Investment and Financial Services Laws Administered by the DFPI

Regulation of Investments

1. Corporate Securities Law of 1968 (Corporations Code § 25000 et seq.) requires persons offering or selling securities such as stocks or bonds to qualify (e.g., submit to the Department for review and approval) the proposed securities, and requires licensing and regulation of securities broker-dealers and certain investment advisers, except as specified; prohibits misrepresentations, fraudulent and deceptive acts in the offer and sale of securities; and provides administrative, civil (injunction, ancillary relief and appoint of receiver) and criminal remedies for violations of the law.

• §§ 25004, 25009 and 25019: defines “broker-dealer,” “investment adviser” and “security”
• § 25110: prohibits the offer or sale of securities without licensure or exemption
• § 25210: prohibits acting as a broker-dealer without licensure or exemption
• § 25230: prohibits acting as an investment adviser without licensure or exemption
• § 25401: prohibits misrepresentations or omissions in the offer or sale of securities
• § 25404: concealing evidence or making untrue statements to Department is a crime
• § 25540: violation of provision, rule or order is a felony/misdemeanor
• § 25541: use of device, scheme or artifice to defraud is a felony

2. California Commodity Law of 1990 (Corporations Code § 29500 et seq.) prohibits misrepresentation, fraudulent and deceptive acts in the offer and sale of certain off-exchange commodities, except as specified; and provides administrative, civil (injunctions, ancillary relief and appointment of receiver) and criminal remedies for violations of the law.

• §§ 29504, 29505 and 29509: defines “commodity,” “commodity contract” and “commodities merchant”
• §§ 29520 and 29535: prohibits the offer or sale of commodities without licensure or exemption
• § 29536: prohibits misrepresentations, fraud or deceptive acts or advertising
• § 29538: concealing evidence or making untrue statement to Department is a crime
• § 29550: violation of provision, rule or order is a felony/misdemeanor

3. Franchise Investment Law (Corporations Code § 31000 et seq.) requires persons offering or selling franchises to register (e.g., submit to the Department for review and approval) the proposed franchises with the Department, except as specified; prohibits misrepresentation, fraudulent and deceptive acts in the offer and sale of franchises; and provides administrative, civil (injunction, ancillary relief and appoint of receiver) and criminal remedies for violations of the law.

• § 31005: defines “franchise”
• § 31110: prohibits the offer or sale of franchises without licensure or exemption
• § 31201: prohibits misrepresentations or omissions in the offer or sale of franchises
• § 31204: concealing evidence or making untrue statements to Department is a crime
• § 31410: violation of provision, rule or order is a misdemeanor
• § 31411: use of device, scheme or artifice to defraud is a felony/misdemeanor

4. Bucket Shop Law (Corporations Code § 29000 et seq.) prohibits the offering or making of any contract constituting “bucketing” (e.g., the purchase or sale of securities or commodities in connection with a specific price quotation), except as specified; and provides and criminal remedies for violations of the law.

• § 29008: defines “bucketing” or “bucket shopping”
• §§ 29100 & 29101: violation of provision is a felony

Regulation of Certain Fiduciaries

5. Check Sellers, Bill Payers and Proraters Law (Financial Code § 12000 et seq.) requires licensing and regulation of persons issuing negotiable instruments and paying bills or obligations on behalf of customers, except certain persons including nonprofit consumer credit counselors; prohibits misrepresentations, fraudulent and deceptive advertising in connection with these business activities; and provides administrative, civil (injunction and appointment of receiver) and criminal remedies for violations of the law.

• §§ 12002 and 12002.1: defines “check seller” and “prorater”
• § 12200: prohibits engaging in the business without licensure or exemption
• § 12102: violation of provision, rule or order is a misdemeanor
• § 12332: concealing evidence or making untrue statements to Department is a crime

6. Escrow Law (Financial Code § 17000 et seq.) requires licensing and regulation of independent escrow companies, except as specified; prohibits misrepresentation, fraudulent and deceptive acts in connection with certain escrow transactions; creates a private indemnity arrangement to protect Licensed escrow companies against specified losses; and provides administrative, civil (injunction, ancillary relief and appointment of receiver) and criminal remedies for violations of the law.

