2005 California Corporations Code Sections 25210-25221 CHAPTER 2. LICENSING OF AGENTS AND BROKER-DEALERS

CORPORATIONS CODE
SECTION 25210-25221

25210.  (a) Unless exempted under the provisions of Chapter 1
(commencing with Section 25200) of this part, no broker-dealer shall
effect any transaction in, or induce or attempt to induce the
purchase or sale of, any security in this state unless the
broker-dealer has first applied for and secured from the commissioner
a certificate, then in effect, authorizing that person to act in
that capacity.
   (b) No person shall, on behalf of a broker-dealer licensed
pursuant to Section 25211, or on behalf of an issuer, effect any
transaction in, or induce or attempt to induce the purchase or sale
of, any security in this state unless that broker-dealer and agent
have complied with any rules as the commissioner may adopt for the
qualification and employment of those agents.
   (c) The commissioner shall, consistent with Section 25213, review
the disciplinary histories of agents upon the filing of notice of (1)
the employment or transfer of an agent for a broker-dealer, (2) an
amendment to the information filed by the agent at the time of
employment or transfer, and (3) the termination of employment of the
agent from the broker-dealer.
25211.  (a) The application for a certificate as a broker-dealer
shall be accompanied by the consent to service of process specified
in Section 25240 and, unless filed pursuant to subdivision (b), shall
contain such information in such detail relating to the applicant
and any persons associated with him or her as the commissioner may by
rule require.
   (b) A broker-dealer registered under the Securities Exchange Act
of 1934 who is a member of the New York Stock Exchange, the American
Stock Exchange, the Pacific Stock Exchange, or the National
Association of Securities Dealers, and who has not had any
certificate as a broker-dealer, investment adviser or agent denied or
revoked under this law or any predecessor statute, may be licensed
by notification pursuant to this subdivision by filing with the
commissioner an application setting forth the following information
in such form and detail as the commissioner may by rule require:
   (1) Such information as is necessary to identify the broker-dealer
and its offices in this state, and the location of its records and
principal office.
   (2) Such information as is necessary to establish that the
broker-dealer meets the requirements for licensure by notification
under this subdivision.
   (3) The consent to service of process specified in Section 25240.
   (4) Such information as the commissioner may require as to the
jurisdictions in which the broker-dealer is licensed or registered
and as to the nature of the business conducted by the broker-dealer.
   (c)  Unless a proceeding has been instituted under Section 25212,
a certificate under subdivision (b) shall become effective on the
third business day after the application is filed with the
commissioner or upon the day the certificate is issued, whichever
first occurs.  However, the commissioner may by order delay
effectiveness for a period not exceeding 15 business days (or for an
additional period with the consent of the applicant) if the
commissioner believes that the delay is necessary in the public
interest to determine if a proceeding should be instituted under
Section 25212.  The commissioner may by rule or order waive that
provision of subdivision (b) which precludes application thereunder
by a person who has had a certificate denied or revoked under this
law or any predecessor statute if the commissioner finds the waiver
to be in the public interest.  The commissioner, after appropriate
notice and opportunity for hearing in accordance with the provisions
of the Administrative Procedure Act, Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code, may by rule or order disqualify a self-regulatory organization
specified in subdivision (b) from the provisions thereof.  The
commissioner may by rule establish standards or criteria pursuant to
which disqualification may be made and he or she may disqualify upon
a finding that the self-regulatory organization fails substantially
to comply with those standards or criteria.  Such disqualification by
the commissioner shall not affect a certificate which has become
effective pursuant to this subdivision prior to the effective date of
that rule or order of disqualification but each person licensed
pursuant to subdivision (b) upon the basis of membership in that
organization shall, within 90 days after the effective date of that
rule or order, or such additional time as the commissioner may allow,
file with the commissioner a complete and current application in
the form required pursuant to subdivision (a).  If a broker-dealer
licensed pursuant to subdivision (b) ceases to meet the
qualifications for licensing pursuant to that subdivision, he shall,
within 10 days after such event, file with the commissioner a
complete and current application in the form required pursuant to
subdivision (a).
