SECTIONS 25000-25023 - California Statutes

CORPORATIONS CODE

SECTION 25000-25023

25000. This division may be known as the "Corporate Securities Law
of 1968."
References herein to "this law" refer to the applicable provisions
of this division.

25001. Unless the context otherwise requires, the definitions in
this part apply throughout this division.

25002. "Advertisement" means any written or printed communication
or any communication by means of recorded telephone messages or
spoken on radio, television, or similar communications media,
published in connection with the offer or sale of a security.

25003. (a) "Agent" means any individual, other than a broker-dealer
or a partner of a licensed broker-dealer, who represents a
broker-dealer or who for compensation represents an issuer in
effecting or attempting to effect purchases or sales of securities in
this state.
(b) "Agent" does not include an individual who only represents an
issuer in effecting transactions in securities exempted by
subdivision (a), (b), (e), (f), (g), (j), (k) or (l) of Section 25100
or in effecting transactions exempted by Section 25102, and does not
include an individual who has no place of business in this state if
he or she effects transactions in this state exclusively with
broker-dealers.
(c) "Agent" does not include an associated person of a broker or
dealer effecting transactions described in Section 15(h)(3) of the
Securities Exchange Act of 1934, subject to the provisions of Section
15(h)(2) of that act.
(d) An officer or director of a broker-dealer or issuer, or an
individual occupying a similar status or performing similar
functions, is an agent only if he otherwise comes within this
definition and receives compensation specifically related to
purchases or sales of securities.

25003.5. "Business days" are all days other than every Saturday,
every Sunday, and such other days as are specified or provided for as
holidays in the Government Code of the State of California.

25004. (a) "Broker-dealer" means any person engaged in the business
of effecting transactions in securities in this state for the
account of others or for his own account. "Broker-dealer" also
includes a person engaged in the regular business of issuing or
guaranteeing options with regard to securities not of his own issue.
"Broker-dealer" does not include any of the following:
(1) Any other issuer.
(2) An agent, when an employee of a broker-dealer or issuer.
(3) A bank, trust company, or savings and loan association.
(4) Any person insofar as he buys or sells securities for his own
account, either individually or in some fiduciary capacity, but not
as part of a regular business.
(5) A person who has no place of business in this state if he
effects transactions in this state exclusively with (A) the issuers
of the securities involved in the transactions or (B) other
broker-dealers.
(6) A broker licensed by the Real Estate Commissioner of this
state when engaged in transactions in securities exempted by
subdivision (f) or (p) of Section 25100 or in securities the issuance
of which is subject to authorization by the Real Estate Commissioner
of this state or in transactions exempted by subdivision (e) of
Section 25102.
(7) An exchange certified by the Commissioner of Corporations
pursuant to this section when it is issuing or guaranteeing options.
The commissioner may by order certify an exchange under this section
upon such conditions as he by rule or order deems appropriate, and
upon notice and opportunity to be heard he may suspend or revoke such
certification, if he finds such certification, suspension, or
revocation to be in the public interest and necessary and appropriate
for the protection of investors.
(b) For purposes of this section, an agent is an employee of a
broker-dealer under paragraph (2) of subdivision (a) when the agent
is employed by or associated with the broker-dealer under all of the
following conditions:
(1) The agent is subject to the supervision and control of the
broker-dealer.
(2) The agent performs under the name, authority, and marketing
policies of the broker-dealer.
(3) The agent discloses to investors the identity of the
broker-dealer.
(4) The agent is reported pursuant to subdivision (c) of Section
25210 and the rules adopted thereunder.

25005. "Commissioner" means the Commissioner of Corporations.

25005.1. "Entity conversion transaction" means a conversion
pursuant to Section 1151, 1157, 15677.2, 15677.8, 15911.02, 15911.08,
16902, 16908, 17540.2, 17540.8, or a conversion that occurs entirely
out of state, unless the interests in the entity resulting from the
conversion to be held by the equity holders of the entity being
converted as a result of the conversion are not securities. For
purposes of Sections 25103 and 25120 an entity conversion transaction
is not a change in the rights, preferences, privileges, or
restrictions of or on outstanding securities or an exchange of
securities by the issuer with its existing security holders
exclusively.

