Article 5. Securities Transactions of California Financial Code >> Division 7. >> Chapter 5. >> Article 5.

Unless the context otherwise requires, in this article:
  (a) "Offer" or "offer to sell" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security for value.
  (b) "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of, a security for value. "Sale" or "sell" includes any exchange of securities and any change in the rights, preferences, privileges, or restrictions of or on outstanding securities.
  (c) "Security" means any stock or debenture, or any warrant, right, or option to subscribe to or purchase any of the foregoing.
  (d) The terms defined in subdivisions (a) and (b) of this section do not include any stock dividend payable with respect to common stock of an industrial loan company solely (except for any cash or script paid for fractional shares) in shares of such common stock, if such industrial loan company has no other class of voting stock outstanding; provided, that shares issued in any such dividend shall be subject to any conditions previously imposed by the commissioner applicable to the shares with respect to which they are issued.

No industrial loan company organized under the laws of this state shall offer or sell any security issued by it unless the commissioner has issued a permit authorizing such sale.

An application for a permit shall be in such form and contain such information as the commissioner may prescribe.

The commissioner shall charge and collect fees for applications filed under this article as fixed in this section.
  (a) The fee for a negotiating permit shall be fifty dollars ($50).
  (b) The fee for a permit to exchange a security or to make any change in the rights, preferences, privileges, or restrictions of or on outstanding securities shall be fifty dollars ($50).
  (c) The fee for any permit to sell securities other than as specified in subdivision (b) shall be one hundred dollars ($100) plus one-tenth of one percent of the aggregate value of the securities sought to be sold, up to a maximum aggregate fee of one thousand seven hundred fifty dollars ($1,750).

If the commissioner finds that the proposed sale of securities is fair, just, and equitable, he or she shall issue to the applicant a permit authorizing it to offer and sell the securities in such amount and upon such terms and conditions as he or she may provide in the permit. If the commissioner finds otherwise, he or she shall deny the application.

The commissioner may impose conditions in any permit issued under Section 18427.4, requiring the deposit in escrow of securities, imposing a legend condition restricting the transferability thereof, impounding the proceeds from the sale thereof, limiting the expense in connection with the sale thereof, or such other conditions as he or she deems reasonable and necessary or advisable in the public interest.

Every permit issued pursuant to Section 18427.4 shall recite that it is permissive only and does not constitute a recommendation or endorsement of the securities permitted to be sold.

The commissioner may amend, alter, suspend, or revoke any permit issued pursuant to Section 18427.4.

Whenever an industrial loan company applies for a permit to issue any security or to deliver any other consideration (whether or not such security or such transaction is exempt from, or not subject to, the provisions of Section 18427.1) in exchange for one or more bona fide outstanding securities (as defined in Section 25019 of the Corporations Code), claims, or property interests, or partly in such exchange and partly for cash, the commissioner is authorized to approve the terms and conditions of such issuance and exchange or such delivery and exchange and the fairness of such terms and conditions and is authorized to hold a hearing on the fairness of such terms and conditions, at which all persons to whom it is proposed to issue any security or to deliver any other consideration in such exchange shall have the right to appear.

There shall be exempted from the provisions of Section 18427.1 all of the following:
  (a) (1) Any offer, not involving a public offering, to an affiliate or to a person of the type described in subdivision (i) of Section 25102 of the Corporations Code or in the regulations of the Commissioner of Corporations adopted thereunder.
  (2) The execution and delivery of an agreement for the sale of securities to any person of the type described in paragraph (1), subject to all of the following:
  (A) The agreement shall contain substantially the following provision: "The sale of the securities which are the subject of this agreement has not been authorized by a permit issued by the Commissioner of Financial Institutions of the State of California. The issuance of the securities or the payment or receipt of any part of the consideration therefor prior to the issuance of a permit is unlawful, unless the sale of securities is exempt from Section 18427.1 of the California Financial Code. The rights of all parties to this agreement are expressly conditioned upon the issuance of a permit, unless the sale is so exempt."

(B) No part of the purchase price may be paid or received, and none of the securities may be issued, until a permit authorizing the sale of the securities is issued, unless the sale is exempt from Section 18427.1.
  (b) Any transaction or security which the commissioner by regulation or order exempts as not being comprehended within the purposes of this article and the regulation of which he or she finds is not necessary or appropriate in the public interest or for the protection of investors.

Nothing contained in this article shall affect the Corporate Securities Law of 1968, Division 1 (commencing with Section 25000) of Title 4 of the Corporations Code.

The commissioner may by regulation or order restrict, limit, prohibit or otherwise condition the uses of the proceeds from the sale of securities, the extent to which a security may be included within the definition of capital, or the extent to which the proceeds from the sale of securities may be included in the investment certificate ratio as defined by Section 18016, or used to increase outstanding investment certificates.