2009 California Financial Code - Section 34100-34115 :: Chapter 9. Enforcement

34100.  In this chapter, unless the context otherwise requires:
   (a) "Office with a licensee" means the position of director,
officer, employee, or agent of such licensee.
   (b) "Subject person", when used with respect to a licensee, means:
   (1) Any director, officer, employee, or agent of such licensee; or
   (2) Any other person who participates in the conduct of the
business of such licensee.

34100.5.  (a) No order issued by the commissioner under Section
34103, 34105, or 34106 shall become effective earlier than the 10th
business day after the issuance of such order.
   (b) No order issued by the commissioner under subdivision (a) of
Section 34104 or subdivision (a) or (b) of Section 34107 shall become
effective earlier than the fifth business day after the issuance of
such order.

34101.  (a) 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 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 conservator may be appointed for the defendant or the
defendant's assets.
   (b) Any receiver or conservator appointed by the court pursuant to
subdivision (a) may, with the approval of the court, exercise all of
the powers of the defendant's directors, officers, partners,
trustees, or persons who exercise similar powers and perform similar
duties, including the filing of a petition for bankruptcy. No action
at law or in equity may be maintained by any party against the
commissioner or the receiver or conservator by reason of the exercise
of powers or the performance of duties pursuant to the order, or
with the approval of, the court.
   (c) The commissioner may include in any action authorized under
subdivision (a) a claim for ancillary relief, including a claim for
restitution or damages on behalf of the persons injured by the act
constituting the subject matter of the action, and the court shall
have jurisdiction to award such additional relief.

34102.  (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 33400, the commissioner may order such person to
cease and desist from such violation unless and until such person is
issued a license.
   (b) (1) Within 30 days after an order is issued pursuant to
subdivision (a), the person to whom such order is issued may file
with the commissioner an application for a hearing on the order. If
the commissioner fails to commence such hearing within 15 business
days after such application is filed with the commissioner (or within
such longer period to which such person consents), the order shall
be deemed rescinded. Within 30 days after the hearing, the
commissioner shall affirm, modify, or rescind the order; otherwise,
the order shall be deemed rescinded.
   (2) The right of any person to whom an order is issued under
subdivision (a) to petition for judicial review of such order shall
not be affected by the failure of such person to apply to the
commissioner for hearing on the order pursuant to paragraph (1) of
this subdivision.

34103.  If, after notice and a hearing, the commissioner finds:

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

    (b) That any licensee or any California agent of a licensee has
violated, is violating, or that there is reasonable cause to believe
that any licensee or any California agent 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.

The commissioner may order such licensee or such California agent to
cease and desist from such action or violation. The order may require
the licensee or such California agent to take affirmative action to
correct any condition resulting from the action or violation.

34104.  (a) If the commissioner finds that any of the factors set
forth in Section 34103 is true with respect to any licensee or any
California agent of a licensee and that such action or violation is
likely:

    (1) To cause the insolvency of the licensee;

    (2) To cause substantial dissipation of the assets or earnings of
the licensee;

    (3) To seriously weaken the condition of the licensee; or

    (4) To otherwise seriously prejudice the interests of purchasers
or holders of payment instruments issued by the licensee:

The commissioner may order such licensee or such California agent to
cease and desist from such action or violation. Such order may
require the licensee or the California agent to take affirmative
action to correct any condition resulting from the action or
violation.
   (b) (1) Within 30 days after an order is issued pursuant to
subdivision (a), any licensee or California agent of a licensee to
whom such order is issued may file with the commissioner an
application for a hearing on yhe order. If the commissioner fails to
commence such hearing within 15 business days after such application
is filed with the commissioner (or within such longer period to which
such licensee or California agent consents), the order shall be
deemed rescinded. Within 30 days after the hearing, the commissioner
shall affirm, modify, or rescind the order; otherwise, the order
shall be deemed rescinded.
   (2) The right of any licensee or California agent of a licensee to
whom an order is issued under subdivision (a) to petition for
judicial review of such order shall not be affected by the failure of
such licensee or California agent of a licensee to apply to the
commissioner for a hearing on the order pursuant to paragraph (1) of
this subdivision.

34105.  If, after notice and a hearing, the commissioner finds:

    (a) (1) 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;

    (2) That any subject person 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 relating
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 the licensee;

    (2) That such action, violation, or breach of fiduciary duty has
seriously prejudiced, or is likely to seriously prejudice, the
interests of purchasers or holders of payment instruments issued by
the licensee; or

    (3) That the subject person has received financial gain by reason
of such 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 order the licensee to suspend or remove the
subject person from his or her office, if any, with the licensee and
to preclude such person from further participating in any manner in
the conduct of the business of the licensee, except with the prior
consent of the commissioner.

34106.  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 financial loss or other damage, demonstrated:

    (a) (1) Dishonesty;

    (2) Gross negligence with respect to the operations of such
institution; or

    (3) Willful disregard for the safety and soundness of such
institution; and

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

The commissioner may order the licensee to remove the subject person
from his or her office, if any, with the licensee and to preclude 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.

