Published: 2015-07-08
Key Benefits:
(a) Unless exempted under the provisions of Chapter 1 (commencing with Section 25200) of this part, no broker-dealer shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless the broker-dealer has first applied for and secured from the commissioner a certificate, then in effect, authorizing that person to act in that capacity.
(b) No person shall, on behalf of a broker-dealer licensed pursuant to Section 25211, or on behalf of an issuer, effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless that broker-dealer and agent have complied with any rules as the commissioner may adopt for the qualification and employment of those agents.
(c) The commissioner shall, consistent with Section 25213, review the disciplinary histories of agents upon the filing of notice of (1) the employment or transfer of an agent for a broker-dealer, (2) an amendment to the information filed by the agent at the time of employment or transfer, and (3) the termination of employment of the agent from the broker-dealer.
(Amended by Stats. 1998, Ch. 769, Sec. 2. Effective January 1, 1999.)
(a) The application for a certificate as a broker-dealer shall be accompanied by the consent to service of process specified in Section 25240 and, unless filed pursuant to subdivision (b), shall contain such information in such detail relating to the applicant and any persons associated with him or her as the commissioner may by rule require.
(b) A broker-dealer registered under the Securities Exchange Act of 1934 who is a member of the New York Stock Exchange, the NYSE Amex, the NYSE Arca, or the Financial Industry Regulatory Authority, and who has not had any certificate as a broker-dealer, investment adviser or agent denied or revoked under this law or any predecessor statute, may be licensed by notification pursuant to this subdivision by filing with the commissioner an application setting forth the following information in such form and detail as the commissioner may by rule require:
(1) Such information as is necessary to identify the broker-dealer and its offices in this state, and the location of its records and principal office.
(2) Such information as is necessary to establish that the broker-dealer meets the requirements for licensure by notification under this subdivision.
(3) The consent to service of process specified in Section 25240.
(4) Such information as the commissioner may require as to the jurisdictions in which the broker-dealer is licensed or registered and as to the nature of the business conducted by the broker-dealer.
(c) Unless a proceeding has been instituted under Section 25212, a certificate under subdivision (b) shall become effective on the third business day after the application is filed with the commissioner or upon the day the certificate is issued, whichever first occurs. However, the commissioner may by order delay effectiveness for a period not exceeding 15 business days (or for an additional period with the consent of the applicant) if the commissioner believes that the delay is necessary in the public interest to determine if a proceeding should be instituted under Section 25212. The commissioner may by rule or order waive that provision of subdivision (b) which precludes application thereunder by a person who has had a certificate denied or revoked under this law or any predecessor statute if the commissioner finds the waiver to be in the public interest. The commissioner, after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may by rule or order disqualify a self-regulatory organization specified in subdivision (b) from the provisions thereof. The commissioner may by rule establish standards or criteria pursuant to which disqualification may be made and he or she may disqualify upon a finding that the self-regulatory organization fails substantially to comply with those standards or criteria. Disqualification by the commissioner shall not affect a certificate which has become effective pursuant to this subdivision prior to the effective date of that rule or order of disqualification but each person licensed pursuant to subdivision (b) upon the basis of membership in that organization shall, within 90 days after the effective date of that rule or order, or such additional time as the commissioner may allow, file with the commissioner a complete and current application in the form required pursuant to subdivision (a). If a broker-dealer licensed pursuant to subdivision (b) ceases to meet the qualifications for licensing pursuant to that subdivision, he or she shall, within 10 days after that event, file with the commissioner a complete and current application in the form required pursuant to subdivision (a).