25006. "Fraud," "deceit," and "defraud" are not limited to common
law fraud or deceit.

25007. "Guaranteed" means guaranteed as to payment of principal,
interest, dividends, or call premium.

25008. (a) An offer or sale of a security is made in this state
when an offer to sell is made in this state, or an offer to buy is
accepted in this state, or (if both the seller and the purchaser are
domiciled in this state) the security is delivered to the purchaser
in this state. An offer to buy or a purchase of a security is made in
this state when an offer to buy is made in this state, or an offer
to sell is accepted in this state, or (if both the seller and the
purchaser are domiciled in this state) the security is delivered to
the purchaser in this state.
(b) An offer to sell or to buy is made in this state when the
offer either originates from this state or is directed by the offeror
to this state and received at the place to which it is directed. An
offer to buy or to sell is accepted in this state when acceptance is
communicated to the offeror in this state; and acceptance is
communicated to the offeror in this state when the offeree directs it
to the offeror in this state reasonably believing the offeror to be
in this state and it is received at the place to which it is
directed. A security is delivered to the purchaser in this state when
the certificate or other evidence of the security is directed to the
purchaser in this state and received at the place to which it is
directed.
(c) An offer to sell or to buy is not made in this state merely
because (1) the publisher circulates or there is circulated on his
behalf in this state any bona fide newspaper or other publication of
general, regular and paid circulation which has had more than
two-thirds of its circulation outside this state during the past 12
months, or (2) a radio or television program originating outside this
state is received in this state.

25009. (a) "Investment adviser" means any person who, for
compensation, engages in the business of advising others, either
directly or through publications or writings, as to the value of
securities or as to the advisability of investing in, purchasing or
selling securities, or who, for compensation and as a part of a
regular business, publishes analyses or reports concerning
securities. "Investment adviser" does not include (1) a bank, trust
company or savings and loan association; (2) an attorney at law,
accountant, engineer or teacher whose performance of these services
is solely incidental to the practice of his or her profession; (3) an
associated person of an investment adviser; (4) a broker-dealer or
agent of a broker-dealer whose performance of these services is
solely incidental to the conduct of the business of a broker-dealer
and who receives no special compensation for them; or (5) a publisher
of any bona fide newspaper, news magazine or business or financial
publication of general, regular and paid circulation and the agents
and servants thereof, but this paragraph (5) does not exclude any
such person who engages in any other activity which would constitute
that person an investment adviser within the meaning of this section.
(b) "Investment adviser" also includes any person who uses the
title "financial planner" and who, for compensation, engages in the
business, whether principally or as part of another business, of
advising others, either directly or through publications or writings,
as to the value of securities or as to the advisability of investing
in, purchasing or selling securities, or who, for compensation and
as part of a regular business, publishes analyses or reports
concerning securities. This subdivision does not apply to: (1) a
bank, trust company, or savings and loan association; (2) an attorney
at law, accountant, engineer, or teacher whose performance of these
services is solely incidental to the practice of his or her
profession, so long as these individuals do not use the title
"financial planner;" (3) an associated person of an investment
adviser where the investment adviser is licensed or exempt from
licensure under this law; (4) an agent of a broker-dealer where the
broker-dealer is licensed or exempt from licensure under this law, so
long as (A) the performance of these services by the agent is solely
incidental to the conduct of the business of the broker-dealer, and
(B) the agent receives no special compensation for the performance of
these services; or (5) a publisher set forth in paragraph (5) of
subdivision (a), so long as the publisher or the agents and servants
of the publisher are not engaged in any other activity which would
constitute that person an investment adviser within the meaning of
this section.

