SECTIONS 28700-28716 - California Statutes

CORPORATIONS CODE

SECTION 28700-28716

28700. For purposes of this chapter, unless the context otherwise
requires:
(a) "Office with a licensee" means the position of director,
officer, or employee of the licensee or of any subsidiary of the
licensee.
(b) "Subject person," when used with respect to a licensee, means
any of the following:
(1) Any controlling person or affiliate of the licensee.
(2) Any director, officer, or employee of the licensee or of any
of the persons specified in paragraph (1).
(3) Any other person who participates in the conduct of the
business of the licensee.

28701. Whenever it appears to the commissioner that any person has
violated, or that there is reasonable cause to believe that any
person may violate, any provision of this division or of any
regulation or order issued under this division, the commissioner may
bring an action in the name of the people of this state in the
superior court to enjoin the violation or to enforce compliance with
this division or with any regulation or order issued under this
division. Upon a proper showing, a restraining order, preliminary or
permanent injunction, or writ of mandate shall be granted, and a
receiver or a conservator may be appointed for the defendant or the
defendant's assets. The court may not require the commissioner to
post a bond.

28702. (a) If the commissioner finds that any person has violated,
or that there is reasonable cause to believe that any person may
violate, Section 28150, the commissioner may order the person to
cease and desist from the violation unless and until the person is
issued a license.
(b) (1) Within 30 days after an order is issued pursuant to
subdivision (a), the person to whom the order is directed may file
with the commissioner an application for a hearing on the order. If
the commissioner fails to commence a hearing within 15 business days
after the application is filed with him or her (or within any longer
period to which the person consents), the order shall be deemed
rescinded. Upon the completion of the hearing, the commissioner shall
affirm, modify, or rescind the order.
(2) The right of any person to whom an order is issued under
subdivision (a) to petition for judicial review of the order shall
not be affected by the failure of the person to apply to the
commissioner for a hearing on the order pursuant to paragraph (1).

28703. The commissioner may issue a cease and desist order,
including an order to take appropriate corrective action, if, after
notice and a hearing, the commissioner finds either of the following:
(a) That any licensee or any subject person of a licensee has
violated, is violating, or that there is reasonable cause to believe
that any licensee or any subject person of a licensee may violate,
any provision of this division or of any regulation or order issued
under this division or any provision of any other applicable law.
(b) That any licensee or any subject person of a licensee has
engaged or participated in, is engaging or participating in, or that
there is reasonable cause to believe that any licensee or any subject
person of a licensee may engage or participate in, any unsafe or
unsound act with respect to the business of the licensee.

28704. (a) The commissioner may issue a cease and desist order,
including an order to take appropriate corrective action, if the
commissioner finds both of the following:
(1) That any of the factors set forth in Section 28703 is true
with respect to any licensee or any subject person of a licensee.
(2) That the action or violation is likely to cause the insolvency
of, or substantial dissipation of the assets or earnings of, the
licensee, or is likely to seriously weaken the condition of the
licensee or otherwise to seriously prejudice the interests of the
licensee or the accredited investors of the licensee, prior to the
completion of proceedings conducted pursuant to Section 28703.
(b) (1) Within 30 days after an order is issued pursuant to
subdivision (a), any licensee or subject person of a licensee to whom
the order is directed may file with the commissioner an application
for a hearing on the order. The filing of an application for a
hearing shall not stay the effectiveness of the order. If the
commissioner fails to commence a hearing within 15 business days
after the application is filed (or within any longer period to which
the licensee or subject person consents), the order shall be deemed
rescinded. Upon the completion of the hearing, the commissioner shall
affirm, modify, or rescind the order.
(2) The right of any licensee or subject person of a licensee to
whom an order is issued under subdivision (a) to petition for
judicial review of the order shall not be affected by the failure of
the licensee or subject person to apply to the commissioner for a
hearing on the order pursuant to paragraph (1).

28705. The commissioner may issue an order removing a subject
person from that person's office with the licensee, if any, and
prohibiting that person from further participating in any manner in
the conduct of the business of the licensee, if, after notice and a
hearing, the commissioner finds all of the following:
(a) (1) That the subject person of a licensee has violated a
provision of this division or of any regulation or order issued under
this division or any provision of any other applicable law;
(2) That the subject person of a licensee has engaged or
participated in any unsafe or unsound act with respect to the
business of the licensee; or
(3) That the subject person of a licensee has engaged or
participated in any act which constitutes a breach of his or her
fiduciary duty as a subject person.
(b) (1) That the act, violation, or breach of fiduciary duty has
caused or is likely to cause substantial financial loss or other
damage to the licensee or the accredited investors of the licensee;
or
(2) That the act, violation, or breach of fiduciary duty has
seriously prejudiced or is likely to seriously prejudice the
interests of the licensee or the accredited investors of the
licensee; or
(3) That the subject person has received financial gain by reason
of the act, violation, or breach of fiduciary duty.
(c) That the act, violation, or breach of fiduciary duty either
involves dishonesty on the part of the subject person or demonstrates
the subject person's gross negligence with respect to the business
of the licensee or a willful disregard for the safety and soundness
of the licensee.

