial institution, in accordance with the procedures set forth in Section 7473 of the Government Code.

(b) A licensee engaged in the business of receiving escrows for deposit or delivery of the types specified in subdivision (c) of Section 17312 and of the types not specified therein shall maintain separate escrow trust accounts, for both types of escrow business in the same manner as provided in subdivision (a) of this section and Sections 17409.1, 17410, 17411, and 17411.1.

(c) Any agreement with a financial institution to establish a trust account pursuant to this section shall be accompanied by a letter from the licensee authorizing and requesting that the financial institution immediately notify the commissioner and Fidelity Corporation, in either electronic or paper form, when it becomes aware of either of the following:

(1) The closure of any account subject to this section, other than to transfer the funds to another designated trust account at the same financial institution in the name of the escrow agent or the remittance of the funds to the Controller’s office for escheat purposes.

(2) The occurrence of any overdraft balance in an account subject to this section.

This subdivision does not impose any duty or obligation on a financial institution to Fidelity Corporation, members of Fidelity Corporation, or the commissioner.

(Amended by Stats. 2009, Ch. 140, Sec. 72. Effective January 1, 2010.)

17409.1.
  

(a) Each person subject to this chapter shall maintain separate escrow trust accounts for each licensed location. Transfers between accounts are prohibited except by the actual writing of a check from one escrow to the other, and by depositing the check for the account of, and the writing of a receipt for the escrow to which the funds are being transferred. Each transfer shall be properly supported and documented in escrow files by inclusion of escrow instructions executed by the principals authorizing the transfer.

(b) With regard to Internet escrow companies, transfers to trust accounts by commercial banks and from operating accounts to cover losses may be made through wire transfer. Receipts for all these transactions may be maintained in electronic form.

(Amended by Stats. 2000, Ch. 437, Sec. 6. Effective January 1, 2001.)

17410.
  

(a) Escrow or trust funds are not subject to enforcement of a money judgment arising out of any claim against the licensee or person acting as escrow agent, and in no instance shall such escrow or trust funds be considered or treated as an asset of the licensee or person performing the functions of an escrow agent.

(b) Interest paid or payable on funds deposited in escrow by a licensee are not subject to enforcement of a money judgment arising out of any claim against the licensee or person acting as escrow agent.

(Amended by Stats. 1982, Ch. 497, Sec. 93. Operative July 1, 1983, by Sec. 185 of Ch. 497.)

17411.
  

No person shall knowingly keep or cause to be kept any funds or money in any bank or state or federal savings and loan association under the heading of “trust funds” or “escrow accounts” or any other name designating such funds or money as belonging to the clients of any escrow agency, except actual escrow or trust funds deposited with such agency.

(Amended by Stats. 1979, Ch. 475.)

17411.1.
  

“Trust funds” or “escrow accounts” as used in Sections 17409, 17410, and 17411 shall include all funds required to be held by an escrow agent pursuant to a federal or state law, or requirement of a governmental agency.

(Added by Stats. 1982, Ch. 663, Sec. 11.)

17414.
  

(a) It is a violation for any person subject to this division or any director, stockholder, trustee, officer, agent, or employee of any such person to do any of the following:

(1) Knowingly or recklessly disburse or cause the disbursal of escrow funds otherwise than in accordance with escrow instructions, or knowingly or recklessly to direct, participate in, or aid or abet in a material way, any activity which constitutes theft or fraud in connection with any escrow transaction.

(2) Knowingly or recklessly make or cause to be made any misstatement or omission to state a material fact, orally or in writing, in escrow books, accounts, files, reports, exhibits, statements, or any other document pertaining to an escrow or escrow affairs.

(b) Any director, officer, stockholder, trustee, employee, or agent of an escrow agent, who abstracts or willfully misappropriates money, funds, trust obligations or property deposited with an escrow agent, is guilty of a felony. Upon conviction, of an offense under this section or similar offenses specified in Chapter 4 (commencing with Section 470), Chapter 5 (commencing with Section 484), or Chapter 6 (commencing with Section 503) of Title 13 of Part 1 of the Penal Code, the court shall, in addition to any other punishment imposed, order the person to make full restitution, first to the escrow agent and then to Fidelity Corporation, to the extent it has indemnified the escrow agent. Nothing in this section shall be deemed or construed to repeal, amend, or impair any existing provision of law prescribing a punishment for such an offense.

