DFI Monthly Bulletin – December 2004
Volume 8, Number 6
DFI Issues Cease and Desist Warning to Malibu Trust Company
A warning to cease and desist from doing business in California without a license from the
Commissioner of Financial Institutions was issued to Malibu Trust Company, 418 Santa Rosa Avenue,
Santa Rosa, California 95404.
Malibu Trust Company is not authorized to transact business in the way or manner of a bank and is not
authorized to transact business under a name which contains the word “trust” or “trust company” and
indicates the business is that of a bank or trust company pursuant to Chapter 18 of Division 1 of the
California Financial Code. All persons who have communicated with Malibu Trust Company are asked
to contact the Department of Financial Institutions, Legal Division, San Francisco, at (415) 263-8528.
Two-Week Absence from Duties Policy
The Department of Financial Institutions (DFI) wishes to clarify its position on what has commonly
been referred to as a “two-week vacation policy” for the officers and employees of its licensees. First,
we wish to clarify that this is not, and has never been intended to be, a policy to specifically require each
officer and employee to take two consecutive weeks of vacation each calendar year.
As a vital internal control to enhance the safety and soundness of its licensees by dramatically reducing
the likelihood of internal fraud and/or embezzlement, the DFI strongly encourages each of its licensees
to formulate, implement, follow, and monitor a board-approved policy to ensure that each of its officers
and employees remains continuously absent from his or her duties for a period of two consecutive
weeks during each calendar year. This requirement for continuous absence from one’s duties could
include a combination of vacation, jury duty, attendance at training or conferences, business trips, and
rotation of employee work assignments.
111 Pine Street, Suite 1100, San Francisco, CA 94111-5613 (415) 263-8500
300 South Spring Street, Suite 15513, Los Angeles, CA 90013-1204 (213) 897-2085
1810—13th Street, Sacramento, CA 95814-7118 (916) 322-5966
7575 Metropolitan Drive, Suite 108, San Diego, CA 92108-4421 (619) 682-7227
Consumer Compliance (800) 622-0620
2 Monthly Bulletin December 2004
An important requirement for any such two-week policy would be for someone other than the “absent”
employee to perform his or her duties during this period of two consecutive weeks. This would provide
an important opportunity for the individual performing the duties on a substitute basis to identify any
discrepancies, irregularities, or other questionable transactions that may have been performed or
perpetuated by the absent individual. The DFI considers a two-week period to be a reasonable time
period during which an absent employee’s duties can be assumed by another for the purpose of
detecting, and reducing the risk of, employee fraud or embezzlement.
If an employee does not hold what would be considered to be a position that could represent financial
risk to the institution or its customers, the board’s policy could provide for that employee to be
specifically exempted from the institution’s two-week policy. However, we would expect that the
reasons for any such exemptions be documented, and any such exemptions should be approved by the
board of directors. Such exemptions should be re-evaluated each year as to appropriateness of that
employee being granted a continued exemption from the two-week policy.
The proper implementation of such a two-week policy has proven to be an effective safeguard to
enhance an institution’s internal controls, risk management practices, and fraud prevention activities in
order to reduce the likelihood of internal fraud or embezzlement. Failure to implement and follow an
appropriate two-week policy, or failure to properly justify and approve any exceptions to such a policy,
could subject a licensee to criticism at future examinations.
Any questions should be addressed to your appropriate Assistant Deputy Commissioner.
DFI to Accept Branch Applications via FDICconnect
The California Department of Financial Institutions (DFI) will accept branch applications via
FDICconnect, a secure Internet-based channel that allows institutions supervised by the Federal Deposit
Insurance Corporation (FDIC) to conduct business and exchange information with the FDIC. Starting in
2005, FDIC-supervised banks may file new branch or branch relocation application notices with DFI
over the Internet via FDICconnect in lieu of mailing a Form 25 to the Department as is now done.
When a bank files an application via FDICconnect, an email is generated notifying the DFI Licensing
Unit that an application has been filed and can be downloaded from the FDIC.
At the present time, only new branch and branch relocation applications that qualify for Financial Code
section 490 exemptions will be accepted for filing via FDICconnect. New branch and branch relocation
applications that are not eligible for exemption and head office relocations may be added at a later date.
Participating in FDICconnect allows DFI to leverage technology to meaningfully reduce regulatory
burden to its licensees and add value to the state charter. We encourage eligible licensees to join DFI in
our efforts to streamline the regulatory process.
For more information on the functionality of FDICconnect, see FDIC Financial Institution Letter (FIL)
FIL-93-2003 and FIL-135-2004. The DFI contact person for applications via FDICconnect is Licensing
Unit manager Patrick Carroll. He can be reached at (415) 263-8559 or by email at firstname.lastname@example.org.
