Article 2. General of California Financial Code >> Division 7. >> Chapter 7. >> Article 2.
When the property and business of a member, other than a
special member, has been liquidated or is in the process of
liquidation by the commissioner and the proceeds of liquidation
distributed ratably are insufficient to pay up to fifty thousand
dollars ($50,000) of each thrift obligation specified in Section
18523, the commissioner shall direct Guaranty Corporation to pay and
Guaranty Corporation shall pay each such deficiency at the direction
of and in amounts as directed by the commissioner within 10 days from
the date the commissioner makes demand for payment. If the total
funds available from Guaranty Corporation at that time are
insufficient to pay in full the amounts provided by Section 18523,
the amount paid to each thriftholder shall be ratably reduced in
proportion to the amount by which the fund is deficient, and
thereafter further payments shall be made ratably to such
thriftholders in accordance with the directions of the commissioner
as additional funds are paid into the fund from assessments or
otherwise. If the thrift obligations are paid, each member's account
and special member's account shall be reduced ratably based on the
account balance for the total amount paid.
(a) When the property and business of a member, other than a
special member, is being liquidated, the commissioner may direct
Guaranty Corporation to pay each thrift obligation of the member
specified in Section 18523 up to fifty thousand dollars ($50,000).
Guaranty Corporation shall pay the thrift obligations at the
direction of, and in the amounts directed by, the commissioner within
10 days from the date the commissioner makes demand for payment
under this section. If the total funds available from Guaranty
Corporation at that time are insufficient to pay in full the amounts
provided by Section 18523, the amount paid to each thriftholder shall
be ratably reduced in proportion to the amount by which the fund is
deficient, and thereafter further payments shall be made ratably to
those thriftholders in accordance with the directions of the
commissioner as additional funds become available to Guaranty
(b) When any thrift obligation is paid up to the guaranteed amount
as provided in subdivision (a), Guaranty Corporation shall be
assigned all rights, title, and interest to each individual thrift
obligation up to the amount paid by Guaranty Corporation to each
(c) Guaranty Corporation shall first receive ratable liquidation
proceeds up to the amount paid by Guaranty Corporation to a
thriftholder prior to any payment of liquidation proceeds to a
thriftholder whose account was in excess of fifty thousand dollars
(d) Each member's account and each special member's account shall
be reduced ratably based on the account balance for the total amount
paid pursuant to subdivision (a). Liquidation proceeds paid to
Guaranty Corporation pursuant to subdivision (c) shall ratably
increase each member and special member account based on the account
balance for the total amount paid pursuant to subdivision (a).
Whenever it appears to the commissioner that Guaranty
(a) Violated its articles of incorporation or any law of this
(b) Not paid amounts as directed by the commissioner pursuant to
(c) Invested its funds in violation of Section 18497;
(d) Not levied assessments as required by Sections 18535 and
(e) Has not brought and diligently prosecuted an action to enforce
payment as required by Section 18538;
(f) Violated any section of this chapter; or
(g) Neglected or refused to submit its books, papers, and affairs
to the inspection of any examiner;
the commissioner may forthwith take possession of the property and
business of Guaranty Corporation and retain possession until Guaranty
Corporation satisfies the commissioner that it will operate in
conformity with this chapter. During the time the commissioner has
such possession he shall perform the duties and carry out the
obligations of Guaranty Corporation.
Whenever the commissioner has taken possession of the
property and business of Guaranty Corporation, Guaranty Corporation
within 10 days after such taking, if it deems itself aggrieved
thereby, may apply to the superior court in the county in which the
head office of Guaranty Corporation is located to enjoin further
proceedings. The court, after citing the commissioner to show cause
why further proceedings should not be enjoined, and after a hearing
and a determination of the facts upon the merits, may dismiss such
application or enjoin the commissioner from further proceedings and
direct him to surrender the property and business to Guaranty
Corporation, or make such further order as may be just.
An appeal may be taken from the judgment of the court by the
commissioner or by Guaranty Corporation in the manner provided by
law for appeals from the judgment of a superior court to the court of
appeal. An appeal from the judgment of the court does not operate as
a stay of the judgment unless the court, on good cause, so orders.