(c) Any person subject to this division who knows of a person’s involvement in an abstraction or misappropriation of money, funds, trust obligations, or property deposited with a licensed escrow agent shall immediately report the abstraction or misappropriation in writing to the commissioner and to Fidelity Corporation. No person shall be civilly liable for reporting as required under this subdivision, unless the information provided in the report is false and the person providing false information does so with knowledge and malice. The reports filed under this section, including the identity of the person making the filing, shall remain confidential pursuant to state law.

(Amended by Stats. 1994, Ch. 423, Sec. 2. Effective January 1, 1995.)

17414.1.
  

(a) Any person who has been convicted of or pleaded nolo contendere to any crime specified in subdivision (b) within the past 10 years, or has been held liable in any civil action by final judgment or any administrative judgment by any public agency within the past seven years, of any of the provisions specified in subdivision (b), shall not serve in any capacity as an officer, director, stockholder, trustee, agent, or employee of an escrow agent, or in any position involving any duties with an escrow agent, in this state. This subdivision shall not apply to any person whose office, employment, ownership interest, or other participation in the business of a licensed escrow agent commenced prior to January 1, 1992.

(b) Subdivision (a) applies to criminal convictions of, pleas of nolo contendere to, or civil or administrative judgments entered for offenses including the following:

(1) Offenses specified in Chapter 18 (commencing with Section 3350) of Division 1.

(2) Offenses specified in Article 4 (commencing with Section 5300) of Chapter 1 of Division 2.

(3) Offenses specified in Article 8 (commencing with Section 14750) of Chapter 4 of Division 5.

(4) Offenses specified in Chapter 3 (commencing with Section 17400), and Chapter 7 (commencing with Section 17700) of Division 6.

(5) Offenses specified in Chapter 6 (commencing with Section 18435) of Division 7.

(6) Offenses specified in provisions of the laws of the United States added or amended by the federal Financial Institutions Reform, Recovery and Enforcement Act of 1989 (Public Law 101-73).

(7) Offenses involving robbery, burglary, theft, embezzlement, fraud, fraudulent conversion or misappropriation of property, forgery, bookmaking, receiving stolen property, counterfeiting, controlled substances, extortion, checks, credit cards, or computer violations specified in Section 502 of the Penal Code.

For the purpose of this section, but not Section 17423, an offense does not include a conviction for which the person has obtained a certificate of rehabilitation from a court of competent jurisdiction under Section 1203.4 or 4852.13 of the Penal Code or a similar certificate of rehabilitation obtained in a foreign jurisdiction.

(c) On and after January 1, 1992, any person who seeks employment by, or an ownership interest in, or other participation in the business of a licensed escrow agent shall, as a condition to obtaining that employment, interest, or participation, authorize Fidelity Corporation and the commissioner, or both, to have access to that person’s state and federal summary criminal history information, as defined in Section 11105 of the Penal Code, for purposes of determining whether the person has a prior conviction of, or pleaded nolo contendere to, a criminal offense specified in subdivision (b).

(d) On or before the 10th day of employment, each escrow agent shall obtain and forward to the commissioner the fingerprint images and related information of persons seeking employment by an escrow agent. The fingerprint images and related information may be submitted by certified mail, return receipt requested, or transmitted electronically, using the process established by the Department of Justice for requesting state and federal summary criminal history information. Persons who have previously submitted fingerprints or fingerprint images and related information to the commissioner may so notify the commissioner and need not submit additional fingerprint images and related information unless requested to do so by the commissioner. The commissioner shall provide written notice to both the escrow agent and to the person if any of the information received pursuant to this division shows that the person’s employment would be in violation of Section 17414.1, and the escrow agent shall deny the person the employment. No person whose employment is in violation of subdivision (a) shall have access to trust funds or sign checks or otherwise perform any activities related to the processing of escrow transactions after the licensed escrow agent has been notified by the commissioner that the person’s employment is in violation of subdivision (a).

(e) Any state and federal summary criminal history information obtained pursuant to this section shall be kept confidential and no recipient shall disclose the contents other than for the purpose of determining eligibility for employment by, or acquisition of an ownership interest in, or other participation in the business of a licensed escrow agent.

(f) The authority granted by this section to the commissioner or to Fidelity Corporation shall be in addition to any other authority granted by law to obtain information about any person who is subject to this division. Nothing in this section shall be construed to limit any authority of the commissioner or Fidelity Corporation otherwise provided by law.