3 Monthly Bulletin December 2004
Recent Changes to Credit Union Law
As a result of the passage of AB 2014, changes were made to two sections of the Credit Union Law as
of January 1, 2005. More specifically, the changes are as follows:
Changes to Financial Code (FC) sections 14252 and 14703(b)
Impact: FC Section 14252 – Small credit unions less than $10 million in assets
FC Section 14703(b) – Federally and privately insured credit unions
FC Section 14252
This section required all California state-chartered credit unions to obtain and file an annual opinion
audit report containing financial statements prepared in accordance with generally accepted accounting
principles, and any other information the Commissioner may specify. The Commissioner may exempt a
credit union from the opinion audit requirement, but the credit union must submit a written request for
approval of this exemption on an annual basis.
Effective January 1, 2005, FC Section 14252 has been amended to permit small credit unions with total
assets of less than $10 million to submit an audit report consisting of alternative procedures acceptable
to the Commissioner, in lieu of an opinion audit, without requesting an exemption each fiscal year. The
alternative procedures may be performed by (1) an independent certified public accountant; (2) an
independent public accountant; or (3) the credit union’s supervisory committee, in accordance with
Section 14533. Federally insured state-chartered credit unions are reminded that they must also satisfy
the requirements of NCUA Rule 715.6.
FC Section 14703 (b)
This section required all credit unions to make an adjustment to the regular reserves and undivided
earnings in an amount equal to the balance in the provision for loan losses expense account. If the
balance is a debit, regular reserves shall be charged, and undivided earnings shall be credited, and, if the
balance is a credit, undivided earnings shall be charged and regular reserves shall be credited.
Effective January 1, 2005, FC 14703 (b) has been deleted. This change eliminates the accounting entry
that makes transfers between the regular reserve and undivided earnings accounts based on the amount
of the provision for loan losses expense. It enables credit unions, both federally and privately insured,
to retain the amounts previously appropriated to the regular reserve account without continued
replenishment or depletion of the account.
Note: While the accounting entry of FC 14703 (b) has been eliminated, the transfer requirements of
California Code of Regulations Section 30.404 are still applicable for privately insured credit unions.
At the end of each accounting period, privately insured credit unions must continue to transfer 10% of
gross income to the regular reserve until the risk asset ratio is 4% and then 5% of gross income until the
regular reserve equals 6% of total risk assets.
4 Monthly Bulletin December 2004
Closing of U.S. Tour & Remittance, Inc.
On Thursday, December 9, 2004, the Commissioner of Financial Institutions took possession of U.S.
Tour & Remittance, Inc. and ordered that it be liquidated. The Commissioner then appointed Robb
Evans as a Special Deputy Commissioner of Financial Institutions to supervise the liquidation, and Mr.
Evans accepted the appointment.
For more information, please contact Robb Evans & Associates LLC at P.O. Box 880, Sun Valley,
California 91353-0880; Telephone: (818) 768-8100; Fax: (818) 768-8802; Email: email@example.com;
Web site: www.robbevans.com
Notice to all Premium Finance Companies Licensed
under the Industrial Loan Law
This is to remind all Premium Finance Company licensees about their financial reporting requirements
under California Financial Code Sections 18405 and 18407.
Pursuant to California Financial Code Section 18405, audited financial statements for each California
Premium Finance Company licensee for the calendar year 2004 are due by no later than March 15, 2005.
These statements should also be sent to: Assistant Deputy Commissioner Douglas Kirkpatrick,
Department of Financial Institutions, 300 So. Spring St. Suite 15513, Los Angeles, CA 90013. For good
cause, the commissioner may grant an extension in which to file these audited statements. Any such
requests must be in writing and received by the Department prior to the March 15th deadline. These
requests should also be sent to Assistant Deputy Commissioner Douglas Kirkpatrick’s attention.
Please note that the audited statements must be prepared in accordance with generally accepted
accounting principles for only the California Corporation that is licensed by our Department. A
consolidated audit report for the parent company will not be acceptable. This is necessary so that
Department can accurately calculate the industry and individual company assessments.
Finally, please be aware that Financial Code Section 18412 imposes a penalty of one hundred ($100) for
each day the report is delayed or withheld by the failure or neglect of the company.
Pursuant to Section 18407, unaudited financial statements (“call reports”) for your company consisting
of at least a balance sheet and a statement of income for the period of January 1, 2004 to December 31,
2004 are due by no later than January 31, 2005. They should be sent to Assistant Deputy Commissioner
Douglas Kirkpatrick’s attention at the Department’s Los Angeles office. Also as a reminder, and on an
ongoing basis, call reports are to be filed by no later than 30 days after the end of each quarter.