28706. The commissioner may issue an order removing a subject
person from his or her office, if any, with the licensee and
prohibiting him or her from further participating in any manner in
the conduct of the business of the licensee, except with the prior
consent of the commissioner, if the commissioner finds, after notice
and a hearing, that the subject person of a licensee has, by engaging
or participating in any act with respect to any financial or other
business institution which resulted in substantial financial loss or
other damage, demonstrated either of the following:
(a) Dishonesty.
(b) Willful or continuing disregard for the safety and soundness
of the financial or other business institution.

28707. (a) The commissioner may issue an order suspending a subject
person from his or her office, if any, with the licensee and
prohibiting him or her from further participating in any manner in
the conduct of the business of the licensee, except with the consent
of the commissioner, if the commissioner finds both of the following:
(1) That the factors set forth in subdivisions (a), (b), and (c)
of Section 28705 or the factors set forth in subdivision (a) of
Section 28706 are true with respect to the subject person of a
licensee.
(2) That it is necessary for the protection of the interests of
the licensee or the accredited investors of the licensee, or for the
protection of the public interest that the commissioner immediately
suspend the subject person from his or her office, if any, with the
licensee and prohibit him or her from further participating in any
manner in the conduct of the business of the licensee.
(b) (1) Within 30 days after an order is issued pursuant to
subdivision (a), any subject person of a licensee to whom the order
is directed may file with the commissioner an application for a
hearing on the order. The filing of an application for a hearing
shall not stay the effectiveness of the order. If the commissioner
fails to begin a hearing within 15 business days after the
application is filed (or within any longer period to which the
subject person consents), the order shall be deemed rescinded. Upon
the completion of the hearing, the commissioner shall affirm, modify,
or rescind the order.
(2) The right of any subject person of a licensee to whom an order
is issued under subdivision (a) to petition for judicial review of
the order shall not be affected by the failure of the subject person
to apply to the commissioner for a hearing on the order pursuant to
paragraph (1).

28708. (a) The commissioner may issue an order suspending a subject
person from his or her office, if any, with the licensee and
prohibiting him or her from further participating in any manner in
the conduct of the business of the licensee, except with the consent
of the commissioner, if the commissioner finds both of the following:
(1) That the subject person of a licensee has been indicted by a
grand jury for, or held to answer by a magistrate for, a crime
involving dishonesty or breach of trust.
(2) That the continuation of that person as a subject person of
the licensee may threaten the interests of the licensee or the
accredited investors of the licensee, or may threaten to impair
public confidence in the licensee.
(b) The commissioner may issue an order suspending or removing the
subject person or former subject person from his or her office, if
any, with the licensee and prohibiting him or her from further
participating in any manner in the conduct of the business of the
licensee, except with the prior consent of the commissioner, if the
commissioner finds both of the following:
(1) That the subject person or former subject person of a licensee
to whom an order was issued pursuant to subdivision (a) or any other
subject person of a licensee has been finally convicted of a crime
which is punishable by imprisonment for a term exceeding one year and
which involves dishonesty or breach of trust.
(2) That the continuation or resumption by that person as a
subject person of the licensee may threaten the interests of the
licensee or the accredited investors of the licensee, or may threaten
to impair public confidence in the licensee.
(c) (1) Within 30 days after an order is issued pursuant to
subdivision (a) or (b), any subject person of a licensee to whom the
order is directed may file with the commissioner an application for a
hearing on the order. If the commissioner fails to commence a
hearing within 15 business days after the application is filed (or
within any longer period to which the subject person consents), the
order shall be deemed rescinded. Upon the completion of the hearing,
the commissioner shall affirm, modify, or rescind the order.
(2) The right of any subject person or former subject person of a
licensee to whom an order is issued under subdivision (a) or (b) to
petition for judicial review of the order shall not be affected by
the failure of the person to apply to the commissioner for a hearing
on the order pursuant to paragraph (1).
(d) The fact that any subject person of a licensee charged with a
crime involving dishonesty or breach of trust is not finally
convicted of the crime shall not preclude the commissioner from
issuing an order to the subject person pursuant to any other section
of this division.