   (d) An application for a certificate as a broker-dealer, with
respect to a broker-dealer to be formed or organized, may be made by
a licensed broker-dealer to which the broker-dealer to be formed or
organized is to be the successor.  The application shall contain such
information in such detail relating to the applicant and to the
successor and any person associated with the applicant or the
successor as the commissioner may by rule require.  The application
shall become effective and the successor may transact business as a
broker-dealer 30 days after the receipt of the application by the
commissioner or within such shorter period of time as the
commissioner may determine, unless an order has been entered under
Section 25212 denying a certificate to the successor or a proceeding
looking toward such an order has been instituted under that section.
The certificate shall terminate on the 45th day after the effective
date thereof, unless prior thereto the successor shall, in accordance
with such rules as the commissioner may prescribe, adopt the
application as its own and file the consent to service of process
specified in Section 25240.
25211.5.  A broker-dealer acting pursuant to a certificate which is
then in effect and which is issued pursuant to Section 25211, shall
be exempt from the usury provisions of the State Constitution.  This
section creates and authorizes a class of persons pursuant to Section
1 of Article XV of the Constitution.
25212.  The commissioner may, after appropriate notice and
opportunity for hearing, by order censure, deny a certificate to,
suspend for a period not exceeding 12 months or revoke the
certificate of, any broker-dealer if the commissioner finds that the
censure, denial, suspension, or revocation is in the public interest
and that the broker-dealer, whether prior or subsequent to becoming a
broker-dealer, or any partner, officer, director, or branch manager
of the broker-dealer, whether prior or subsequent to becoming
associated with the broker-dealer, or any person directly or
indirectly controlling the broker-dealer, whether prior or subsequent
to becoming such, or any agent employed by the broker-dealer while
so employed has done any of the following:
   (a) Has willfully made or caused to be made in any application for
a certificate or in any report required to be filed with the
commissioner under this law, or in any proceeding before the
commissioner, any statement which was at the time and in the light of
the circumstances under which it was made false or misleading with
respect to any material fact, or has willfully omitted to state in
the application or report any material fact which is required to be
stated therein.
   (b) Has been either (1) convicted of or has pled nolo contendere
to a felony or misdemeanor, or (2) held liable in a civil action by
final judgment of a court based upon conduct showing moral turpitude,
and the commissioner finds that the felony, misdemeanor, or civil
action (A) involved the purchase or sale of any security, (B) arose
out of the conduct of the business of a broker-dealer or investment
adviser, (C) involved theft, or (D) involved the violation of Section
1341, 1342, or 1343 of Title 18 of the United States Code.
   (c) Is permanently or temporarily enjoined by order, judgment, or
decree of any court of competent jurisdiction from acting as an
investment adviser, underwriter, or broker-dealer, or as an
affiliated person or employee of any investment company, bank, or
insurance company, or from engaging in or continuing any conduct or
practice in connection with that activity or in connection with the
purchase or sale of any security.
   (d) Is or has been subject to (1) any order of the Securities and
Exchange Commission or the securities administrator of any other
state denying registration to, or revoking or suspending the
registration of, the person as a broker, dealer, agent, or investment
adviser, (2) any order of any national securities association or
national securities exchange (registered under the Securities
Exchange Act of 1934) suspending or expelling that person from
membership in the association or exchange or from association with
any member thereof, or (3) any other order of the commission or any
administrator, association, or exchange referred to in this
subdivision which is or has been necessary for the protection of any
investor.
   (e) Has willfully violated any provision of the Securities Act of
1933, the Securities Exchange Act of 1934, the Investment Advisers
Act of 1940, the Investment Company Act of 1940, the Commodity
Exchange Act, or Title 4 (commencing with Section 25000), including
the Franchise Investment Law, Division 5 (commencing with Section
31000), or the California Commodity Law of 1990, Division 4.5
(commencing with Section 29500), or of any rule or regulation under
any of those statutes, or any order of the commissioner which is or
has been necessary for the protection of any investor.
   (f) Is or has been subject to (1) any order of the Commodity
Futures Trading Commission denying registration to, or revoking or
suspending the registration of, that person under the Commodity
Exchange Act, (2) any order of any board of trade or commodity
exchange, including, but not limited to, the New York Mercantile
Exchange, the Chicago Mercantile Exchange, the Chicago Board of
Trade, or the Chicago Board Options Exchange, suspending or expelling
that person from membership in the board of trade or commodity
exchange or from association with any member thereof, or (3) any
other order of the commission or any board or exchange referred to in
this subdivision which is or has been necessary for the protection
of any investor.