25009.1. "Investment adviser" does not include persons excepted
from the definition of "investment adviser" by Section 202(a)(11) of
the Investment Advisers Act of 1940 (15 U.S.C. 80a-1 et seq., as
amended), except that with regard to those persons the commissioner
may investigate and bring enforcement actions with respect to fraud
and deceit, including and without limitation fraud and deceit under
Section 25235, and any rules of the commissioner adopted thereunder.

25009.5. (a) "Investment adviser representative" or "associated
person of an investment adviser" means any partner, officer, director
of (or a person occupying a similar status or performing similar
functions) or other individual, except clerical or ministerial
personnel, who is employed by or associated with, or subject to the
supervision and control of, an investment adviser that has obtained a
certificate or that is required to obtain a certificate under this
law, and who does any of the following:
(1) Makes any recommendations or otherwise renders advice
regarding securities.
(2) Manages accounts or portfolios of clients.
(3) Determines which recommendation or advice regarding securities
should be given.
(4) Solicits, offers, or negotiates for the sale or sells
investment advisory services.
(5) Supervises employees who perform any of the foregoing.
(b) "Investment adviser representative" means, with respect to an
investment adviser subject to Section 25230.1, a person defined as an
investment adviser representative by Rule 203A-3 of the Securities
and Exchange Commission (17 C.F.R. 275.203A-3) and who has a place of
business in this state.

25010. "Issuer" means any person who issues or proposes to issue
any security, except that:
(a) With respect to certificates of deposit, voting trust
certificates or collateral-trust certificates, or with respect to
certificates of interest or shares in an unincorporated investment
trust not having a board of directors or persons performing similar
functions or of the fixed, restricted management or unit type,
"issuer" means the person or persons performing the acts and assuming
the duties of depositor or manager pursuant to the provisions of the
trust or other agreement or instrument under which the security is
issued. However, with respect to equipment-trust certificates or like
securities, "issuer" means the person by whom the equipment or
property is or is to be used.
(b) With respect to certificates of interest or participation in
oil, gas or mining titles or leases or in payments out of production
under those titles or leases, "issuer" means the person or persons in
active control of the exploration or development of the property who
sell those interests or participations or payments or any person or
persons who subdivide and sell those interests or participations or
payments. The determination of the person or persons in active
control of the exploration or development of the property shall be
made on the basis of the actual relationship of the parties and not
on the basis of the legal designation of a person's interest.
(c) With respect to a fractional or pooled interest in a viatical
or life settlement contract, "issuer" means the person who creates,
for the purposes of sale, the fractional or pooled interest. In the
case of a viatical or life settlement contract that is not
fractionalized or pooled, "issuer" means the person effecting the
transactions with the investors in those contracts.
(d) In the case of an unincorporated association which provides by
its articles for limited liability of any or all of its members, or
in the case of a trust, committee, or other legal entity, the
trustees or members thereof shall not be individually liable as
issuers of any security issued by the association, trust, committee,
or other legal entity.

25011. "Nonissuer transaction" means any transaction not directly
or indirectly for the benefit of the issuer. A transaction is
indirectly for the benefit of the issuer if any portion of the
purchase price of any securities involved in the transaction will be
received indirectly by the issuer. An offering which involves both an
issuer transaction and a nonissuer transaction shall be treated for
the purposes of Chapters 2 (commencing with Section 25110) and 4
(commencing with Section 25130) of Part 2 of this division as an
issuer transaction, but for the purposes of Chapter 1 (commencing
with Section 25100) of Part 2 of this division they shall be treated
as separate transactions.

25012. "Owners' association" means a nonprofit corporation or
association created to own or lease the commonly owned lots, parcels
or areas referred to in clause (a) of Section 25015, or to provide
management, maintenance, preservation or control of either such lots,
parcels or areas or of the separately owned lots, parcels or areas,
or both, or any portion of or interest in them, or interest subject
to subdivision (g) of Section 11004.5 of the Business and Professions
Code, if the shares or certificates of membership therein are
transferable only by transfer of the interests in the lots, parcels
or areas. Such shares of stock or memberships shall be considered
interests in a real estate development or in subdivided lands or a
subdivision.

