2009 California Financial Code - Section 31700-31713 :: Chapter 11. Enforcement

31700.  In this chapter, unless the context otherwise requires:
   (a) "Office with a licensee" means the position of director,
officer, or employee of such licensee or of any subsidiary of such
licensee.
   (b) "Subject person", when used with respect to a licensee, means:
   (1) Any controlling person or affiliate of such licensee;
   (2) Any director, officer, or employee of such licensee or of any
of the persons specified in paragraph (1) of this subdivision; or
   (3) Any other person who participates in the conduct of the
business of such licensee.

31701.  Whenever it appears to the commissioner that any person has
violated, or that there is reasonable cause to believe that any
person is about to 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 such 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.

31702.  (a) If the commissioner finds that any person has violated,
or that there is reasonable cause to believe that any person is about
to violate, Section 31150, the commissioner may order the person to
cease and desist from such 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 such application is filed with him (or within such longer
period to which the person consents), the order shall be deemed
rescinded. Upon such 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).

31703.  If, after notice and a hearing, the commissioner finds:

    (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 is about to
violate, any provision of this division or of any regulation or order
issued under this division or any provision of any other applicable
law; or

    (b) That any licensee or any subject person of a licensee has
engaged or participated, is engaging or participating, or that there
is reasonable cause to believe that any licensee or any subject
person of a licensee is about to engage or participate, in any unsafe
or unsound act with respect to the business of such licensee;

the commissioner may order such licensee or such subject person to
cease and desist from such action or violation. Such order may
require such licensee or such subject person to take affirmative
action to correct any condition resulting from such action or
violation.

31704.  (a) If the commissioner finds:

    (1) That any of the factors set forth in Section 31703 is true
with respect to any licensee or any subject person of a licensee; and

    (2) That such 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, prior to the completion of proceedings conducted pursuant
to Section 31703;

the commissioner may order the licensee or the subject person to
cease and desist from such action or violation. The order may require
the licensee or the subject person to take affirmative action to
correct any condition resulting from such action or violation.
   (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. If the commissioner fails to commence a
hearing within 15 business days after the application is filed with
him (or within such longer period to which the licensee or subject
person consents), the order shall be deemed rescinded. Upon such
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).

31705.  If, after notice and a hearing, the commissioner finds:

    (a) (1) That any 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 any subject person of a licensee has engaged or
participated in any unsafe or unsound act with respect to the
business of such licensee; or

    (3) That any subject person of a licensee has engaged or
participated in any act which constitutes a breach of his fiduciary
duty as a subject person; and

    (b) (1) That such act, violation, or breach of fiduciary duty has
caused or is likely to cause substantial financial loss or other
damage to such 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

    (3) That the subject person has received financial gain by reason
of the act, violation, or breach of fiduciary duty; and

    (c) That such 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;

the commissioner may issue an order removing the 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.

31706.  If, after notice and a hearing, the commissioner finds that
any 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:

    (a) (1) Dishonesty; or

    (2) Willful or continuing disregard for the safety and soundness
of such financial institution; and

    (b) Unfitness to continue as a subject person of the licensee or
participate in the conduct of the business of the licensee;

the commissioner may issue an order removing the 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.

31706.5.  (a) If the commissioner finds:

    (1) That the factors set forth in subdivisions (a), (b), and (c)
of Section 31705 or the factors set forth in subdivisions (a) and (b)
of Section 31706 are true with respect to any subject person of a
licensee; and

    (2) That it is necessary for the protection of the interests 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;

the commissioner may issue an order suspending the 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.
   (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. If the commissioner fails to begin a hearing
within 15 business days after the application is filed (or within
such longer period to which the subject person consents), the order
shall be deemed rescinded. Upon 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).

31707.  (a) If the commissioner finds:

    (1) That any 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; and

    (2) That the fact that the person continues to be a subject
person of the licensee may threaten the interests of the licensee or
may threaten to impair public confidence in the licensee;

the commissioner may issue an order suspending the 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.
   (b) If the commissioner finds:

    (1) That any 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; and

    (2) That the fact that the person continues to be or will resume
to be a subject person of the licensee may threaten the interests of
the licensee or may threaten to impair public confidence in the
licensee;

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.
   (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 with
him (or within such longer period to which the subject person
consents), the order shall be deemed rescinded. Upon such 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.

31708.  Any person to whom an order is issued under Section 31705,
31706, 31706.5, or 31707 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.

31709.  If, after notice and a hearing, the commissioner finds:

   (a) That any licensee or any controlling person or affiliate of a
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 any licensee is conducting its business in an unsafe and
unsound manner;
   (c) That any licensee is in such condition that it is unsafe or
unsound for it to transact business;
   (d) That any licensee has ceased to transact business as a
business and industrial development corporation;
   (e) That any licensee is insolvent;
   (f) That any 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 any licensee is the subject of an order for relief in
bankruptcy or has sought relief under any bankruptcy, reorganization,
insolvency, or moratorium law, or that any person has applied for
any such relief under any such law against any licensee and such
licensee has by any affirmative act approved of or consented to such
action or such relief has been granted; or
   (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 such application;
the commissioner may issue an order suspending or revoking the
license of such licensee.

31710.  (a) If the commissioner finds that any of the factors set
forth in Section 31709 is true with respect to any licensee and that
it is necessary for the protection of the public interest that he or
she immediately suspend or revoke the license of such licensee, the
commissioner may issue an order suspending or revoking the license of
such licensee.
   (b) Within 30 days after an order is issued pursuant to
subdivision (a), any licensee to whom such order is directed may file
with the commissioner a request for a hearing on such order. If the
commissioner fails to commence a hearing within 15 business days
after such request is filed with him or her (or within such longer
period to which such licensee consents), such order shall be deemed
rescinded. Upon such hearing, the commissioner shall affirm, modify,
or rescind such order.

31711.  Any person whose license is suspended or revoked shall
immediately deliver such license to the commissioner.

31712.  Any person to whom an order is issued under Section 31709 or
31710 may apply to the commissioner to modify or rescind such order.
The commissioner shall not grant such application unless the
commissioner finds that it is in the public interest to do so and
that it is reasonable to believe that such 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.

31713.  (a) If the commissioner finds that any of the factors set
forth in Section 31709 is true with respect to any licensee and that
it is necessary for the protection of the interests 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 such
conditions as he or she 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 such further order
as 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 to the court of
appeal. 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 pursuant to Article 1 (commencing with Section 3100),
Chapter 17, Division 1, and the provisions of that article (except
Sections 3100, 3101, and 3102) shall apply as if the licensee were a
bank.