34107.  (a) If the commissioner finds:

    (1) That any subject person of a licensee has been charged in an
indictment issued by a grand jury or in an information, complaint, or
similar pleading issued by a United States attorney, district
attorney, or other governmental official or agency authorized to
prosecute crimes, with a crime which is punishable by imprisonment
for a term exceeding one year and which involves dishonesty or breach
of trust; and

    (2) That such subject person's continuing to serve as a subject
person of the licensee may pose a threat to the interests of
purchasers or holders of payment instruments issued by the licensee
or may threaten to impair public confidence in the licensee:

The commissioner may order such licensee to suspend such subject
person from his or her office, if any, with the licensee and to
preclude such person from further participating in any manner in the
conduct of the business of the licensee, except with the prior
consent of the commissioner. In case the criminal proceedings are
terminated other than by a judgment of conviction, such order shall
be deemed rescinded.
   (b) If the commissioner finds:

    (1) That any subject person or former subject person of a
licensee with respect 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 such person's continuing to serve or resumption of
service as a subject person of the licensee may pose a threat to the
interests of purchasers or holders of payment instruments issued by
the licensee or may threaten to impair confidence in the licensee:

The commissioner may order such licensee to suspend or remove such
subject person or former subject person from his or her office, if
any, with the licensee and to preclude him 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 licensee to which such order is issued or
any subject person or former subject person of a licensee with
respect to whom such order is issued may file with the commissioner
an application for a hearing on the order. If the commissioner fails
to commence such hearing within 15 business days after such
application is filed with the commissioner (or within such longer
period to which such licensee, subject person, or former subject
person consents), the order shall be deemed rescinded. Within 30 days
after the hearing, the commissioner shall affirm, modify, or rescind
the order; otherwise, the order shall be deemed rescinded.
   (2) The right of any licensee to which an order is issued under
subdivision (a) or (b) or of any subject person or former subject
person of a licensee with respect to whom such an order is issued to
petition for judicial review of such order shall not be affected by
the failure of such person to apply to the commissioner for a hearing
on the order pursuant to paragraph (1) of this subdivision.
   (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 such crime shall not preclude the commissioner from
issuing an order regarding such licensee or such subject person
pursuant to any other section of this division.

34108.  (a) Any licensee to which an order is issued under Section
34105, 34106, or 34107 or any subject person or former subject person
of a licensee with respect to whom such an order is issued 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 subject person or former subject
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.
   (b) The right of any licensee to which an order is issued under
Section 34105, 34106, or 34107 or any subject person or former
subject person of a licensee with respect to whom such an order is
issued to petition for judicial review of such order shall not be
affected by the failure of such licensee, subject person, or former
subject person to apply to the commissioner pursuant to subdivision
(a) to modify or rescind the order.

34109.  If, after notice and a hearing, the commissioner finds:

   (a) That any 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 or
unsound manner;
   (c) That any licensee is in such condition that it is unsafe or
unsound for it to transact the business of selling in this state
payment instruments issued by it;
   (d) That any licensee has ceased to transact the business of
selling in this state payment instruments issued by it;
   (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 other 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.

34110.  (a) If the commissioner finds that any of the factors set
forth in Section 34109 is true with respect to any licensee and that
it is necessary for the protection of the interests of purchasers or
holders of payment instruments issued by such licensee or 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) (1) Within 30 days after an order is issued pursuant to
subdivision (a), any licensee to whom such order is issued may file
with the commissioner an application for a hearing on the order. If
the commissioner fails to commence such hearing within 15 business
days after such application is filed with the commissioner (or within
such longer period to which such licensee consents), the order shall
be deemed rescinded. Within 30 days after the hearing, the
commissioner shall affirm, modify, or rescind the order; otherwise,
the order shall be deemed rescinded.
   (2) The right of any licensee to which an order is issued under
subdivision (a) to petition for judicial review of such order shall
not be affected by the failure of such licensee to apply to the
commissioner for a hearing on the order pursuant to paragraph (1) of
this subdivision.

34111.  Any person whose license is suspended or revoked shall
immediately deliver such license to the commissioner.

34112.  (a) Any person to whom an order is issued under Section
34109 or 34110 may apply to the commissioner to modify or rescind
such order. The commissioner shall not grant such application unless
he or she 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.
   (b) The right of any person to whom an order is issued under
Section 34109 or 34110 to petition for judicial review of such order
shall not be affected by the failure of such person to apply to the
commissioner pursuant to subdivision (a) to modify or rescind the
order.

34113.  (a) If the commissioner finds that any of the factors set
forth in Section 34109 is true with respect to any licensee and that
it is necessary for the protection of the interests of purchasers or
holders of payment instruments issued by 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 by order 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 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, within 10 days, apply to the superior court in any county of
this state in which an office of the licensee is located (or, in case
the licensee has no office in this state, in the County of
Sacramento, in the City and County of San Francisco, or in the County
of Los Angeles) to enjoin further proceedings. The court may, after
citing the commissioner to show cause why further proceedings should
not be enjoined and after a hearing, 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. The
judgment of the superior court may be appealed 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.
   (c) 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 the article (except
Sections 3100, 3101, and 3102) apply as if the licensee were a bank.

34114.  (a) No California agent of a licensee who has actual notice
that the commissioner has suspended or revoked the license of such
licensee or that the commissioner has issued an order taking
possession of the property and business of the licensee, shall sell
any payment instrument issued by the licensee.
   (b) If any California agent of a licensee, after first having
actual notice that the commissioner has suspended or revoked the
license of such licensee or that the commissioner has issued an order
taking possession of the property and business of the licensee,
sells any payment instrument issued by the licensee, such agent shall
be jointly and severally liable with the licensee for the payment of
such payment instrument.

34115.  In case any person engages in the business of selling in
this state any payment instruments that are issued by a second person
which is neither (i) a licensee which is licensed to sell such
payment instruments and for which the first person is an agent nor
(ii) a person which is referred to in subdivision (a) of Section
33100, which is permitted to sell such payment instruments under the
paragraph of subdivision (a) of Section 33100 applicable to it, and
for which the first person is an agent, the first person shall be
jointly and severally liable as a comaker with the second person for
the payment of each such payment instrument.