25013. "Person" means an individual, a corporation, a partnership,
a limited liability company, a joint venture, an association, a joint
stock company, a trust, an unincorporated organization, a
government, or a political subdivision of a government.

25014. "Publish" means publicly to issue or circulate by newspaper,
mail, radio or television, or otherwise to disseminate to the
public.

25014.5. "Rollup participant" means a finite-life limited
partnership.
(a) Except as provided in subdivision (b) of Section 25014.6, a
limited partnership has "finite-life" if both of the following apply:
(1) It operates as a conduit vehicle for investors to participate
in the ownership of assets for a limited period of time.
(2) It has a policy or purpose of distributing to investors
substantially all proceeds from the sale, financing, or refinancing
of assets, whether for the term of the partnership or after an
initial period of time following commencement of operations, rather
than reinvesting those proceeds in the business.
(b) Rollup participant does not include any partnership registered
under the Investment Company Act of 1940 or any business development
company as defined in Section 80a-2(48) of Title 15 of the United
States Code.

25014.6. "Rollup transaction" means any transaction or series of
transactions that directly or indirectly through acquisition or
otherwise involves the combination or reorganization of one or more
rollup participants and is one of the following:
(a) The offer or sale of securities by a successor entity, whether
newly formed or previously existing, to one or more investors of the
rollup participants to be combined or reorganized.
(b) The acquisition of the successor entity's securities by the
rollup participants being combined or reorganized; provided however,
that a rollup transaction shall not include any transaction that:
(1) The Securities and Exchange Commission exempts from the
definition of a rollup transaction pursuant to subparagraph (c) (ii)
of Item 901 of Regulation S-K adopted by the Securities and Exchange
Commission.
(2) Is determined to be exempt from this definition by the
Commissioner of Corporations upon his or her determination that this
action is in the public interest and consistent with the protection
of investors.
(3) Involves one or more limited partnerships all of the
securities of which are, prior to the transaction, securities for
which transactions are reported under a transaction reporting plan
declared effective before January 1, 1991, by the Securities and
Exchange Commission under Section 11A of the Securities Exchange Act
of 1934.
(4) Involves only those issuers not required to register or report
under Section 12 of the Securities Exchange Act of 1934 where the
resulting issuer is also not required to register or report under
Section 12.
(5) Involves the reorganization to corporate, trust, or
association form or restructuring of a single limited partnership if,
as a consequence of the proposed transaction there will be no
significant, adverse change in any of the following: voting rights,
the term of existence of the entity, management compensation, or
investment objectives.
(6) Involves the reorganization to corporate, trust, or
association form or restructuring of a single limited partnership if
each investor is provided an option to retain a security under
substantially the same terms and conditions as the original issue.
(7) Involves the reorganization to corporate, trust, or
association form or restructuring of a single limited partnership if
transactions in the security issued as a result of the reorganization
or restructuring are not reported under a transaction reporting plan
declared effective before January 1, 1991, by the Securities and
Exchange Commission under Section 11A of the Securities Exchange Act
of 1934.

