Article 2. General Provisions of California Financial Code >> Division 7. >> Chapter 1. >> Article 2.

An industrial loan company shall not appoint or continue in office any officer, director or management personnel who do not have the qualifications required by Section 18117 (d).

(a) An industrial loan company shall not deposit its funds except with a bank, trust company, or savings association authorized to do business in this state, except as provided in subdivision (b).
  (b) An industrial loan company which is insured, as that term is defined in Section 18003.5, may also deposit its funds in an out-of-state financial institution, the accounts of which are insured by the Federal Deposit Insurance Corporation.
  (c) Funds deposited in an out-of-state financial institution shall not in any case exceed the applicable amount of federal deposit insurance.
  (d) The depository shall be approved by a majority vote of the board of directors or the executive committee, exclusive of the vote of any director who is an officer, director, trustee, or shareholder of the depository so designated. An out-of-state savings association subject to the Management Consignment Program of the Office of Thrift Supervision shall not be used as a depository.
  (e) An industrial loan company shall furnish an authorization for disclosure to the commissioner of the financial records of deposits pursuant to Section 7473 of the Government Code. No deposit shall be made in an out-of-state financial institution unless that institution agrees in writing to disclose financial records of the industrial loan company to the commissioner.

No industrial loan company shall invest any of its funds, except as authorized in this division. Industrial loan companies may invest their funds in investments that are legal investments for commercial banks, including the capital stock, obligations, or other securities of one or more corporations, subject to rules and orders prescribed by the commissioner. Companies may also invest their funds in the choses in action issued by any other industrial loan company.

An industrial loan company may organize, sponsor, operate, control, or render investment advice to, an investment company, or underwrite, distribute, or sell securities of any investment company which has qualified to sell its securities in this state pursuant to Part 2 (commencing with Section 25100) of Division 1, Title 4 of the Corporations Code, if the officers and employees of the industrial loan company who sell these securities meet such standards with respect to training experience, and sales practices as established by the Secretary of Business, Consumer Services, and Housing or the secretary's designee. For the purpose of this section, "investment company" means an investment company as defined in the Investment Company Act of 1940 (15 U.S.C., Sec. 80a-1 et seq.).

If an industrial loan company has investment or thrift certificates outstanding, then such company shall not borrow, except by the sale of investment or thrift certificates, in an amount in excess of 300 percent of the amount represented by its outstanding capital stock, surplus and undivided profits, without the written consent of the commissioner. All sums so borrowed in excess of 150 percent of outstanding capital stock, surplus and undivided profits shall be unsecured borrowings or, if secured, approved in writing by the commissioner in advance of the borrowings, and be included as investment or thrift certificates for purposes of computing the ratio allowed under Sections 18319 and 18320.

In addition to the borrowings under Section 18023, an industrial loan company may borrow funds from the Federal Home Loan Bank, the Federal Deposit Insurance Corporation, or a Federal Reserve Bank, which borrowed funds shall not be included in the borrowing limitations contained in Section 18023.

An industrial loan company shall not transact business or make any loan provided for by this division under any other name than that set forth in the articles of incorporation as filed with the commissioner.

No person shall use a holding company or any other device for the purpose of evading or avoiding any of the provisions of this division. This section shall not affect the right of a holding company to issue preferred stock or debentures when permitted to do so under the Corporate Securities Law of 1968. "Holding company" means any company which directly or through one or more intervening subsidiaries, whether or not wholly owned, controls or has the power to control a majority of the shares of an industrial loan company.

Corporations subject to this division are not subject to the provisions or regulations of the Personal Property Brokers Law, Division 9 (commencing with Section 22000), the Consumer Finance Lenders Law, Division 10 (commencing with Section 24000), or the Commercial Finance Lenders Law, Division 11 (commencing with Section 26000).

All corporations formed under the provisions of this division are taxed in the same manner and at the same rates as other corporations are taxed pursuant to Section 27 of Article XIII of the Constitution of this state.

Each industrial loan company shall keep and use in its business, books, accounts, and records which will enable the commissioner to determine if the company is complying with the provisions of this division and with the rules and regulations made by the commissioner.

Each industrial loan company shall preserve the books, accounts, and records, including cards used in the card system, if any, for a least two years after making the final entry on any loan or purchased obligation recorded therein.