28709. Any person to whom an order is issued under Section 28705,
28706, 28707, or 28708 may apply to the commissioner to modify or
rescind the order. The commissioner shall not grant the application
unless the commissioner finds that it is in the public interest to do
so and that it is reasonable to believe that the person will, if and
when he or she becomes a subject person of a licensee, comply with
all applicable provisions of this division and of any regulation or
order issued under this division.

28710. The commissioner may issue an order suspending or revoking
the license of a licensee, if, after notice and a hearing, the
commissioner finds any of the following:
(a) That the licensee or any controlling person or affiliate of
the licensee has violated any provision of this division or of any
regulation or order issued under this division or any provision of
any other applicable law.
(b) That the licensee is conducting its business in an unsafe and
unsound manner.
(c) That the licensee is in a condition that it is unsafe or
unsound for it to transact business.
(d) That the licensee has ceased to transact business as a capital
access company.
(e) That the licensee is insolvent.
(f) That the licensee has suspended payment of its obligations,
has made an assignment for the benefit of its creditors, or has
admitted in writing its inability to pay its debts as they become
due.
(g) That the licensee is the subject of an order for relief in
bankruptcy or has sought other similar relief under any other
bankruptcy, reorganization, insolvency, or moratorium law, or that
any person has applied for any of that relief under any of those laws
against any licensee and the licensee has by any affirmative act
approved of or consented to the action or the relief has been
granted.
(h) That any fact or condition exists which, if it had existed at
the time when any licensee applied for its license, would have been
grounds for denying the application.

28711. (a) If the commissioner finds that any of the factors set
forth in Section 28710 is true with respect to any licensee and that
it is necessary for the protection of the public interest that the
commissioner immediately suspend or revoke the license of the
licensee, the commissioner may issue an order suspending or revoking
the license of the licensee.
(b) Within 30 days after an order is issued pursuant to
subdivision (a), any licensee to whom the order is directed may file
with the commissioner a request for a hearing on the order. If the
commissioner fails to commence a hearing within 15 business days
after the request is filed (or within any longer period to which the
licensee consents), the order shall be deemed rescinded. Upon the
completion of the hearing, the commissioner shall affirm, modify, or
rescind the order.

28712. Any person whose license is suspended or revoked shall
immediately deliver the license to the commissioner.

28713. Any person to whom an order is issued under Section 28709 or
28710 may apply to the commissioner to modify or rescind the order.
The commissioner shall not grant the application unless the
commissioner finds that it is in the public interest to do so and
that it is reasonable to believe that the person will, if and when it
becomes a licensee, comply with all applicable provisions of this
division and of any regulation or order issued under this division.

28714. (a) If the commissioner finds that any of the factors set
forth in Section 28709 is true with respect to any licensee and that
it is necessary for the protection of the interests of the licensee
or the accredited investors of the licensee, or for the protection of
the public interest that the commissioner take immediate possession
of the property and business of the licensee, the commissioner may
forthwith take possession of the property and business of the
licensee and retain possession until the licensee resumes business or
is finally liquidated. The licensee may, with the consent of the
commissioner, resume business upon any conditions that the
commissioner may prescribe.
(b) Whenever the commissioner takes possession of the property and
business of a licensee pursuant to subdivision (a), the licensee may
apply within 10 days to the superior court in the county in which
the head office of the licensee 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,
may dismiss the application or enjoin the commissioner from further
proceedings and order the commissioner to surrender the property and
business of the licensee to the licensee or make any further order
that may be just.
(c) An appeal may be taken from the judgment of the superior court
by the commissioner or by the licensee in the manner provided by law
for appeals from the judgment of a superior court. An appeal from
the judgment of the superior court shall operate as a stay of the
judgment. No bond need be given if the appeal is taken by the
commissioner, but if the appeal is taken by the licensee, a bond
shall be given as required by the Code of Civil Procedure.
(d) Whenever the commissioner takes possession of the property and
business of a licensee pursuant to subdivision (a), the commissioner
shall conserve or liquidate the property and business of the
licensee.

28715. Sections 11041, 11042, and 11043 of the Government Code do
not apply to the Commissioner of Corporations.

28716. (a) It is unlawful for any person to knowingly alter,
destroy, mutilate, conceal, cover up, falsify, or make a false entry
in any record, document, or tangible object with the intent to
impede, obstruct, or influence the administration or enforcement of
this division.
(b) It is unlawful for any person to knowingly make an untrue
statement to the commissioner during the course of licensing,
investigation, or examination, with the intent to impede, obstruct,
or influence the administration or enforcement of any provision of
this division.