25014.7. (a) "Eligible rollup transaction" means a rollup
transaction in which the new securities issued are listed or approved
for listing on a national securities exchange which has been
certified by the commissioner under subdivision (o) of Section 25100,
if the exchange requires as a condition to listing or designation
that the rollup transaction be conducted in accordance with
procedures to protect the rights of limited partners.
(b) The rights of limited partners will be presumed to be
protected if the rollup transaction provides for the right of
dissenting limited partners:
(1) To receive compensation for their limited partnership units
based on an appraisal of the limited partnership assets performed by
an independent appraiser unaffiliated with the sponsor or general
partner of the limited partnership and which value the assets as if
sold in an orderly manner in a reasonable period of time, plus or
minus other balance sheet items, and less the cost of sale or
refinancing. Compensation to dissenting limited partners of rollup
transactions may be cash, secured debt instruments, unsecured debt
instruments, or freely tradeable securities; provided, however, that:
(A) Rollups which utilize debt instruments as compensation provide
for a trustee and an indenture to protect the rights of the debt
holders and provide a rate of interest based upon, but not less than,
the then applicable federal rate as determined in accordance with
Section 1274 of the Internal Revenue Code of 1986.
(B) Rollups which utilize unsecured debt instruments as
compensation, in addition to the requirements of subparagraph (A),
limit total leverage to 70 percent of the appraised value of the
assets.
(C) All debt securities have a term no greater than seven years
and provide for prepayment with 80 percent of the net proceeds of any
sale or refinancing of the assets previously owned by the entity or
any part thereof.
(D) Freely tradeable securities utilized as compensation to
dissenting limited partners must be issued by an issuer whose
securities are listed on a national securities exchange that has been
certified for at least one year prior to the transaction, and the
number of securities to be received in return for limited partnership
interests must be determined by an appraisal of limited partnership
assets, conducted in a manner consistent with this paragraph, in
relation to the average last sale price of the freely tradeable
securities in the 20-day period following the transaction. If the
issuer of the freely tradeable securities is affiliated with the
sponsor or general partner, newly issued securities to be utilized as
compensation to dissenting limited partners shall not represent more
than 20 percent of the issued and outstanding shares of that class
of securities after giving effect to the issuance. For the purposes
of the preceding sentence, a sponsor or general partner is
"affiliated" with the issuer of the freely tradeable securities if
the sponsor or general partner receives any material compensation
from the issuer or its affiliates in conjunction with the rollup
transaction or the purchase of the general partner's interest;
provided, however, that nothing herein shall restrict the ability of
a sponsor or general partner to receive any payment for its equity
interests and compensation as otherwise provided by this section.
(2) To receive or retain a security with substantially the same
terms and conditions as the security originally held, provided that
the receipt or retention of that security is not a step in a series
of subsequent transactions that directly or indirectly through
acquisition or otherwise involves future combinations or
reorganizations of one or more rollup participants. Securities
received or retained will be considered to have the same terms and
conditions as the security originally held if:
(A) There is no material adverse change to dissenting limited
partners' rights, including, but not limited to, rights with respect
to voting, the business plan, or the investment, distribution,
management compensation and liquidation policies of the limited
partnership or resulting entity.
(B) The dissenting limited partners receive the same preferences,
privileges, and priorities as they had pursuant to the security
originally held.
The rights set forth in paragraphs (1) and (2) are the only rights
of dissenting limited partners to which the presumption under this
subdivision applies. A general partner or sponsor shall file an
application for qualification pursuant to Section 25110 or Section
25120 with respect to any other rights proposed to be offered to
dissenting limited partners.
At the time a registration statement is filed with the Securities
and Exchange Commission with respect to an eligible rollup
transaction, a general partner or sponsor shall notify, to the
maximum extent permitted by the federal securities laws, each limited
partner who has an address in this state by certified mail of the
following: That a registration statement has been filed with the
Securities and Exchange Commission with respect to a rollup
transaction; that the general partner or sponsor claims an exemption
from the review process under the law by virtue of Section 25014.7,
which defines "eligible rollup transaction"; that the general partner
or sponsor has the burden of proof under the law that the
transaction meets the definition of eligible rollup transaction; and
that the commissioner does not recommend or endorse the transaction.
(c) The rights of limited partners shall be presumed not to be
protected if the general partner:
(1) Converts an equity interest in the limited partnerships
subject to a rollup for which consideration was not paid and which
was not otherwise provided for in the limited partnership agreement
and disclosed to limited partners, into a voting interest in the new
entity, provided, however, an interest originally obtained in order
to comply with the provisions of Internal Revenue Service Revenue
Proclamation 89-12 may be converted.
(2) Fails to follow the valuation provisions in the limited
