Bill Text: CA SB204 | 2009-2010 | Regular Session | Chaptered
Bill Title: Financial transactions: escrow agents: exchange
Spectrum: Partisan Bill (Republican 4-0)
Status: (Passed) 2009-10-11 - Chaptered by Secretary of State. Chapter 568, Statutes of 2009. [SB204 Detail]
Download: California-2009-SB204-Chaptered.html
BILL NUMBER: SB 204 CHAPTERED
BILL TEXT
CHAPTER 568
FILED WITH SECRETARY OF STATE OCTOBER 11, 2009
APPROVED BY GOVERNOR OCTOBER 11, 2009
PASSED THE SENATE SEPTEMBER 9, 2009
PASSED THE ASSEMBLY SEPTEMBER 3, 2009
AMENDED IN ASSEMBLY SEPTEMBER 2, 2009
AMENDED IN ASSEMBLY AUGUST 27, 2009
AMENDED IN ASSEMBLY JUNE 8, 2009
AMENDED IN SENATE APRIL 20, 2009
AMENDED IN SENATE APRIL 13, 2009
INTRODUCED BY Senators Benoit, Huff, and Runner
(Coauthor: Assembly Member Hagman)
FEBRUARY 23, 2009
An act to amend Sections 17600, 51003, 51005, and 51007 of, and to
amend and repeal Section 17207 of, the Financial Code, relating to
financial transactions.
LEGISLATIVE COUNSEL'S DIGEST
SB 204, Benoit. Financial transactions: escrow agents: exchange
facilitators.
Existing law provides for the licensing and regulation of escrow
agents by the Commissioner of Corporations. Existing law, until
January 1, 2010, requires each escrow agent to pay an annual license
fee of up to $2,800 for each office or location and authorizes the
commissioner to additionally levy a special assessment of up to $500,
which is required to be paid by the escrow agent within 30 days of
receipt of notification by the commissioner, for each office or
location in certain circumstances. Commencing January 1, 2010,
existing law instead requires each escrow agent to pay to the
commissioner the agent's pro rata share of the commissioner's annual
administrative costs and expenses, as specified.
This bill would repeal the provisions that would require an escrow
agent, commencing January 1, 2010, to pay to the commissioner the
agent's pro rata share of the commissioner's annual administrative
costs and expenses. The bill would, instead, continue the requirement
for an escrow agent to pay an annual license fee of up to $2,800 for
each office or location. The bill would authorize the special
assessment that may be levied by the commissioner to be in an amount
of up to $1,000 for each office or location. The bill would require
an escrow agent to pay the special assessment within 60 days of
notification by the commissioner.
Existing law provides that the license of an escrow agent remains
in effect until surrendered, revoked, or suspended. Existing law sets
forth the procedure for the surrender of the license of an escrow
agent, and requires a surrendering licensee to, among other things,
tender his or her license and all other indicia of licensure to the
commissioner, and submit a closing audit to the commissioner, as
specified. Existing law provides that a license is not surrendered
until the commissioner has reviewed and accepted the closing audit,
made a determination that there is no violation of law, and, in
writing, accepted tender of the license.
This bill would delete the requirement that the commissioner make
a determination that there is no violation of law and instead require
a determination that acceptance of the surrender is in the public
interest.
Existing law requires a person engaging in business as an exchange
facilitator, as defined, to comply with certain bonding and
insurance requirements that may include, among other things,
maintaining a fidelity bond or bond and a policy of errors and
omissions insurance executed by an insurer authorized to do business
in this state. Existing law authorizes a person to file a claim to
recover damages on the bonds, deposits, or letters of credit
maintained by an exchange facilitator for a failure to comply with
the provisions regulating exchange facilitators.