• §§ 17004, 17004.5, 17005, 17005.4: defines “escrow agent,” “internet escrow agent,” “Licensee” and “person subject to this division”
• § 17200: prohibits engaging in escrow business without licensure or exemption
• § 17700: violation of provision, rule or order is a felony/misdemeanor
• § 17703: concealing evidence or making untrue statements to Department is a crime

7. Securities Depository Law (Financial Code § 30000 et seq.) requires licensing and regulation of persons holding securities as custodians on behalf of securities owners, except as specified; prohibits misrepresentations, fraudulent and deceptive acts in connection with securities depository activities; and provides administrative, civil (injunction) and criminal remedies for violations of the law.

• § 30004: defines “securities depository”
• § 30200: prohibits operating a securities depository without licensure or exemption
• § 30209: unlicensed activity is a misdemeanor
• § 30218: concealing evidence or making untrue statements to Department is a crime

8. Capital Access Company Law (Corporations Code § 28000 et seq.) requires licensing and regulation of capital access companies which provide financial and managerial assistance to small business firms, except as specified; prohibits misrepresentations, fraudulent and deceptive acts in connection with providing financial and managerial assistance; and provides administrative, civil (appointment of receiver) and criminal remedies for violations of the law.

• §§ 28039 and 28045: defines “Licensee” and “to provide financial assistance to a person”
• § 28150: prohibits engaging in the business without licensure or exemption
• § 28155: written misrepresentations or omissions are a violation
• § 28716: concealing evidence or making untrue statements to Department is a crime
• § 28880: violation of provision is a misdemeanor

Regulation of Lenders

9. California Deferred Deposit Transaction Law (Financial Code § 23000 et seq.) requires licensing and regulation of deferred deposit originators (so-called “payday lenders”), except as specified; prohibits misrepresentations, fraudulent and deceptive acts in connection with these transactions; and provides administrative, civil (injunction and ancillary relief) and criminal remedies for violations of the law.

• § 23001: defines “deferred deposit transaction,” “Licensee” and “deferred deposit originator”
• § 23005: prohibits origination without licensure or exemption
• § 23015: concealing evidence or making untrue statement to Department is a crime
• § 23027: prohibits false, misleading or deceptive advertising
• § 23035(b): customer not liable for criminal penalties for failure to adhere to agreement
• § 23065: violation of provision, rule or order is a misdemeanor

10. California Financing Law (Financial Code § 22000 et seq.) requires licensing and regulation of Finance lenders and brokers making and brokering consumer and commercial loans, except as specified; prohibits misrepresentations, fraudulent and deceptive acts in connection with making and brokering of loans; and provides administrative, civil (injunction and ancillary relief) and criminal remedies for violations of the law.

• §§ 22007, 22009 & 22010: defines “Licensee,” “Finance lender” and “broker”
• § 22100: prohibits lending without licensure or exemption
• § 22161: prohibits false, misleading or deceptive advertising
• § 22170: concealing evidence or making untrue statements to Department a crime
• §§ 22753 & 22780: violation of provision, rule or order is a felony/misdemeanor

11. California Residential Mortgage Lending Act (Financial Code § 50000 et seq.) requires licensing and regulation of residential mortgage lenders and servicers of specified federally-regulated mortgage loans, except as specified; prohibits misrepresentations, fraudulent and deceptive acts in connection with making, brokering and servicing of these residential mortgage loans; and provides administrative, civil (injunction, ancillary relief and appointment of receiver) and criminal remedies for violations of the law.

• § 50002: prohibits lending or servicing without licensure or exemption
• § 50003: defines “engage in the business,” “lender,” “Licensee” and “servicer”
• § 50500: violation of provision, rule or order a felony/misdemeanor
• § 50502: written misrepresentations or omissions are a violation
• § 50512: concealing evidence or making untrue statements to Department is a crime

 
12. Student Loan Servicing Act (Financial Code Section 22000, et seq.) requires licensing and regulation of student loan servicers. Covered servicing includes activity that originated in California and is directed to persons in or outside of California, or originated outside of California and is directed to persons inside California. The statute established state standards to ensure consistent, fair, and quality servicing; and provides administrative and criminal remedies for violations of the law.

• § 28104: defines “Servicing,” “Student Loan” and “Student Loan Servicer”
• § 28102: prohibits servicing student loans without licensure or exemption
• § 28130: set specific duties that a licensee must do
• § 28148: requires licensees to submit annual audited financial statements.
• §§ 28172 & 28174: violation of provision, rule or order can lead to criminal proceedings or civil penalties.