18349.5
. (a) For the purposes of this section, the following
definitions are applicable:
(1) "Account holder" includes, in the case of an investment
certificate account, an investment certificate holder; in the case of
a trust account, each trustor and beneficiary of the trust account;
and, in the case of any other fiduciary account, each person who
occupies, with respect to the account, a position which is similar to
the position that a trustor or beneficiary occupies with respect to
a trust account.
(2) "Industrial loan company" means any corporation which falls
within the definitions of Sections 18003 and 18003.5.
(3) "Order" means any approval, consent, authorization, permit,
exemption, denial, prohibition, or requirement applicable to a
specific case issued by the commissioner, including without
limitation, any condition thereof. "Order" does not include any
certificate of authority or license issued by the commissioner, but
does include any condition of a license and any written agreement
made by any person with the commissioner under this division.
(4) "Subject person of an industrial loan company" means any
director, officer, or employee of the industrial loan company, or any
person who participates in the conduct of the business of the
industrial loan company. However, "subject person of an industrial
loan company" does not include an individual who is a director,
officer, or employee of a controlling person of an industrial loan
company unless the individual is a director, officer, or employee of
the industrial loan company or participates in the conduct of the
industrial loan company.
(5) "Controlling person" means a person who, directly or
indirectly, controls an industrial loan company.
(6) "Violation" includes, without limitation, any act done, alone
or with one or more persons, for or toward causing, bringing about,
participation in, counseling, aiding or abetting a violation.
(b) If, after notice and opportunity for hearing, the commissioner
finds the following, the commissioner may issue an order suspending
or removing a subject person of an industrial loan company from his
or her office with the industrial loan company and prohibiting the
subject person from further participating in any manner in the
conduct of the business of the industrial loan company, except with
the prior consent of the commissioner:
(1) (A) That the subject person has violated any provision of this
division or of any regulation or order issued under this division,
or any provision of any other applicable law relating to the business
of the industrial loan company; or
(B) That the subject person has engaged or participated in any
unsafe or unsound act with respect to the business of the industrial
loan company; or
(C) That the subject person has committed or engaged in any act
which constitutes a breach of his or her fiduciary duty as a subject
person; and
(2) (A) That the industrial loan company has suffered or will
probably suffer substantial financial loss or other damage by reason
of that violation, act, or breach of fiduciary duty; or
(B) That the interests of the industrial loan company's
accountholders have been or are likely to be seriously prejudiced by
reason of the violation, act, or breach of fiduciary duty; or
(C) That the subject person has received financial gain by reason
of that violation, act, or breach of fiduciary duty; and
(3) That the violation, act, or breach of fiduciary duty is one
involving personal dishonesty on the part of the subject person, or
one which demonstrates a willful or continuing disregard for the
safety or soundness of the industrial loan company.
(c) If, after notice and opportunity for hearing, the commissioner
finds the following, the commissioner may issue an order suspending
or removing a subject person of an industrial loan company from his
or her office with the industrial loan company and prohibiting the
subject person from further participating in any manner in the
conduct of the business of the industrial loan company, except with
the prior consent of the commissioner:
(1) That the subject person's conduct or practice with respect to
another industrial loan company or business institution has resulted
in substantial financial loss or other damage; and
(2) That the conduct or practice has evidenced personal dishonesty
or willful or continuing disregard for the safety and soundness of
the other industrial loan company or business institution; and
(3) That the conduct or practice is relevant in that it
demonstrates unfitness to continue as a subject person of the
industrial loan company.
(d) If the commissioner finds the following, the commissioner may
immediately issue an order suspending or removing a subject person of
an industrial loan company from his or her office with the
industrial loan company and prohibiting the subject person from
further participating in any manner in the conduct of the business of
the industrial loan company, except with the prior consent of the
commissioner:
(1) That it is necessary for the protection of the industrial loan
company or the interests of the industrial loan company's account
holders that the commissioner issue the order immediately, and
(2) (A) That any of the factors set forth in paragraphs (1) and
(2) of subdivision (b) and any of the factors set forth in paragraph
(3) of subdivision (c) are true with respect to the subject person;
or
(B) That any of the factors set forth in paragraphs (1), (2), and
(3) of subdivision (c), and the factor set forth in paragraph (3) of
subdivision (c) are true with respect to the subject person.