   (g) Has willfully aided, abetted, counseled, commanded, induced,
or procured the violation by any other person of any of the statutes
or rules or regulations referred to in subdivision (e) above, or has
failed reasonably to supervise, with a view to preventing violations
of those statutes, rules and regulations, another person who commits
a violation, if the other person is subject to his or her
supervision; for the purposes of this subdivision, no person shall be
deemed to have failed reasonably to supervise any person if (1)
there have been established procedures, and a system for applying
those procedures, which would reasonably be expected to prevent and
detect, insofar as practicable, any violation by the other person,
and (2) that person has reasonably discharged the duties and
obligations incumbent upon him or her by reason of those procedures
and system without reasonable cause to believe that those procedures
and system were not being complied with.
   (h) Is subject to any currently effective order of the
commissioner entered pursuant to Section 25213 revoking or suspending
the certificate of the person as an agent.
   (i) Has violated any provision of this division or the rules
thereunder or, in the case of an applicant only, any similar
regulatory scheme of the State of California or a foreign
jurisdiction.
25212.1.  The commissioner may immediately revoke by order the
certificate of any broker-dealer if the broker-dealer fails to comply
with any currently effective order of the commissioner which is
necessary for the protection of any investor, unless the
broker-dealer secures a court order restraining the enforcement of
the commissioner's revocation order within 10 days of the date the
order is issued.
25213.  The commissioner may, after appropriate notice and
opportunity for hearing, by order censure, or suspend for a period
not exceeding 12 months, or deny or bar from any position of
employment, management or control of any broker-dealer or investment
adviser, any officer, director, partner, agent, employee of, or
person performing similar functions for, a broker-dealer, or any
other person, if the commissioner finds that the censure, suspension,
denial, or bar is in the public interest and that the person has
committed any act or omission enumerated in subdivision (a), (e),
(f), or (g) of Section 25212 or has been convicted of, or pled nolo
contendere to, any offense or been held liable in any civil action
specified in subdivision (b) of Section 25212, or is enjoined from
any act, conduct or practice specified in subdivision (c) of Section
25212 or is subject to any order specified in subdivision (d) of
Section 25212.
25213.3.  The commissioner shall, after appropriate notices and
opportunity for hearing, by order suspend, for a period not exceeding
12 months, or bar from any position of employment, management or
control of any broker-dealer, any officer, director, partner, agent,
employee of, or person performing similar functions for, a
broker-dealer, or any other person, if the person has been convicted
of, or has pleaded nolo contendere to, a felony or misdemeanor in
violation of Section 25541 that was committed on or after January 1,
1989.
25214.  (a) It is unlawful for any person, as to whom an order
suspending or barring employment or control is in effect pursuant to
Section 25213 or 25213.3, willfully to become or to be employed by
any broker-dealer or investment adviser, contrary to the terms of
that order, without the consent of the commissioner; and it is
unlawful for any broker-dealer to permit a person as to whom an order
is in effect pursuant to Section 25213, 25213.3, or 25232.1 to
become or to remain a person employed by the broker-dealer, contrary
to the terms of that order, without the consent of the commissioner,
if the broker-dealer knew, or in the exercise of reasonable care
should have known, of the order.
   (b) Any person as to whom an order suspending or barring
employment or control is issued pursuant to Section 25213 or 25213.3
may petition the commissioner for reinstatement or reduction of
penalty, or for modification of the order, as provided in and subject
to the provisions of Section 11522 of the Government Code.  The
commissioner may, at any time and with the consent of that person
without hearing, modify such order.