(d) An application for a certificate as a broker-dealer, with respect to a broker-dealer to be formed or organized, may be made by a licensed broker-dealer to which the broker-dealer to be formed or organized is to be the successor. The application shall contain such information in such detail relating to the applicant and to the successor and any person associated with the applicant or the successor as the commissioner may by rule require. The application shall become effective and the successor may transact business as a broker-dealer 30 days after the receipt of the application by the commissioner or within such shorter period of time as the commissioner may determine, unless an order has been entered under Section 25212 denying a certificate to the successor or a proceeding looking toward an order has been instituted under that section. The certificate shall terminate on the 45th day after the effective date thereof, unless prior thereto the successor shall, in accordance with such rules as the commissioner may prescribe, adopt the application as its own and file the consent to service of process specified in Section 25240.
(Amended by Stats. 2009, Ch. 131, Sec. 12. Effective January 1, 2010.)
A broker-dealer acting pursuant to a certificate which is then in effect and which is issued pursuant to Section 25211, shall be exempt from the usury provisions of the State Constitution. This section creates and authorizes a class of persons pursuant to Section 1 of Article XV of the Constitution.
(Added by Stats. 1983, Ch. 859, Sec. 2. Effective September 16, 1983.)
The commissioner may, after appropriate notice and opportunity for hearing, by order censure, deny a certificate to, suspend for a period not exceeding 12 months or revoke the certificate of, any broker-dealer if the commissioner finds that the censure, denial, suspension, or revocation is in the public interest and that the broker-dealer, whether prior or subsequent to becoming a broker-dealer, or any partner, officer, director, or branch manager of the broker-dealer, whether prior or subsequent to becoming associated with the broker-dealer, or any person directly or indirectly controlling the broker-dealer, whether prior or subsequent to becoming such, or any agent employed by the broker-dealer while so employed has done any of the following:
(a) Has willfully made or caused to be made in any application for a certificate or in any report required to be filed with the commissioner under this law, or in any proceeding before the commissioner, any statement which was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, or has willfully omitted to state in the application or report any material fact which is required to be stated therein.
(b) Has been either (1) convicted of or has pled nolo contendere to a felony or misdemeanor, or (2) held liable in a civil action by final judgment of a court based upon conduct showing moral turpitude, and the commissioner finds that the felony, misdemeanor, or civil action (A) involved the purchase or sale of any security, (B) arose out of the conduct of the business of a broker-dealer or investment adviser, (C) involved theft, or (D) involved the violation of Section 1341, 1342, or 1343 of Title 18 of the United States Code.
(c) Is permanently or temporarily enjoined by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter, or broker-dealer, or as an affiliated person or employee of any investment company, bank, or insurance company, or from engaging in or continuing any conduct or practice in connection with that activity or in connection with the purchase or sale of any security.
(d) Is or has been subject to (1) any order of the Securities and Exchange Commission or the securities administrator of any other state denying registration to, or revoking or suspending the registration of, the person as a broker, dealer, agent, or investment adviser, (2) any order of any national securities association or national securities exchange (registered under the Securities Exchange Act of 1934) suspending or expelling that person from membership in the association or exchange or from association with any member thereof, or (3) any other order of the commission or any administrator, association, or exchange referred to in this subdivision which is or has been necessary for the protection of any investor.
(e) Has willfully violated any provision of the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Commodity Exchange Act, or Title 4 (commencing with Section 25000), including the Franchise Investment Law, Division 5 (commencing with Section 31000), or the California Commodity Law of 1990, Division 4.5 (commencing with Section 29500), or of any rule or regulation under any of those statutes, or any order of the commissioner which is or has been necessary for the protection of any investor.
(f) Is or has been subject to (1) any order of the Commodity Futures Trading Commission denying registration to, or revoking or suspending the registration of, that person under the Commodity Exchange Act, (2) any order of any board of trade or commodity exchange, including, but not limited to, the New York Mercantile Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, or the Chicago Board Options Exchange, suspending or expelling that person from membership in the board of trade or commodity exchange or from association with any member thereof, or (3) any other order of the commission or any board or exchange referred to in this subdivision which is or has been necessary for the protection of any investor.