(e) (1) If the commissioner finds the following, the commissioner
may immediately issue an order suspending or removing a subject
person of an industrial loan company from his or her office with the
industrial loan company and prohibiting the subject person from
further participating in any manner in the conduct of the business of
the industrial loan company, except with the prior consent of the
commissioner.
(A) That the subject person has been charged in an indictment
issued by a grand jury or in an information, complaint, or similar
pleading issued by a United States attorney, district attorney, or
other governmental official or agency authorized to prosecute crimes,
with a crime which is punishable by imprisonment for a term
exceeding one year and which involves dishonesty or breach of trust;
and
(B) That the person's continuing to serve as a subject person of
the industrial loan company may pose a material threat to the
interest of the industrial loan company's account holders or may
threaten to materially impair public confidence in the industrial
loan company. In case the criminal proceedings are terminated other
than by a judgment of conviction the order shall be deemed rescinded.
(2) If the commissioner finds the following, the commissioner may
immediately issue an order suspending or removing a subject person of
an industrial loan company or a former subject of an industrial loan
company, from his or her office, if any, with the industrial loan
company and prohibiting the person from further participating in any
manner in the conduct of the business of the industrial loan company,
except with the prior consent of the industrial loan company:
(A) That the person has been finally convicted of a crime which is
punishable by imprisonment for a term exceeding one year and which
involves dishonesty or breach of trust; and
(B) That the person's continuing to serve or resumption of service
as a subject person of the industrial loan company may pose a
material threat to the interests of the industrial loan company's
account holders or may threaten to materially impair public
confidence in the industrial loan company.
(3) The fact that any subject person of an industrial loan company
charged with a crime involving dishonesty or breach of trust is not
finally convicted of that crime shall not preclude the commissioner
from issuing an order regarding the subject person pursuant to other
provisions of this division.
(f) Within 30 days after an order is issued pursuant to
subdivision (d) or (e), the person to whom the order is issued may
file an application for a hearing.
(g) Any person to whom an order is issued under subdivision (b),
(c), (d), or (e) may apply to the commissioner to modify or rescind
that order. The commissioner shall not grant that application unless
the commissioner finds that it is in the public interest to do so and
that it is reasonable to believe that the person will, if and when
he or she becomes a subject person of an industrial loan company,
comply with all applicable provisions of this division and of any
regulation or order issued thereunder.
(h) A hearing held pursuant to this section shall be private
unless the commissioner, in his or her discretion, after fully
considering the views of the parties, determines that a public
hearing is necessary to protect the public interest.
(i) (1) It is unlawful for any subject person of an industrial
loan company or former subject person of an industrial loan company
to whom an order is issued under subdivision (b), (c), (d), or (e) to
do any of the following, except with the prior consent of the
commissioner, so long as the order is effective:
(A) To serve or act as a director, officer, employee, or agent of
any industrial loan company.
(B) To vote any shares or other securities of an industrial loan
company having voting rights, for the election of any person as a
director of an industrial loan company.
(C) Directly or indirectly, to solicit, procure, or transfer or
attempt to transfer, or vote any proxy, consent, or authorization
with respect to any shares or other securities of any industrial loan
company having voting rights.
(D) Otherwise to participate in any manner in the conduct of the
business of any industrial loan company.
(2) Any person who violates paragraph (1) shall, upon conviction,
be punished by a fine of not more than ten thousand dollars ($10,000)
or imprisoned pursuant to subdivision (h) of Section 1170 of the
Penal Code, or in a county jail not to exceed one year, or by both
that fine and imprisonment.
(3) If the commissioner believes that any person has violated
paragraph (1), the commissioner may bring an action in a court of
competent jurisdiction petitioning the court to assess that person a
civil penalty in an amount as the commissioner may specify; provided,
however, that the amount of the civil penalty shall not exceed two
thousand five hundred dollars ($2,500) for each violation or, in the
case of a continuing violation, two thousand five hundred dollars
($2,500) for each day for which the violation continues.
In determining the amount of a civil penalty to be assessed under
this paragraph, the court shall consider the financial resources and
good faith of the person charged, the gravity of the violation, the
history of previous violations by the person, and such other factors
as in the opinion of the court may be relevant.