(a) Guaranty Corporation shall have independent authority to
approve membership, or suspend or revoke the right to participate in
Guaranty Corporation by any member for cause and to submit reports
and make recommendations to the commissioner regarding the financial
condition of any member and shall also do so if requested by the
commissioner. These reports and recommendations shall not be public
documents. There shall be no liability on the part of, and no cause
of action of any nature shall arise against, Guaranty Corporation or
its members, directors, officers, employees or agents, or the
commissioner or his or her authorized representatives, for any
statements made by them in any reports or recommendations made
(b) In order to permit Guaranty Corporation to fulfill its
obligations under subdivision (a), upon the written request of
Guaranty Corporation the commissioner may furnish to Guaranty
Corporation a copy of financial statements or reports filed by a
member or an industrial loan company making application to
participate in Guaranty Corporation and a copy of the commissioner's
analysis of an industrial loan company's receivables. Except for
reports filed under Sections 18407 and 18410, such statements and
reports shall not be public documents, and the information contained
therein shall be privileged, and confidential to Guaranty Corporation
for its sole use in carrying out its statutory functions. There
shall be no liability on the part of, and no cause of action of any
nature shall arise against the State of California, the commissioner
or members of the commissioner's staff or the commissioner's
authorized representatives, for the release of any information
furnished to Guaranty Corporation pursuant to this subdivision.
(c) By written consent of a majority of its directors, Guaranty
Corporation, in order to fulfill its obligations under subdivision
(a), may appoint an independent certified public accountant or public
accountant to prepare an audit report containing audited financial
statements, together with such other information as Guaranty
Corporation, in good faith, requires regarding the financial
condition of any member. For the purposes of examination and
investigation the certified public accountant or public accountant
appointed by Guaranty Corporation shall have free access to the
offices and places of business, books, accounts, papers, records,
files, safes and vaults of the member.
(d) By written consent of a majority of its directors, Guaranty
Corporation, in order to fulfill its obligations under subdivision
(a), may hire or appoint specialized committees or employees to
investigate the operations of a member company. Guaranty Corporation
may have its specialized employees or committees investigate the
affairs and examine the books, accounts, records and files used in
the business of the member. For the purposes of examination and
investigation the specialized employees and committees of Guaranty
Corporation shall have free access to the offices and places of
business, books, accounts, papers, records, files, safes, and vaults
of the member.
(e) Costs and expenses for such audit report or special
investigation report shall be paid by Guaranty Corporation.
(f) Any person who uses any information obtained under
subdivision (b), (c) or (d) for any purpose not authorized by
subdivision (a) is guilty of a misdemeanor.
(g) The powers granted to the Guaranty Corporation by this section
may not be exercised in connection with special members.
(a) A director, officer, employee, or agent of Thrift
Guaranty Corporation shall be subject to liability for acts of fraud,
willful misconduct, or reckless or criminal acts arising out of, or
in connection with, the performance of his or her duties on behalf of
Thrift Guaranty Corporation, but shall not be subject to liability
or causes of action for acts other than those set forth in this
(b) The board of directors shall exercise reasonable efforts to
obtain directors, officers, employees, and agents, errors and
omissions liability insurance coverage and shall within 30 days from
the end of each fiscal year submit to the commissioner its reports,
advising the commissioner of the terms and costs of such coverage, if
Guaranty Corporation may invest its funds only in readily
marketable securities as provided by rules of the commissioner.
Upon request of the commissioner, Guaranty Corporation shall
furnish an authorization for disclosure to the commissioner of
financial records of such funds pursuant to Section 7473 of the
Income from investments shall be recorded in an income
account and be used to defray expenses of administration. Income from
investments that exceeds an amount determined by the board of
directors to be adequate to provide for current expenses may be
credited to members' accounts. Each member's account shall receive
credit ratably based on the account balance, for the amount of the
excess. Income received by Guaranty Corporation, whether or not
credited to members' accounts, shall be subject to a demand of the
commissioner made pursuant to Section 18490 except as to that portion
reserved by the board of directors for expenses of administration
during the calendar year.
Expenses of administration that exceed income from
investments at year end shall be charged to members' accounts. Each
member's account shall be charged ratably based on the account
balance for the amount of the excess.
Guaranty Corporation shall have authority to:
(a) Borrow funds when necessary to effectuate the provisions of
(b) Make loans to, deposits in, purchase assets or securities of,
assume liabilities of, or make contributions to any Guaranty
Corporation member to minimize the deficiency payments that might be
required under Article 2 (commencing with Section 18490).
(c) Organize a new thrift company to assume the thrift obligations
and temporarily perform the functions of the closed company. The
commissioner may waive any provision of the Industrial Loan Law
necessary to enable Guaranty Corporation to organize a new thrift
(d) Act as a conservator or receiver of a member company that the
commissioner has taken possession of.
(e) Guaranty Corporation may use the fund, or any portion of the
fund, in exercising its authority.
(f) Employ consultants, advisors, and others to assist Guaranty
Corporation in fulfilling its obligations and objectives.