(g) Has willfully aided, abetted, counseled, commanded, induced, or procured the violation by any other person of any of the statutes or rules or regulations referred to in subdivision (e) above, or has failed reasonably to supervise, with a view to preventing violations of those statutes, rules and regulations, another person who commits a violation, if the other person is subject to his or her supervision; for the purposes of this subdivision, no person shall be deemed to have failed reasonably to supervise any person if (1) there have been established procedures, and a system for applying those procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any violation by the other person, and (2) that person has reasonably discharged the duties and obligations incumbent upon him or her by reason of those procedures and system without reasonable cause to believe that those procedures and system were not being complied with.
(h) Is subject to any currently effective order of the commissioner entered pursuant to Section 25213 revoking or suspending the certificate of the person as an agent.
(i) Has violated any provision of this division or the rules thereunder or, in the case of an applicant only, any similar regulatory scheme of the State of California or a foreign jurisdiction.
(Amended by Stats. 2003, Ch. 473, Sec. 2. Effective January 1, 2004.)
The commissioner may immediately revoke by order the certificate of any broker-dealer if the broker-dealer fails to comply with any currently effective order of the commissioner which is necessary for the protection of any investor, unless the broker-dealer secures a court order restraining the enforcement of the commissioner’s revocation order within 10 days of the date the order is issued.
(Amended by Stats. 2002, Ch. 772, Sec. 2. Effective January 1, 2003.)
The commissioner may, after appropriate notice and opportunity for hearing, by order censure, or suspend for a period not exceeding 12 months, or deny or bar from any position of employment, management or control of any broker-dealer or investment adviser, any officer, director, partner, agent, employee of, or person performing similar functions for, a broker-dealer, or any other person, if the commissioner finds that the censure, suspension, denial, or bar is in the public interest and that the person has committed any act or omission enumerated in subdivision (a), (e), (f), or (g) of Section 25212 or has been convicted of, or pled nolo contendere to, any offense or been held liable in any civil action specified in subdivision (b) of Section 25212, or is enjoined from any act, conduct or practice specified in subdivision (c) of Section 25212 or is subject to any order specified in subdivision (d) of Section 25212.
(Amended by Stats. 2002, Ch. 772, Sec. 3. Effective January 1, 2003.)
The commissioner shall, after appropriate notices and opportunity for hearing, by order suspend, for a period not exceeding 12 months, or bar from any position of employment, management or control of any broker-dealer, any officer, director, partner, agent, employee of, or person performing similar functions for, a broker-dealer, or any other person, if the person has been convicted of, or has pleaded nolo contendere to, a felony or misdemeanor in violation of Section 25541 that was committed on or after January 1, 1989.
(Amended by Stats. 2002, Ch. 772, Sec. 4. Effective January 1, 2003.)
(a) It is unlawful for any person, as to whom an order suspending or barring employment or control is in effect pursuant to Section 25213 or 25213.3, willfully to become or to be employed by any broker-dealer or investment adviser, contrary to the terms of that order, without the consent of the commissioner; and it is unlawful for any broker-dealer to permit a person as to whom an order is in effect pursuant to Section 25213, 25213.3, or 25232.1 to become or to remain a person employed by the broker-dealer, contrary to the terms of that order, without the consent of the commissioner, if the broker-dealer knew, or in the exercise of reasonable care should have known, of the order.
(b) Any person as to whom an order suspending or barring employment or control is issued pursuant to Section 25213 or 25213.3 may petition the commissioner for reinstatement or reduction of penalty, or for modification of the order, as provided in and subject to the provisions of Section 11522 of the Government Code. The commissioner may, at any time and with the consent of that person without hearing, modify such order.
(Amended by Stats. 1988, Ch. 1339, Sec. 2.)