partnership agreements of the subject limited partners when valuing
their limited partnership interests.
(3) Utilizes a future value of their equity interest rather than
the current value of their equity interest, as determined by an
appraisal conducted in a manner consistent with paragraph (1) of
subdivision (b), when determining their interest in the new entity.
(d) The rights of limited partners shall be presumed not to be
protected as to voting rights, if:
(1) The voting rights in the entity resulting from a rollup do not
generally follow the original voting rights of the limited
partnerships participating in the rollup transaction.
(2) A majority of the interest in an entity resulting from a
rollup transaction may not, without concurrence by the sponsor,
general partners, board of directors or trustee, depending on the
form of entity, vote to:
(A) Amend the limited partnership agreement, articles of
incorporation or bylaws, or indenture.
(B) Dissolve the entity.
(C) Remove management and elect new management.
(D) Approve or disapprove the sale of substantially all of the
assets of the entity.
(3) The general partner or sponsor proposing a rollup is not
required to provide each person whose equity interest is subject to
the rollup transaction with a document which instructs the person on
the proper procedure for voting against or dissenting from the rollup
transaction.
(4) The general partner or sponsor does not utilize an independent
third party to receive and tabulate all votes and dissents, and
require that the third party make the tabulation available to the
general partner and any limited partner upon request at any time
during and after voting occurs.
(e) The rights of limited partners shall be presumed not to be
protected as to transaction costs if:
(1) Limited partners bear an unfair portion of the transaction
costs of a proposed rollup transaction that is rejected. For purposes
of this provision, transaction costs are defined as the costs of
printing and mailing the proxy, prospectus, or other documents; legal
fees not related to the solicitation of votes or tenders; financial
advisory fees; investment banking fees; appraisal fees; accounting
fees; independent committee expenses; travel expenses; and all other
fees related to the preparatory work of the transaction, but not
including costs that would have otherwise been incurred by the
subject limited partnerships in the ordinary course of business, or
solicitation expenses.
(2) Transaction costs of a rejected rollup transaction are not
apportioned between general and limited partners of the subject
limited partnerships according to the final vote on the proposed
transaction as follows:
(A) The general partner or sponsor bears all rollup transaction
costs in proportion to the number of votes to reject the rollup
transaction.
(B) Limited partners bear transaction costs in proportion to the
number of votes to approve the rollup transaction.
(3) The dissenting limited partnership is required to pay any of
the costs of the rollup transaction and the general partner or
sponsor is not required to pay the rollup transaction costs on behalf
of the dissenting limited partnerships in a rollup in which one or
more limited partnerships determines not to approve the transaction,
but where the rollup transaction is consummated with respect to one
or more approving limited partnerships.
(f) The rights of limited partners shall be presumed not to be
protected as to fees of general partners and sponsors, if:
(1) General partners and sponsors are not prevented from receiving
both unearned management fees discounted to a present value, if
those fees were not previously provided for in the limited
partnership agreement and disclosed to limited partners, and new
asset-based fees.
(2) Property management fees and other management fees are not
appropriate, not reasonable and greater than what would be paid to
third parties for performing similar services.
(3) Changes in fees which are substantial and adverse to limited
partners are not approved by an independent committee according to
the facts and circumstances of each transaction.
(g) A general partner or sponsor proposing a rollup transaction
shall pay all solicitation expenses related to the transaction,
including all preparatory work related thereto, in the event the
rollup transaction is not approved. For purposes of this section,
"solicitation expenses" include direct marketing expenses such as
telephone calls, broker-dealer factsheets, legal and other fees
related to the solicitation, as well as direct solicitation
compensation to brokers and dealers.
(h) A broker or dealer may not receive compensation for soliciting
votes or tenders from limited partners in connection with a rollup
transaction unless that compensation:
(1) Is payable and equal in amount regardless of whether the
limited partner votes affirmatively or negatively in the proposed
rollup.
(2) In the aggregate, does not exceed 2 percent of the exchange
value of the newly created securities.
(3) Is paid regardless of whether the limited partners reject the
proposed rollup transaction.
(i) As used in this section, the following terms have the
following meanings:
(1) "Limited partnership" includes any entity determined to be a
"partnership" pursuant to Section 14(h)(4)(B) of the Securities
Exchange Act of 1934 or such other entity having a substantially
economically equivalent form of ownership instrument.
(2) "Dissenting limited partner" means a holder or a beneficial
interest in a limited partnership that is the subject of a rollup
transaction who casts a vote against the rollup transaction, except
that for purposes of an exchange or tender offer dissenting limited
partner means any person who files a dissent from the terms of the
transaction with the party responsible for tabulating the votes or
tenders, to be received in connection with the transaction during the
period in which the offer is outstanding.
(3) "Management fee" means a fee paid to the sponsor, general
partner, their affiliates, or other persons for management and
administration of the limited partnership.