This bill would authorize the fidelity bond or bonds and the
policy of errors and omissions insurance maintained by an exchange
facilitator to be executed by specified eligible surplus line
insurers. The bill would require claims for damages to be subject to
the terms and conditions of the bonds, deposits, or letters of credit
maintained by an exchange facilitator and would provide that the
amounts of those bonds, deposits, or letters of credit shall be
reduced to the extent of any payment made.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17207 of the Financial Code, as amended by
Section 1 of Chapter 257 of the Statutes of 2005, is amended to read:
17207. The commissioner shall charge and collect the following
fees and assessments:
(a) For filing an application for an escrow agent's license, six
hundred twenty-five dollars ($625) for the first office or location
and four hundred twenty-five dollars ($425) for each additional
office or location.
(b) For filing an application for a duplicate of an escrow agent's
license lost, stolen, or destroyed, or for replacement, upon a
satisfactory showing of the loss, theft, destruction, or surrender of
certificate for replacement, two dollars ($2).
(c) For investigation services in connection with each
application, one hundred dollars ($100), and for investigation
services in connection with each additional office application, one
hundred dollars ($100).
(d) For holding a hearing in connection with the application, as
set forth under Section 17209.2, the actual costs experienced in each
particular instance.
(e) (1) Each escrow agent shall pay to the commissioner for the
support of this division for the ensuing year an annual license fee
not to exceed two thousand eight hundred dollars ($2,800) for each
office or location.
(2) On or before May 30 in each year, the commissioner shall
notify each escrow agent by mail of the amount of the annual license
fee levied against it, and that the payment of the invoice is payable
by the escrow agent within 30 days after receipt of notification by
the commissioner.
(3) If payment is not made within 30 days, the commissioner may
assess and collect a penalty, in addition to the annual license fee,
of 10 percent of the fee for each month or part of a month that the
payment is delayed or withheld.
(4) If an escrow agent fails to pay the amount due on or before
the June 30 following the day upon which payment is due, the
commissioner may by order summarily suspend or revoke the certificate
issued to the company.
(5) If, after an order is made pursuant to paragraph (4), a
request for a hearing is filed in writing and a hearing is not held
within 60 days thereafter, the order is deemed rescinded as of its
effective date. During any period when its certificate is revoked or
suspended, a company shall not conduct business pursuant to this
division, except as may be permitted by order of the commissioner.
However, the revocation, suspension, or surrender of a certificate
shall not affect the powers of the commissioner as provided in this
division.
(f) Fifty dollars ($50) for investigation services in connection
with each application for qualification of any person under Section
17200.8, other than investigation services under subdivision (c) of
this section.
(g) A fee not to exceed twenty-five dollars ($25) for the filing
of a notice or report required by rules adopted pursuant to
subdivision (a) or Section 17203.1.
(h) (1) If costs and expenses associated with the enforcement of
this division, including overhead, are or will be incurred by the
commissioner during the year for which the annual license fee is
levied, and that will or could result in the commissioner's incurring
of costs and expenses, including overhead, in excess of the costs
and expenses, including overhead, budgeted for expenditure for the
year in which the annual license fee is levied, then the commissioner
may levy a special assessment on each escrow agent for each office
or location in an amount estimated to pay for the actual costs and
expenses associated with the enforcement of this division, including
overhead, in an amount not to exceed one thousand dollars ($1,000)
for each office or location. The commissioner shall notify each
escrow agent by mail of the amount of the special assessment levied
against it, and that payment of the special assessment is payable by
the escrow agent within 60 days of receipt of notification by the
commissioner. The funds received from the special assessment shall be
deposited into the State Corporations Fund and shall be used only
for the purposes for which the special assessment is made.
(2) If payment is not made within 60 days, the commissioner may
assess and collect a penalty, in addition to the special assessment,
of 10 percent of the special assessment for each month or part of a
month that the payment is delayed or withheld. If an escrow agent
fails to pay the special assessment on or before 60 days following
the day upon which payment is due, the commissioner may by order
summarily suspend or revoke the certificate issued to the company. If
an order is made under this subdivision, the provisions of paragraph
(5) of subdivision (e) shall apply.
(3) If the amount collected pursuant to this subdivision exceeds
the actual costs and expenses, including overhead, incurred in the
administration and enforcement of this division and any deficit
incurred, the excess shall be credited to each escrow agent on a pro
rata basis.