(g) Any person who knowingly violates subdivision (a) or (d), including, but not limited to, any escrow agent who permits employment by, or an ownership interest in, or other participation in the business of an escrow agent in violation of subdivision (a) or (d) shall, upon conviction, be subject to punishment as set forth in Section 17700. Any person who knows of a violation of subdivision (a) or (d) shall immediately report the violation in writing to the commissioner. No person shall be civilly liable for reporting as required under this subdivision, unless the information provided in the report is false and the person providing false information does so with knowledge and malice. The reports filed under this section, including the identity of the person making the filing, shall remain confidential pursuant to state law.

(h) Nothing in this section shall be construed to permit the reinstatement of any person barred by the commissioner pursuant to Section 17423 nor to prohibit the commissioner from bringing any action pursuant to Section 17423.

(i) If any provision of this section or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of this section which can be given effect without the invalid provision or application, and to this end the provisions of this section are severable.

(Amended by Stats. 2008, Ch. 262, Sec. 4. Effective January 1, 2009.)

17414.2.
  

(a) In response to any written request by an escrow agent or by Fidelity Corporation, any bank, savings association, credit union, any other financial institution, or any other exempt person specified in Section 17006, an escrow agent or Fidelity Corporation may provide a written employment reference that advises of the person’s involvement in a crime or act specified in Section 17414 or subdivision (b) of Section 17414.1, or any theft, embezzlement, misappropriation, or other defalcation which has been reported to federal authorities pursuant to federal banking guidelines, or that has been reported to the commissioner or Fidelity Corporation, pursuant to this division. In order for the immunity provided in subdivision (b) to apply, a copy of the written employment reference shall be sent concurrently by the Fidelity Corporation, person, entity, escrow agent, bank, savings association, credit union, any other financial institution, or exempt person specified in Section 17006 providing the reference, to the last known address of the person concerning whom the reference is provided.

(b) No licensed escrow agent, bank, savings association, credit union, any other financial institution, exempt person specified in Section 17006, or Fidelity Corporation shall be civilly liable for providing an employment reference as specified in subdivision (a), unless the information provided is false and the licensed escrow agent, bank, savings association, credit union, any other financial institution, or exempt person specified in Section 17006, or Fidelity Corporation providing false information does so with knowledge and malice.

(Added by Stats. 1991, Ch. 1221, Sec. 5.)

17415.
  

(a) If the commissioner, as a result of any examination or from any report made to him or her, shall find that any person subject to this division is in an insolvent condition, is conducting escrow business in such an unsafe or injurious manner as to render further operations hazardous to the public or to customers, has failed to comply with the provisions of Section 17212.1 or 17414.1, has permitted its tangible net worth to be lower than the minimum required by law, has failed to maintain its liquid assets in excess of current liabilities as set forth in Section 17210, or has failed to comply with the bonding requirements of Chapter 2 (commencing with Section 17200) of this division, the commissioner may, by an order addressed to and served by registered or certified mail or by personal service on such person and on any other person having in his or her possession or control any escrowed funds, trust funds or other property deposited in escrow with said person, direct discontinuance of the disbursement of trust funds by the parties or any of them, the receipt of trust funds, the delivery or recording of documents received in escrow, or other business operations. No person having in his or her possession any of these funds or documents shall be liable for failure to comply with the order unless he or she has received written notice of the order. Subject to subdivision (b), the order shall remain in effect until set aside by the commissioner in whole or in part, the person is the subject of an order for relief in bankruptcy, or pursuant to Chapter 6 (commencing with Section 17621) of this division the commissioner has assumed possession of the escrow agent.

(b) Within 15 days from the date of an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Division 3 of Title 2 of the Government Code. Upon receipt of a request, the matter shall be set for hearing to commence within 30 days after such receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of such notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing. Neither the request for a hearing nor the hearing itself shall stay the order issued by the commissioner under subdivision (a).

(Amended by Stats. 2009, Ch. 500, Sec. 40. Effective January 1, 2010.)

17416.
  

Whenever in the opinion of the commissioner any person, except as named in Section 17006, is engaged, either actually or through subterfuge, in the business of receiving escrows for deposit or delivery as defined in this division, without a license from the commissioner the commissioner may order that person to desist and to refrain from engaging in that business. If, within 30 days after such an order is served, a request for a hearing is filed in writing and the hearing is not held within 60 days thereafter, the order is rescinded.