No order may be entered under Section 25212, 25213, 25213.3, or 25252 except after notice to any person affected thereby (and, in the case of an agent, to his or her employer or prospective employer if known to the commissioner) of the intention of the commissioner to enter that order and of the reasons therefor and that upon receipt of a request the matter will be set down for hearing to commence within 15 business days after that receipt unless the person affected consents to a later date. If no hearing is requested within 30 days after the mailing of the notice and none is ordered by the commissioner, the order may be entered without hearing to remain in effect until it is modified or vacated by the commissioner. In the case of an original application for a certificate, that hearing shall be set down to commence within 15 business days after receipt of a written request by the applicant made 30 days or more after the filing of the application, even though no notice by the commissioner has been given, unless the applicant consents to a later date. If a hearing is requested or ordered, it shall be held in accordance with the provisions of 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 of the powers granted thereunder.
(Amended by Stats. 1998, Ch. 391, Sec. 1. Effective January 1, 1999.)
(a) No broker-dealer or agent shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state by means of any manipulative, deceptive or other fraudulent scheme, device, or contrivance. The commissioner shall, for the purposes of this subdivision, by rule define such schemes, devices or contrivances as are manipulative, deceptive, or otherwise fraudulent.
(b) No broker-dealer or agent shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in connection with which such broker-dealer or agent engages in any fraudulent, deceptive or manipulative act or practice or makes any fictitious quotation. The commissioner shall, for the purposes of this subdivision, by rule define and prescribe means reasonably designed to prevent such acts and practices as are fraudulent, deceptive, or manipulative and such quotations as are fictitious.
(c) No broker-dealer or agent shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in contravention of such rules as the commissioner may prescribe as necessary or appropriate in the public interest or for the protection of investors to provide safeguards with respect to the financial responsibility of broker-dealers. Subject to the limitations of Section 15(h) of the Securities Exchange Act of 1934, those rules may require a minimum capital for broker-dealers or prescribe a ratio between net capital and aggregate indebtedness or both and a fidelity bond.
(d) No broker-dealer or agent shall effect or attempt to effect in this state, in contravention of such rules as the commissioner may prescribe as necessary or appropriate in the public interest or for the protection of investors, (1) any transaction in connection with any security whereby any party to such transaction acquires any put, call, straddle, or other option or privilege (A) of buying or selling the security, (B) on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the market value thereof), (C) entered into on a national securities exchange relating to foreign currency, or (2) any transaction in connection with any security with relation to which the broker-dealer or agent has, directly or indirectly, any interest in any such put, call, straddle, option, or privilege, or (3) any transaction in any security for the account of any person who the broker-dealer or agent has reason to believe has, and who actually has, directly or indirectly, any interest in any such put, call, straddle, option, or privilege with relation to such security.
(e) The commissioner may by rule require any issuer who employs agents in connection with any security or transaction not exempted by Chapter 1 (commencing with Section 25100) of Part 2 of this division to post a surety bond in an amount not exceeding ten thousand dollars ($10,000), conditioned that the issuer will comply with the provisions of this law and the rules and orders issued thereunder. The bond, unless previously canceled, shall cover for the entire period that the qualification is in effect. If a deposit in lieu of a bond is made pursuant to Article 7 (commencing with Section 995.710) of Chapter 2 of Title 14 of Part 2 of the Code of Civil Procedure, the deposit may include an appropriate deposit of securities. No suit may be maintained to enforce any liability on the bond unless brought within two years after the contract of sale or other act upon which the suit is based.
(Amended by Stats. 1997, Ch. 391, Sec. 20. Effective January 1, 1998.)
(a) No broker-dealer licensed under this chapter shall, effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless such broker-dealer and all agents employed by such broker-dealer meet such specified and appropriate standards with respect to training, experience, supervision, terms of employment, and other qualifications as the commissioner finds necessary or desirable. The commissioner may establish such standards by rules, which may: (1) appropriately classify broker-dealers and agents (taking into account relevant matters, including types of business done and nature of securities sold); (2) specify that all or any portion of such standards shall be applicable to any such class; (3) require persons in any such class to pass examinations prescribed in accordance with such rules; and (4) provide that persons in any such class, other than a broker-dealer and partners, officers and supervisory employees (which term may be defined by the commissioner’s rules and as so defined shall include branch managers of broker-dealers) of broker-dealers, may be qualified solely on the basis of compliance with such specified standards of training and such other qualifications as the commissioner finds appropriate.
