Division 1.8. Securities Sales of California Financial Code >> Division 1.8.
Any financial institution doing business in this state, or
any other person, that sells to the public at any retail branch
office at which deposits are accepted, any security which is not a
deposit, and which is not insured by an agency or instrumentality of
the United States, or a private share insurance or guaranty
arrangement, shall provide the customer a disclosure statement as
defined in subdivision (a).
(a) For the purposes of this section:
(1) "Disclosure statement" means, in addition to any other
disclosure required by law, a disclosure in writing, in accordance
with subdivision (b), provided to a customer each time the customer
purchases securities from an employee or any other person in a retail
(2) "Financial institution" means a depository institution, the
deposits of which are insured by a federal deposit insurance agency
or instrumentality, or a private share insurance or guaranty
arrangement, including, but not limited to, banks, savings banks,
savings associations, credit unions, and industrial loan companies.
(3) "Security" means any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, or any other security within the
meaning of Section 25019 of the Corporations Code.
(4) "Public" means individuals and includes members of a credit
union. "Public" does not include institutional investors as set forth
in subdivision (i) of Section 25102 of the Corporations Code.
(5) "Retail branch office" means only that part of a financial
institution's premises open to the public for purposes of accepting
(6) "Deposit" includes shares of credit unions and investment
certificates of industrial loan companies.
(b) Any disclosure statement provided pursuant to this section
shall contain a sentence in at least 10-point bold type to the effect
that: "I understand that the product or products I am purchasing or
may purchase are not deposits and may not be insured by an agency or
instrumentality of the United States such as the Federal Deposit
Insurance Corporation (FDIC)." For credit unions, the disclosure
statement provided pursuant to this section shall contain a sentence
in at least 10-point bold type to the effect that: "I understand that
the product or products I am purchasing or may purchase are not
deposits and may not be insured by an agency of the United States
such as National Credit Union Share Insurance Fund (NCUSIF), or a
private share insurance or guaranty arrangement." With respect to
agreements for the purchase of securities executed by a customer at a
retail branch office of the institution which accepts deposits, a
customer shall be required to acknowledge in writing that he or she
has received and read this statement.
(c) Notwithstanding the provisions of subdivision (b), in the case
of account relationships opened, or securities sold, by telephone or
electronic order, the requirements of this section are met if the
disclosure statement is provided at the time the new account
documents are sent to the customer.
(d) The provisions of this section shall not apply to sales of
securities or contracts entered into for the purchase of securities
prior to January 1, 1991.
Any violation of this division by a bank is a violation of
Division 1.1 (commencing with Section 1000); a violation by a savings
association is a violation of Division 2 (commencing with Section
5000); a violation by a credit union is a violation of Division 5
(commencing with Section 14000); and a violation by an industrial
loan company is a violation of Division 7 (commencing with Section
Nothing in this division shall be construed or interpreted to
mean that this division in any way gives a financial institution the
authority to offer or sell any type of security that it could not
otherwise offer or sell under state or federal law.