(Amended by Stats. 1987, Ch. 564, Sec. 4.)

17419.
  

On and after January 1, 1992, any person seeking employment with an escrow agent shall complete an employment application on or before the first day of employment which includes, at least, the following information. A copy of the employment application shall be forwarded to the commissioner on or before the first day of the applicant’s employment. Persons required to file a statement of identity and questionnaire pursuant to subdivision (g) of Section 17209 or Section 17212.1 are not required to file the employment application set forth in this section. Each person completing the employment application shall be given the notice required by the Information Practices Act (Section 1798.17 of the Civil Code), copies of which may be obtained from the commissioner. Nothing in this section shall limit an escrow agent from requesting additional information from an applicant.

STATEMENT OF IDENTITY
AND EMPLOYMENT APPLICATION

Name of Escrow Company:

Escrow Agent License Number:

1. Exact Full Name:
 

(Please Print or Type)First NameMiddle NameLast Name

(Do not use initials or nicknames)

 Title of position to be filled in connection with the preparation of this employment application.
 



 2. Employment for the last 10 years:

From

To

Employer Name and Address

Occupation and Duties

_____

Present

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

 NOTE: Attach separate schedule if space is not adequate.

 3. Residence addresses for the last 10 years:

From

To

Street

City

State

_____

Present

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

_____

 NOTE: Attach separate schedule if space is not adequate.

 4. Have you ever been named in any order, judgment or decree of any court or any governmental agency or administrator, temporarily or permanently restraining or enjoining you from engaging in or continuing any conduct, practice or employment?

( ) Yes  

( ) No

If the answer is “Yes,” please complete the following:

_____

Date of Suit:

Location of Court (City, County, State):

Nature of Suit:

 Note: Attach a certified copy of any order, judgment, or decree.

 5. Have you ever been refused a license to engage in any business in this state or any other state, or has any such license ever been suspended or revoked?

( ) Yes

( ) No

If the answer is “Yes,” please complete the following:

_____

State: Title of State Department:
Nature of License and Number:

Note: Attach a certified copy of any order, judgment, or decree.

 6. Have you ever been convicted of or pleaded nolo contendere to a crime other than minor traffic citations that do not constitute a misdemeanor or felony offense?

NOTE: A conviction is a plea or verdict of guilty or a conviction following a plea of nolo contendere. A conviction also includes an order granting probation and suspending the imposition of sentence, notwithstanding a subsequent order pursuant to Sections 1203.4 or 1203.4a of the Penal Code permitting the person to withdraw his or her plea of guilty, or dismissing the accusation, information, or indictment.

_____

( )  Yes

( ) No

If the answer is “Yes,” please complete the following:

_____

Date of Case:

Location of Court (City, County, State):

Nature of Case:

Note: Attach a certified copy of any order, judgment, or decree.

 7. Have you ever been a defendant in a civil court action other than divorce, condemnation or personal injury?

_____

( )  Yes

( ) No

 If the answer is “Yes,” please complete the following:

_____

Date of Suit:

Location of Court (City, County, State):

Nature of Suit:

Note: Attach a certified copy of any order, judgment, or decree.

 8. Have you ever changed your name or ever been known by any name other than that herein listed?

(Including a woman’s maiden name)

  _____

( ) Yes

( ) No

 If so, explain. Change in name through marriage or court order should also be listed.

 EXACT DATE OF EACH NAME CHANGE MUST BE LISTED.
 
 

 9. Have you ever done business under a fictitious firm name either as an individual or in the partnership or corporate form?

( ) Yes

( ) No

 If the answer is “Yes,” set forth particulars:

 

 

 10. Have you ever been a subject of a bankruptcy or a petition in bankruptcy?

( ) Yes

( ) No

 If the answer is “Yes,” give date, title of case, location of bankruptcy filing:

 

 

 

 11. Have you ever been refused a bond, or have you ever had a bond revoked or canceled?

( ) Yes

( ) No

If the answer is “Yes,” give details:

 

 

 12. In what capacity will you be employed?

(e.g., Clerk, Escrow Officer, Receptionist, etc.)

_____ _____

 13. Do you expect to be a party to, or broker or salesperson in connection with, escrows conducted by the escrow company which is employing you?

( ) Yes

( ) No

 If the answer is “Yes,” please explain:

_____

 

 

 

NOTE: Attach separate schedule if space is not adequate.