The commissioner shall give prompt notice to Guaranty
Corporation when the commissioner takes possession of the property
and business of a member and shall give further prompt notice when
the commissioner determines to liquidate the property and business of
Memberships issued by Guaranty Corporation shall be
nontransferable and shall be exempt from the provisions of the
Corporate Securities Law of 1968.
The commissioner and the commissioner's duly designated
representatives may at any time investigate the affairs and examine
the books, accounts, records and files used by Guaranty Corporation.
The commissioner and the commissioner's duly designated
representatives shall have free access to the offices, books,
accounts, papers, records, files, safes, and vaults of Guaranty
Any member or industrial loan company making application to
participate in Guaranty Corporation aggrieved by any action or
decision of Guaranty Corporation may appeal to the commissioner
within 30 days from the action or decision.
(a) After consultation with, and approval by, the Thrift
Guaranty Corporation, the commissioner shall adopt rules and
regulations regarding information to be given to holders of
investment certificates of industrial loan companies including, but
not limited to, information containing any reference to a guarantee
or insurance program of investment certificates, and the time and
conditions for payments to the holders of investment certificates, in
the event an industrial loan company is taken over by the
commissioner. These regulations shall include the means for informing
investment certificate holders of their rights.
(b) It is the intent of the Legislature that the commissioner
authorize information which can be clearly understood by a typical
investment certificate holder. In addition, the information may in no
way imply that the State of California stands behind or is involved
with any type of guarantee or insurance program for industrial loan
companies investment certificate holders.
(c) These rules and regulations shall be adopted on an emergency
basis within 60 days of the effective date of this section.
No person shall advertise, print, display, publish,
distribute, or broadcast, or cause or permit to be advertised,
printed, displayed, published, distributed, or broadcast, in any
manner any statement or representation with regard to its membership
in Guaranty Corporation or that any of its thrift obligations are in
any manner guaranteed.
In order to permit Guaranty Corporation to fulfill its
obligations under this chapter, the commissioner shall furnish to
Guaranty Corporation a list of all industrial loan companies that are
not insured companies which have outstanding thrift obligations and
one copy of the independent audit report on each such industrial loan
company filed with him as of the preceding December 31 and not later
than April 1 of each year.
An industrial loan company or its successor shall not be
entitled to receive a refund, return, withdrawal, or distribution of
the amount in its member's account or of any assessments paid by it
except upon liquidation of Guaranty Corporation.
(a) Guaranty Corporation may elect to wind up and dissolve
upon approval of the commissioner, the board, and the members in
accordance with Section 8610 of the Corporations Code, after (1) each
industrial loan company has become a member of the Federal Deposit
Insurance Corporation or redeemed all of its outstanding thrift
obligations or (2) Guaranty Corporation has satisfied its guarantee
of thrift obligations as provided in this chapter.
(b) Upon liquidation, after complying with the provisions of
Section 8713 of the Corporations Code and notwithstanding Section
8717 of the Corporations Code, the assets of Guaranty Corporation
shall be distributed to its members, past and present, including
special members, ratably based on the balance of the members'
accounts, as established by resolution of the Board of Directors of
Guaranty Corporation in accordance with the following:
(1) The account of each member, past and present, including
special members, shall be credited with all assessments paid by the
member to Guaranty Corporation.
(2) For each fiscal year, all current and prior expenses of
administration of Guaranty Corporation shall be charged to the
accounts of all members, past and present, including special members,
ratably based on the balance of each account.
(3) With respect to the account of each member to whom Guaranty
Corporation has advanced funds or on whose behalf Guaranty
Corporation has paid claims and expenses, the following adjustments
shall be made:
(A) The member's account shall be charged in the amount of the
funds advanced or paid as of the date of advance or payment.
(B) If the amount advanced or paid exceeds the balance of the
member's account, then (i) the member's account shall be deemed to
have been closed, and the excess shall be allocated and charged
ratably to the accounts of all other members, past and present,
including special members, and (ii) if the member continued to
operate after the date of the advance or payment, whether under new
ownership or management or under the management of Guaranty
Corporation, then a new member account shall, for purposes of this
section, be deemed to have been established for the member with a
zero balance, which shall be credited with subsequent assessments
The Board of Directors of Guaranty Corporation shall be
composed of five members, at least two of which shall be public
members. The five members shall be appointed by the commissioner. The
commissioner shall consult with the President of Thrift Guaranty
Corporation before making an appointment. Public members shall not be
affiliated with any company or affiliate of any company or employed
by any state agency. A public member shall not be a relative of any
officer or director of any company or its affiliates.
Guaranty Corporation shall establish a permanent office in
The commissioner may require Guaranty Corporation to obtain
a bond, insurance, or reinsurance which provides additional
protection against losses to its members' thriftholders. The type,
amount, and form of this protection is subject to the commissioner's