SEC. 2. Section 17207 of the Financial Code, as amended by Section
2 of Chapter 257 of the Statutes of 2005, is repealed.
SEC. 3. Section 17600 of the Financial Code is amended to read:
17600. (a) An escrow agent's license remains in effect until
surrendered, revoked, or suspended.
(b) A licensee that ceases to engage in the business regulated by
this division and desires to no longer be licensed shall notify the
commissioner in writing and, at that time, tender the license and all
other indicia of licensure to the commissioner. Within 105 days of
the written notice to the commissioner, the licensee shall submit to
the commissioner, at its own expense, a closing audit report as of
the date the license is tendered to the commissioner for surrender,
or for another period as the commissioner may specify, to be
performed by an independent certified public accountant. The closing
audit shall include, but not be limited to, information required by
the commissioner, a bank reconciliation of the trust account, and a
verified statement from a certified public accountant confirming
lawful disbursement of funds. A license is not surrendered until the
commissioner has reviewed and accepted the closing audit report, a
determination has been made by the commissioner that acceptance of
the surrender is in the public interest, and tender of the license is
accepted in writing by the commissioner.
SEC. 4. Section 51003 of the Financial Code is amended to read:
51003. (a) A person who engages in business as an exchange
facilitator shall at all times comply with one or more of the
following:
(1) Maintain a fidelity bond or bonds in an amount not less than
one million dollars ($1,000,000), executed by an insurer authorized
to do business in this state or an eligible surplus line insurer that
is on the list of eligible surplus line insurers maintained by the
Insurance Commissioner pursuant to subdivision (f) of Section 1765.1
of the Insurance Code.
(2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than one million dollars
($1,000,000) in an interest-bearing deposit account or a money market
account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
(3) Deposit all exchange funds in a qualified escrow account or
qualified trust, as those terms are defined under Treasury Regulation
1.1031(k)-1(g)(3), with a financial institution and provide that any
withdrawals from that escrow account or trust require that person's
and the client's written authorization.
(b) A person who engages in business as an exchange facilitator
may maintain a bond or bonds or deposit an amount of cash or
securities or irrevocable letters of credit in excess of the minimum
required amounts.
(c) If the person engaging in business as an exchange facilitator
is listed as a named insured on one or more fidelity bonds that total
at least one million dollars ($1,000,000), the requirements of this
section shall be deemed satisfied.
SEC. 5. Section 51005 of the Financial Code is amended to read:
51005. Any person claiming to have sustained damage by reason of
the failure of a person engaging in business as an exchange
facilitator to comply with this division may file a claim on the
bonds, deposits, or letters of credit described in Section 51003 to
recover the damages subject to the terms and conditions of the bonds,
deposits, or letters of credit. The amounts of the bonds, deposits,
or letters of credit shall be reduced to the extent of any payment
made.
SEC. 6. Section 51007 of the Financial Code is amended to read:
51007. (a) A person who engages in business as an exchange
facilitator shall at all times comply with either of the following:
(1) Maintain a policy of errors and omissions insurance in an
amount not less than two hundred fifty thousand dollars ($250,000),
executed by an insurer authorized to do business in this state or an
eligible surplus line insurer that is on the list of eligible surplus
line insurers maintained by the Insurance Commissioner pursuant to
subdivision (f) of Section 1765.1 of the Insurance Code.
(2) Deposit an amount of cash or securities or irrevocable letters
of credit in an amount not less than two hundred fifty thousand
dollars ($250,000) in an interest-bearing deposit account or a money
market account with the financial institution of the person's choice.
Interest on that amount shall accrue to the exchange facilitator.
(b) A person who engages in business as an exchange facilitator
may maintain insurance or deposit an amount of cash or securities or
irrevocable letters of credit in excess of the minimum required
amounts.
(c) If the person engaging in business as an exchange facilitator
is listed as a named insured on an errors and omissions policy of at
least two hundred fifty thousand dollars ($250,000), the requirements
of this section shall be deemed satisfied.