(b) In addition to the fees imposed by Section 25608, the commissioner may prescribe by rule reasonable fees and charges to defray the cost of any examination administered by the commissioner or under the commissioner’s direction. The commissioner may cooperate with national securities associations and national securities exchanges and with the Securities and Exchange Commission in administering examinations and may require broker-dealers and agents to pass examinations administered by or on behalf of any such association or exchange or by the Securities and Exchange Commission and to pay to such association or exchange or such commission reasonable fees or charges to defray the costs incurred by such association or exchange or commission in administering such examinations.
(c) A broker-dealer licensed under this chapter making loans to its customers which are subject to the provisions of Division 9 (commencing with Section 22000) of the Financial Code shall be licensed as a personal property broker under that division.
(Amended by Stats. 1979, Ch. 665.)
No broker-dealer licensed under this chapter shall effect any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in contravention of such rules as the commissioner may prescribe designed to promote just and equitable principles of trade, to provide safeguards against unreasonable profits or unreasonable rates of commissions or other charges, and in general to protect investors and the public interest, and to remove impediments to and perfect the mechanism of a free and open market.
(Amended by Stats. 1979, Ch. 665.)
Notwithstanding any other provision of this division, if in his or her opinion the public interest and the protection of investors so require, the commissioner is authorized summarily to suspend all over-the-counter trading in this state by broker-dealers and agents in any security or summarily to suspend all trading on a national securities exchange located in this state in any security (provided, in the case of trading on that exchange, that the security is not listed on any national securities exchange located outside this state on which trading has not been suspended) for a period not exceeding 90 days, and for successive periods of 90 days. No broker-dealer or agent shall effect any transaction (other than an unsolicited brokerage transaction effected on a national securities exchange located outside this state) in, or induce or attempt to induce the purchase or sale of, any security in this state in which trading is in any manner suspended under this section, except in performance of a contract previously entered into.
(Amended by Stats. 2009, Ch. 131, Sec. 13. Effective January 1, 2010.)
At any time after the issuance of an order under Section 25219, any interested person (including, but not limited to, the issuer of the security and any broker-dealer who has been making a market in the security) may in writing request that the suspension of trading be rescinded. Upon the receipt of such a written request, the matter shall be set down for hearing to commence within 15 business days after such receipt unless the person making the request consents to a later date. After such hearing, which shall be conducted in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and in connection with which the commissioner shall have all of the powers granted thereunder, the commissioner may order such suspension to be continued until modified or rescinded by further order of the commissioner if he finds that trading in the security will be unfair, unjust, or inequitable to investors or will tend to work a fraud upon the purchasers or sellers of such security. Otherwise, he shall rescind the suspension of trading and no further orders may be entered under Section 25219 with respect to the same security in the absence of changed circumstances justifying such order.
(Amended by Stats. 1973, Ch. 390.)
(a) Notwithstanding any other provision of law, a broker-dealer, or any affiliate thereof, licensed under this chapter, or any officer or employee thereof, may submit to the Department of Justice fingerprints of an applicant for employment for the purpose of obtaining information as to the existence and nature of a record of a conviction and of an arrest for which the Department of Justice establishes that the applicant was released on bail or on his or her own recognizance pending trial. Fingerprints taken pursuant to this section include fingerprints taken by the use of fingerprint live-scan technology, as described in Section 1596.871 of the Health and Safety Code.
(b) The Department of Justice shall provide the following information to the broker-dealer, affiliate, or officer or employee thereof pursuant to subdivision (a):
(1) Every conviction rendered against the applicant.
(2) Every arrest for which the Department of Justice establishes that the applicant was released on bail or on his or her own recognizance pending trial.
(Added by Stats. 2001, Ch. 547, Sec. 1. Effective January 1, 2002.)