25215.  No order may be entered under Section 25212, 25213, 25213.3,
or 25252 except after notice to any person affected thereby (and, in
the case of an agent, to his or her employer or prospective employer
if known to the commissioner) of the intention of the commissioner
to enter that order and of the reasons therefor and that upon receipt
of a request the matter will be set down for hearing to commence
within 15 business days after that receipt unless the person affected
consents to a later date.  If no hearing is requested within 30 days
after the mailing of the notice and none is ordered by the
commissioner, the order may be entered without hearing to remain in
effect until it is modified or vacated by the commissioner.  In the
case of an original application for a certificate, that hearing shall
be set down to commence within 15 business days after receipt of a
written request by the applicant made 30 days or more after the
filing of the application, even though no notice by the commissioner
has been given, unless the applicant consents to a later date.  If a
hearing is requested or ordered, it shall be held in accordance with
the provisions of the Administrative Procedure Act (Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code), and the commissioner shall have all of the
powers granted thereunder.
25216.  (a) No broker-dealer or agent shall effect any transaction
in, or induce or attempt to induce the purchase or sale of, any
security in this state by means of any manipulative, deceptive or
other fraudulent scheme, device, or contrivance.  The commissioner
shall, for the purposes of this subdivision, by rule define such
schemes, devices or contrivances as are manipulative, deceptive, or
otherwise fraudulent.
   (b) No broker-dealer or agent shall effect any transaction in, or
induce or attempt to induce the purchase or sale of, any security in
this state in connection with which such broker-dealer or agent
engages in any fraudulent, deceptive or manipulative act or practice
or makes any fictitious quotation.  The commissioner shall, for the
purposes of this subdivision, by rule define and prescribe means
reasonably designed to prevent such acts and practices as are
fraudulent, deceptive, or manipulative and such quotations as are
fictitious.
   (c) No broker-dealer or agent shall effect any transaction in, or
induce or attempt to induce the purchase or sale of, any security in
this state in contravention of such rules as the commissioner may
prescribe as necessary or appropriate in the public interest or for
the protection of investors to provide safeguards with respect to the
financial responsibility of broker-dealers.  Subject to the
limitations of Section 15(h) of the Securities Exchange Act of 1934,
those rules may require a minimum capital for broker-dealers or
prescribe a ratio between net capital and aggregate indebtedness or
both and a fidelity bond.
   (d) No broker-dealer or agent shall effect or attempt to effect in
this state, in contravention of such rules as the commissioner may
prescribe as necessary or appropriate in the public interest or for
the protection of investors, (1) any transaction in connection with
any security whereby any party to such transaction acquires any put,
call, straddle, or other option or privilege (A) of buying or selling
the security, (B) on any security, certificate of deposit, or group
or index of securities (including any interest therein or based on
the market value thereof), (C) entered into on a national securities
exchange relating to foreign currency, or (2) any transaction in
connection with any security with relation to which the broker-dealer
or agent has, directly or indirectly, any interest in any such put,
call, straddle, option, or privilege, or (3) any transaction in any
security for the account of any person who the broker-dealer or agent
has reason to believe has, and who actually has, directly or
indirectly, any interest in any such put, call, straddle, option, or
privilege with relation to such security.
   (e) The commissioner may by rule require any issuer who employs
agents in connection with any security or transaction not exempted by
Chapter 1 (commencing with Section 25100) of Part 2 of this division
to post a surety bond in an amount not exceeding ten thousand
dollars ($10,000), conditioned that the issuer will comply with the
provisions of this law and the rules and orders issued thereunder.
The bond, unless previously canceled, shall cover for the entire
period that the qualification is in effect.  If a deposit in lieu of
a bond is made pursuant to Article 7 (commencing with Section
995.710) of Chapter 2 of Title 14 of Part 2 of the Code of Civil
Procedure, the deposit may include an appropriate deposit of
securities.  No suit may be maintained to enforce any liability on
the bond unless brought within two years after the contract of sale
or other act upon which the suit is based.
25217.  (a) No broker-dealer licensed under this chapter shall,
effect any transaction in, or induce or attempt to induce the
purchase or sale of, any security in this state unless such
broker-dealer and all agents employed by such broker-dealer meet such
specified and appropriate standards with respect to training,
experience, supervision, terms of employment, and other
qualifications as the commissioner finds necessary or desirable.  The
commissioner may establish such standards by rules, which may:  (1)
appropriately classify broker-dealers and agents (taking into account
relevant matters, including types of business done and nature of
securities sold); (2) specify that all or any portion of such
standards shall be applicable to any such class; (3) require persons
in any such class to pass examinations prescribed in accordance with
such rules; and (4) provide that persons in any such class, other
than a broker-dealer and partners, officers and supervisory employees
(which term may be defined by the commissioner's rules and as so
defined shall include branch managers of broker-dealers) of
broker-dealers, may be qualified solely on the basis of compliance
with such specified standards of training and such other
qualifications as the commissioner finds appropriate.