25015. "Real estate development" means a development (a) which
consists or will consist of separately owned lots, parcels or areas
with either or both of the following features: (1) one or more
additional continguous or noncontiguous lots, parcels, or areas owned
in common by the owners of the separately owned lots, parcels, or
areas, or (2) mutual, common, or reciprocal interests in or
restrictions upon all or portions of such separately owned lots,
parcels, or areas; and (b) in which the several owners of the
separately owned lots, parcels, or areas have rights, directly or
indirectly, to the beneficial use and enjoyment of the lots, parcels,
or areas owned in common, or any one or more of them or portions
thereof or interests therein, or of the interests or restrictions
referred to in clause (a) above, or both. The estate in a separately
or commonly owned lot, parcel, or area may be an estate of
inheritance or perpetual estate, an estate for life, or an estate for
years. The common ownership of the lots, parcels, or areas or the
enjoyment of the interests or restrictions referred to in clause (a)
above or both may be through ownership of shares of stock or
memberships in an owners' association or otherwise.

25016. "Rule" means any published regulation or standard of general
application issued by the commissioner. "Order" means a consent,
authorization, approval, permit, or requirement applicable to a
specific case issued by the commissioner.

25017. (a) "Sale" or "sell" includes every contract of sale of,
contract to sell, or disposition of, a security or interest in 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.
(b) "Offer" or "offer to sell" includes every attempt or offer to
dispose of, or solicitation of an offer to buy, a security or
interest in a security for value.
(c) Any security given or delivered with, or as a bonus on account
of, any purchase of securities or any other thing constitutes a part
of the subject of the purchase and is considered to have been
offered and sold for value.
(d) A purported gift of assessable stock involves an offer and
sale.
(e) Every sale or offer of a warrant or right to purchase or
subscribe to another security of the same or another issuer, as well
as every sale or offer of a security which gives the holder a present
or future right or privilege to convert the security into another
security of the same or another issuer, includes an offer and sale of
the other security only at the time of the offer or sale of the
warrant or right or convertible security; but neither the exercise of
the right to purchase or subscribe or to convert nor the issuance of
securities pursuant thereto is an offer or sale.
(f) The terms defined in this section do not include: (1) any bona
fide secured transaction in or loan of outstanding securities; (2)
any stock dividend payable with respect to common stock of a
corporation solely (except for any cash or scrip paid for fractional
shares) in shares of such common stock, if the corporation 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; or (3) any act incident to a transaction or
reorganization approved by a state or federal court in which
securities are issued and exchanged for one or more outstanding
securities, claims, or property interests, or partly in that exchange
and partly for cash, and nothing in this division shall be construed
to prohibit a court from applying the protections described in
Section 25014.7 or 25140 and the regulations adopted thereunder when
approving any transaction involving a rollup participant.

25018. "Securities Act of 1933," "Securities Exchange Act of 1934,"
"Public Utility Holding Company Act of 1935," "Investment Advisers
Act of 1940," and "Investment Company Act of 1940" mean the federal
statutes of those names as amended before or after the effective date
of this law.