VERIFICATION

I, the undersigned, state that I am the person named in the foregoing Statement of Identity and Employment Application; that I have read and signed the Statement of Identity and Employment Application and know the contents thereof, including all exhibits attached thereto, and that the statements made therein, including any exhibits attached thereto, are true.

Any person who knows or should have known of a violation of this section shall immediately report the violation in writing to the commissioner.

_____

I certify/declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

_____

Executed at

_____

(City)

_____

_____

(County)(State)

_____

thisday of, 20__.

_____

_____

(Signature of Declarant)

(Amended by Stats. 2007, Ch. 130, Sec. 94. Effective January 1, 2008.)

17420.
  

Except for the normal compensation of his own employees, it shall be a violation of this division for any person subject to this division to pay over to any other person any commission, fee, or other consideration as compensation for referring, soliciting, handling, or servicing escrow customers or accounts.

It shall also be a violation for any person to enter into any arrangement, either of his own making or of a subsidiary nature, or through any other person having a dual capacity, or through any person having a direct or indirect interest in the escrow, or other device permitting any fee, commission, or compensation which is contingent upon the performance of any act, condition, or instruction set forth in an escrow to be drawn or paid, either in whole or in part, or in kind or its equivalent, prior to the actual closing and completion of the escrow.

(Amended by Stats. 1961, Ch. 475.)

17421.
  

Notwithstanding the provisions of Section 17420, a disbursal, other than for a fee, commission or compensation may be advanced or paid out prior to the close of an escrow if the written instructions of all parties to the transaction so provide.

(Added by Stats. 1963, Ch. 996.)

17421.5.
  

(a) Notwithstanding Section 17420, a licensee may charge a fee for administering an escrow that has been postponed for at least two months from the most recent closing date agreed upon by the parties in the written instructions or has been canceled if all of the following requirements are met:

(1) The postponement or cancellation resulted from the acts or omissions of the parties to the escrow transaction.

(2) The fee was disclosed in the written instructions in not less than 8-point bold type on the face or front page of the instructions.

(3) The principal parties to the escrow transaction have executed the written fee instructions by initialing those instructions.

(b) This section shall apply to written instructions made on and after January 1, 2008.

(Added by Stats. 2007, Ch. 237, Sec. 4. Effective January 1, 2008.)

17422.
  

A joint control agent, unless acting pursuant to written instructions of his principals, shall not disburse funds for the payment of the cost of labor, materials, services, permits, fees, or other items of expense incurred in the construction of improvements upon real property until such time as he determines that the person furnishing such labor, materials, services, permits, fees, or other items has substantially complied with the specifications contained in the control agreement.

(Added by Stats. 1965, Ch. 1205.)

17423.
  

(a) The commissioner may, after appropriate notice and opportunity for hearing, by order, censure or suspend for a period not exceeding 12 months, or bar from any position of employment, management, or control any escrow agent, or any other person, if the commissioner finds either of the following:

(1) That the censure, suspension, or bar is in the public interest and that the person has committed or caused a violation of this division or rule or order of the commissioner, which violation was either known or should have been known by the person committing or causing it or has caused material damage to the escrow agent or to the public.

(2) That the person has been convicted of or pleaded nolo contendere to any crime, or has been held liable in any civil action by final judgment, or any administrative judgment by any public agency, if that crime or civil or administrative judgment involved any offense specified in subdivision (b) of Section 17414.1, or any other offense reasonably related to the qualifications, functions, or duties of a person engaged in the business in accordance with the provisions of this division.

(b) Within 15 days from the date of a notice of intention to issue an order pursuant to subdivision (a), the person may request a hearing under the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Division 3 of Title 2 of the Government Code). Upon receipt of a request, the matter shall be set for hearing to commence within 30 days after such receipt unless the person subject to this division consents to a later date. If no hearing is requested within 15 days after the mailing or service of such notice and none is ordered by the commissioner, the failure to request a hearing shall constitute a waiver of the right to a hearing.

(c) Upon receipt of a notice of intention to issue an order pursuant to this section, the person who is the subject of the proposed order is immediately prohibited from engaging in any escrow processing activities, including disbursing any trust funds in the escrow agent’s possession, custody or control, and the financial institution holding trust funds shall be so notified by service of the notice, accusation and other administrative pleadings. The prohibition against disbursement of trust funds may be set aside, in whole or in part, by the commissioner for good cause.