If you have any questions regarding these requirements, please call Assistant Deputy Commissioner
Douglas Kirkpatrick at (213) 897-2223 or by email at firstname.lastname@example.org.
5 Monthly Bulletin December 2004
Commercial Bank Activity
Charter Oak Bank
1739 Trancas Street, Napa, Napa County, CA 94558
Officers: Brian Kelly, President and Chief Executive Officer
Rod Wiessner, Executive Vice President and Chief Financial Officer
Kathryn Sommer, Executive Vice President and Chief Credit Officer
Pan Pacific Bank
47065 Warm Springs Boulevard, Fremont, Alameda County
Correspondent: Maryam Hamzeh
Carpenter & Company
5 Park Plaza, Suite 950
Irvine, CA 92614
Security Bank of California
3403 Tenth Street, City and County of Riverside
Correspondent: Maryam Hamzeh
Carpenter & Company
5 Park Plaza, Suite 950
Irvine, CA 92614
(Name changed from Security Pacific Bank on 12/10/04)
2410 San Ramon Valley Boulevard, San Ramon, Contra Costa County
Correspondent: Grace Wickersham
Carpenter & Company
Five Park Plaza, Suite 950
Irvine, CA 92614
6 Monthly Bulletin December 2004
Bank of Amador, Jackson, with and into American River Bank, Sacramento
Bank of Lodi, N.A., Lodi, with and into Placer Sierra Bank, Auburn
Center Savings Bank of Washington, Lynwood, Washington, with and into Center Bank, Los Angeles
Community First National Bank, Fargo, North Dakota, with and into Bank of the West, San Francisco
Industrial Bank Activity
New Industrial Bank
910 East Hamilton Avenue, Suite 150, Campbell, Santa Clara County
Correspondent: David L. Redman
910 E. Hamilton Avenue, Suite 400
Campbell, CA 95008
Premium Finance Company Activity
New Premium Finance Company
Global Premium Funding, Inc.
1010 North Hollywood Way, Burbank, Los Angeles County
Correspondent: Moses M. Gazazian
1010 North Hollywood Way,
Burbank, CA 91505
NCMIC Finance Corporation of California
980 9th Street, City and County of Sacramento
Correspondent: Mark Raymie
14001 University Avenue
Clive, IA 50325
7 Monthly Bulletin December 2004
New Premium Finance Company (Continued)
Pi Omega Delta Financial Services, Inc.
14500 Hurricane Lane, Helendale, San Bernardino County
Correspondent: Todd Greenbaum
Input 1, LLC
21820 Burbank Boulevard, Suite 300
Woodland Hills, CA 91367
Sequoia Premium Finance Company, Inc.
2211 Plaza Drive, Suite 100, Rocklin, Placer County
Correspondent: Patrick M. Royan
20170 Upper Thompson Road
Los Gatos, CA 95033
Foreign (Other State) Bank Activity
Change of Name
First International Capital to UPS Capital Business Credit (Facility – Uninsured Bank)
Foreign (Other Nation) Bank Activity
Nacional Financiera, S.N.C.
600 Wilshire Boulevard, Suite 1210, City and County of Los Angeles (Representative Office)
Address changed: 11/3/04 from 900 North Broadway, Santa Ana, Orange County
Royal Bank of Canada, Montreal, Quebec, Canada
San Francisco, San Francisco County (Representative Office)
8 Monthly Bulletin December 2004
Credit Union Activity
Kai-Perm Sacramento Federal Credit Union, Sacramento into Sacramento Credit Union, Sacramento
New World Federal Credit Union, Lafayette into Telesis Community Credit Union, Chatsworth
Vallejo Schools Federal Credit Union, Vallejo, into 1st Pacific Credit Union, Vallejo
Field of Membership
Thirteen credit unions received approvals to add 33 new fields of membership during November 2004.
Two credits union received approval for one bylaw amendments during November 2004.
One credit union received an approval for a request for variance to sections of the California Code of
Regulations during November 2004.
Twenty-seven new fields of membership applications were approved during the month of October, not
28, as reported in the November 2004 issue of the Monthly Bulletin.
Transmitter of Money Abroad Activity
New Transmitter of Money Abroad
Banagricola de El Salvador, Inc.
G&T Continental Tranferencias Mundiales, Inc.
9 Monthly Bulletin December 2004
Change of Name
Comercial dos Acores, Inc. to BANIF & Comercial dos Acores, Inc.
Giromex, Inc. to Omnex Group, Inc.
Voluntary Surrender of License
Espirito Santo E Comercial De Lisboa Inc.
Commissioner of Financial Institutions
Bulletin for Month ended
December 2004, issued pursuant
to Financial Code section 258
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