25019. "Security" means any note; stock; treasury stock; membership
in an incorporated or unincorporated association; bond; debenture;
evidence of indebtedness; certificate of interest or participation in
any profit-sharing agreement; collateral trust certificate;
preorganization certificate or subscription; transferable share;
investment contract; viatical settlement contract or a fractionalized
or pooled interest therein; life settlement contract or a
fractionalized or pooled interest therein; voting trust certificate;
certificate of deposit for a security; interest in a limited
liability company and any class or series of those interests
(including any fractional or other interest in that interest), except
a membership interest in a limited liability company in which the
person claiming this exception can prove that all of the members are
actively engaged in the management of the limited liability company;
provided that evidence that members vote or have the right to vote,
or the right to information concerning the business and affairs of
the limited liability company, or the right to participate in
management, shall not establish, without more, that all members are
actively engaged in the management of the limited liability company;
certificate of interest or participation in an oil, gas or mining
title or lease or in payments out of production under that title or
lease; put, call, straddle, option, or privilege on any security,
certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof); or any put,
call, straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency; any beneficial
interest or other security issued in connection with a funded
employees' pension, profit sharing, stock bonus, or similar benefit
plan; or, in general, any interest or instrument commonly known as a
"security"; or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or
warrant or right to subscribe to or purchase, any of the foregoing.
All of the foregoing are securities whether or not evidenced by a
written document. "Security" does not include: (1) any beneficial
interest in any voluntary inter vivos trust which is not created for
the purpose of carrying on any business or solely for the purpose of
voting, or (2) any beneficial interest in any testamentary trust, or
(3) any insurance or endowment policy or annuity contract under which
an insurance company admitted in this state promises to pay a sum of
money (whether or not based upon the investment performance of a
segregated fund) either in a lump sum or periodically for life or
some other specified period, or (4) any franchise subject to
registration under the Franchise Investment Law (Division 5
(commencing with Section 31000)), or exempted from registration by
Section 31100 or 31101.

25020. "State" means any state, territory, or possession of the
United States, the District of Columbia and Puerto Rico.

25021. "Subdivided lands" and "subdivision" have the meanings
prescribed in Sections 11000, 11004.5, and 11218 of the Business and
Professions Code.

25022. "Underwriter" means a person who has agreed with an issuer
or other person on whose behalf a distribution is to be made (a) to
purchase securities for distribution or (b) to distribute securities
for or on behalf of such issuer or other person or (c) to manage or
supervise a distribution of securities for or on behalf of such
issuer or other person.

25023. (a) Except as provided in subdivision (b), "viatical
settlement contract" means an agreement as defined in paragraph (1)
of subdivision (a) of Section 10113.1 of the Insurance Code and "life
settlement contract" means an agreement, other than a viatical
settlement contract, for the purchase, sale, assignment, transfer,
devise, or bequest of any portion of the death benefit or ownership
of a life insurance policy or certificate for consideration that is
less than the expected death benefit of the life insurance policy or
certificate.
(b) "Viatical settlement contract" and "life settlement contract"
do not include any of the following:
(1) The assignment, transfer, sale, devise, or bequest of a death
benefit, life insurance policy, or certificate of insurance by the
insured or the original owner to any person if the assignment,
transfer, sale, devise, or bequest (A) is not accompanied by the
publication of any advertisement and (B) is not effected by or
through a broker-dealer (Section 25004).
(2) The assignment of a life insurance policy to a bank, savings
bank, savings association, credit union, or other lender (either
licensed or not required to be licensed) as collateral for a loan, or
to a stop-loss insurer or reinsurer.
(3) The exercise of accelerated benefits pursuant to the terms of
a life insurance policy issued in accordance with the insurance laws
of this state.
(4) The assignment, transfer, sale, devise or bequest of any
undivided death benefit, life insurance policy, or certificate of
insurance by an entity licensed pursuant to Section 10113.2 of the
Insurance Code, or a viatical or life settlement provider licensed
from another state, to one individual or entity, provided that the
individual or entity represents that the individual or entity is
purchasing for its own account (or trust account, if the entity is a
trustee) and not with a view to or for sale in connection with a
distribution of the individual death benefit, life insurance policy,
or certificate of insurance.