(d) Fidelity Corporation shall disclose to all licensees the identity of persons who have been censured, suspended, or barred from any position of employment, management, or control.

(e) Persons suspended or barred under this section are prohibited from participating in any business activity of a licensed escrow agent and from engaging in any business activity on the premises where a licensed escrow agent is conducting escrow business. This subdivision shall not be construed to prohibit suspended or barred persons from having their personal escrow transactions processed by a licensed escrow agent.

(f) This section shall apply to any violation, conviction, plea, or judgment occurring at any time prior to and after the enactment of this section.

(g) The provisions of Section 17414.1 exempting convictions for which a person has obtained a certificate of rehabilitation from the prohibition against serving as an officer, director, stockholder, trustee, agent, or employee of an escrow agent, or in any position involving any duties with an escrow agent, shall not apply to permit the reinstatement of any person barred by the commissioner pursuant to this section, nor to prohibit the commissioner from bringing any action pursuant to this section.

(h) If any provision of this section or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of this section which can be given effect without the invalid provision or application, and to this end the provisions of this section are severable.

(Amended by Stats. 1993, Ch. 625, Sec. 4. Effective January 1, 1994.)

17423.1.
  

(a) (1) Whenever the commissioner takes any enforcement or disciplinary action pursuant to Section 17423, upon the action becoming final the commissioner shall notify the Real Estate Commissioner and the Insurance Commissioner of the action or actions taken. The purpose of this notification is to alert the departments that enforcement or disciplinary action has been taken, if the person seeks or obtains employment with entities regulated by the departments.

(2) The commissioner shall provide the Real Estate Commissioner and the Insurance Commissioner, in addition to the notification of the action taken, with a copy of the written accusation, statement of issues, or order issued or filed in the matter and, at the request of the Real Estate Commissioner or Insurance Commissioner, with any underlying factual material relevant to the enforcement or disciplinary action. Any confidential information provided by the commissioner to the Insurance Commissioner or the Real Estate Commissioner shall not be made public pursuant to this section. Notwithstanding any other provision of law, the disclosure of any underlying factual material to the Insurance Commissioner or the Real Estate Commissioner shall not operate as a waiver of confidentiality or any privilege that the commissioner may assert.

(b) The commissioner shall establish and maintain, on the Web site maintained by the Department of Business Oversight, a separate and readily identifiable database of all persons who have been subject to any enforcement or disciplinary action that triggers the notification requirements of this section. The database shall also contain a direct link to the databases, described in Section 10176.1 of the Business and Professions Code and Section 12414.31 of the Insurance Code and required to be maintained on the Web sites of the Bureau of Real Estate and the Department of Insurance, respectively, of persons who have been subject to enforcement or disciplinary action for malfeasance or misconduct related to the escrow industry by the Insurance Commissioner and the Real Estate Commissioner.

(c) There shall be no liability on the part of, and no cause of action of any nature shall arise against, the State of California, the Department of Business Oversight, the Commissioner of Business Oversight, any other state agency, or any officer, agent, employee, consultant, or contractor of the state, for the release of any false or unauthorized information pursuant to this section, unless the release of that information was done with knowledge and malice, or for the failure to release any information pursuant to this section.

(Amended by Stats. 2013, Ch. 352, Sec. 89. Effective September 26, 2013. Operative July 1, 2013, by Sec. 543 of Ch. 352.)

17424.
  

(a) For any licensee, a disciplinary action taken by the State of California, another state, an agency of the federal government, or another country for an action substantially related to the activity regulated under this division may be grounds for disciplinary action by the commissioner. A certified copy of the record of the disciplinary action taken against the licensee by the State of California, other state, agency of the federal government, or other country shall be conclusive evidence of the events related therein.

(b) Nothing in this section shall preclude the commissioner from applying a specific statutory provision in this division providing for discipline against a licensee as a result of disciplinary action taken against a licensee by the State of California, another state, an agency of the federal government, or another country.

(Added by Stats. 2003, Ch. 473, Sec. 19. Effective January 1, 2004.)

17425.
  

Any person subject to this division or any director, stockholder, trustee, officer, agent, or employee of that person who violates any provision of the federal Real Estate Settlement Procedures Act, as amended (12 U.S.C. Sec. 2601 et seq.), or any regulation promulgated thereunder, violates this division.

(Added by Stats. 2007, Ch. 237, Sec. 5. Effective January 1, 2008.)

FINFinancial Code - FIN