   (b) In addition to the fees imposed by Section 25608, the
commissioner may prescribe by rule reasonable fees and charges to
defray the cost of any examination administered by the commissioner
or under the commissioner's direction.  The commissioner may
cooperate with national securities associations and national
securities exchanges and with the Securities and Exchange Commission
in administering examinations and may require broker-dealers and
agents to pass examinations administered by or on behalf of any such
association or exchange or by the Securities and Exchange Commission
and to pay to such association or exchange or such commission
reasonable fees or charges to defray the costs incurred by such
association or exchange or commission in administering such
examinations.
   (c) A broker-dealer licensed under this chapter making loans to
its customers which are subject to the provisions of Division 9
(commencing with Section 22000) of the Financial Code shall be
licensed as a personal property broker under that division.
25218.  No broker-dealer licensed under this chapter shall effect
any transaction in, or induce or attempt to induce the purchase or
sale of, any security in this state in contravention of such rules as
the commissioner may prescribe designed to promote just and
equitable principles of trade, to provide safeguards against
unreasonable profits or unreasonable rates of commissions or other
charges, and in general to protect investors and the public interest,
and to remove impediments to and perfect the mechanism of a free and
open market.
25219.  Notwithstanding any other provision of this division, if in
his or her opinion the public interest and the protection of
investors so require, the commissioner is authorized summarily to
suspend all over-the-counter trading in this state by broker-dealers
and agents in any security or summarily to suspend all trading on a
national securities exchange located in this state in any security
(provided, in the case of trading on that exchange, that the security
is not listed on the National Market System of the NASDAQ Stock
Market or any national securities exchange located outside this state
on which trading has not been suspended) for a period not exceeding
90 days, and for successive periods of 90 days.  No broker-dealer or
agent shall effect any transaction (other than an unsolicited
brokerage transaction effected on the National Market System of the
NASDAQ Stock Market or on a national securities exchange located
outside this state) in, or induce or attempt to induce the purchase
or sale of, any security in this state in which trading is in any
manner suspended under this section, except in performance of a
contract previously entered into.
25220.  At any time after the issuance of an order under Section
25219, any interested person (including, but not limited to, the
issuer of the security and any broker-dealer who has been making a
market in the security) may in writing request that the suspension of
trading be rescinded.  Upon the receipt of such a written request,
the matter shall be set down for hearing to commence within 15
business days after such receipt unless the person making the request
consents to a later date.  After such hearing, which shall be
conducted in accordance with the provisions of the Administrative
Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, and in connection with
which the commissioner shall have all of the powers granted
thereunder, the commissioner may order such suspension to be
continued until modified or rescinded by further order of the
commissioner if he finds that trading in the security will be unfair,
unjust, or inequitable to investors or will tend to work a fraud
upon the purchasers or sellers of such security.  Otherwise, he shall
rescind the suspension of trading and no further orders may be
entered under Section 25219 with respect to the same security in the
absence of changed circumstances justifying such order.
25221.  (a) Notwithstanding any other provision of law, a
broker-dealer, or any affiliate thereof, licensed under this chapter,
or any officer or employee thereof, may submit to the Department of
Justice fingerprints of an applicant for employment for the purpose
of obtaining information as to the existence and nature of a record
of a conviction and of an arrest for which the Department of Justice
establishes that the applicant was released on bail or on his or her
own recognizance pending trial.  Fingerprints taken pursuant to this
section include fingerprints taken by the use of fingerprint
live-scan technology, as described in Section 1596.871 of the Health
and Safety Code.
   (b) The Department of Justice shall provide the following
information to the broker-dealer, affiliate, or officer or employee
thereof pursuant to subdivision (a):
   (1) Every conviction rendered against the applicant.
   (2) Every arrest for which the Department of Justice establishes
that the applicant was released on bail or on his or her own
recognizance pending trial.


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