2007 California Financial Code Article 1. Examinations

CA Codes (fin:1900-1917)

1900.  (a) (1) For purposes of this subdivision, an examination made
by the commissioner in conjunction with or with assistance from a
bank regulatory agency of the United States, of a state of the United
States, or of a foreign nation is deemed to be an examination caused
by the commissioner.
   (2) No provision of this subdivision shall be deemed to require
that the commissioner cause an examination to be made onsite at the
offices of a bank.
   (3) The commissioner shall cause every California state bank,
every California state trust company, and the business in this state
of every foreign (other nation) bank licensed under Article 3
(commencing with Section 1750) of Chapter 13.5 to be examined to the
extent and whenever and as often as the commissioner shall deem it
advisable, but in no case less than once every two calendar years.
   (b) The commissioner may at any time examine any of the following:

   (1) Any office of a bank organized under the laws of this state.
   (2) Any office of a foreign (other state) bank that maintains an
office in this state.
   (3) Any office of a foreign (other nation) bank that maintains an
office in this state.
   (c) The officers and employees of every California state bank,
California state trust company, and foreign bank being examined shall
exhibit to the examiners, on request, any or all of its securities,
books, records, and accounts and shall otherwise facilitate the
examination so far as it may be in their power.



1901.  (a) Whenever, in the judgment of the commissioner, it is
necessary or advisable to make an extra examination of or to devote
any extraordinary attention to any bank, any foreign bank, or any
office of a foreign bank, he or she has the authority to do so and to
charge and collect from the bank or foreign bank, in the case of an
extra examination, an amount not exceeding seventy-five dollars ()
per hour for each examiner engaged in the examination and, in the
case of extraordinary attention, an amount not exceeding the
department's expenses in providing the extraordinary attention,
including, but not limited to, compensation of employees.
   (b) Whenever in the judgment of the commissioner it is necessary
or expedient for any examiner engaged in any examination to travel
outside this state, the commissioner may charge for the travel
expenses of the examiner.



1902.  (a) The commissioner may by order or regulation grant
exemptions from this section in cases where the commissioner finds
that the requirements of this section are not necessary.
   (b) Each California state bank shall, within 90 days after the end
of each fiscal year, or within such extended time as the
commissioner may prescribe, file with the commissioner an audit
report for the fiscal year.
   (c) The audit report called for in subdivision (b) shall comply
with all of the following provisions:
   (1) The audit report shall contain those audited financial
statements of the bank for or as of the end of the fiscal year
prepared in accordance with generally accepted accounting principles
and any other information that the commissioner may require.
   (2) The audit report shall be based upon an audit of the bank
conducted in accordance with generally accepted auditing standards
and any other requirements that the commissioner may prescribe.
   (3) The audit report shall be prepared by an independent certified
public accountant or independent public accountant who is not
unsatisfactory to the commissioner.
   (4) The audit report shall include or be accompanied by a
certificate or opinion of the independent certified public accountant
or independent public accountant that is satisfactory in form and
content to the commissioner.  If the certificate or opinion is
qualified, the commissioner may order the bank to take such action as
the commissioner may find necessary to enable the independent
certified public accountant or independent public accountant to
remove the qualification.



1906.  The commissioner, whenever in his or her opinion the
condition of the bank, trust company, or foreign banking corporation
is such as to require such audit, may require any bank, trust
company, or foreign banking corporation to employ a certified public
accountant to make a special audit of the affairs of such bank or
trust company at its expense.



1907.  The commissioner, for good cause, at any time and from time
to time may employ appraisers to appraise the value of any
investment, asset, or property held or upon which a lien is held as
security for a loan.  The bank, trust company, or foreign banking
corporation shall pay to the commissioner on demand the cost of such
appraisal.



1908.  The commissioner, a deputy commissioner, and every examiner
assigned to an examination may administer an oath to any person whose
testimony is required for the purposes of any examination authorized
by this division and may by issuance of subpoena compel the
appearance of any person and the production of any evidence for the
purposes of the examination.



1909.  (a) In this section, "governmental agency" includes, without
limitation, any agency of this state, of any other state of the
United States, of the United States, or of any foreign nation.
   (b) The commissioner may furnish information  to a governmental
agency that regulates financial institutions.
   (c) The commissioner may furnish to a governmental agency that
administers a loan guarantee or similar program, information relating
to a person who participates in the program.
   (d) The commissioner may furnish to a governmental agency that
regulates business activities, other than the type described in
subdivision (b), information relating to:
   (1) A suspected violation of a law administered by the agency.
   (2) A person involved in an application to the agency for a
license, approval, or other authorization.
   (e) The commissioner may furnish to a governmental agency that is
a law enforcement agency information relating to a suspected crime.
   (f) The commissioner may furnish information to any person who
provides share insurance or guaranty of the shares of a credit union
in accordance with Section 14858, 16004, or 16503 of the Financial
Code.
   (g) This section does not prescribe the only circumstances under
which the commissioner may furnish information.



1910.  If a deputy commissioner or any examiner has knowledge of the
insolvency or unsafe condition of any bank, trust company, or
foreign banking corporation and fails or neglects to forthwith report
such fact to the commissioner in writing over his or her signature,
he or she is guilty of a felony.



1911.  A national banking association doing business in this state
and receiving deposits of any bank organized under the laws of this
state, at the request of the commissioner, shall submit to an
examination by him or her, at the expense of such association, should
he or she deem it necessary or desirable that such examination be
made.  If any such association refuses to permit such an examination
to be made, the commissioner shall notify every bank depositing its
funds with such association to withdraw its deposits therefrom and
the banks so notified shall comply with his or her order.



1912.  If it appears to the commissioner that a bank, trust company,
or foreign banking corporation is violating or failing to comply
with its articles or with any applicable law, the commissioner may
direct the bank, trust company, or foreign banking corporation to
comply with its articles or with the law by an order issued over his
or her official seal, or if it appears to the commissioner that any
bank, trust company, or foreign banking corporation is conducting its
business in an unsafe or injurious manner the commissioner may in
like manner direct it to discontinue the unsafe or injurious
practices.  The order shall require the bank, trust company, or
foreign banking corporation to show cause before the commissioner at
a time and place to be fixed by him or her why the order should not
be observed.



1913.  If upon any hearing held pursuant to Section 1912 it appears
to the commissioner that the bank, trust company, or foreign banking
corporation is violating or failing to comply with its articles or
with any applicable law or is conducting its business in an unsafe or
injurious manner the commissioner may make a final order directing
it to comply with its articles or with the law or to discontinue the
unsafe or injurious practices.  Unless within 10 days after the
issuance of the final order its enforcement is restrained in a
proceeding brought by the bank, trust company, or foreign banking
corporation, it shall forthwith comply with the order.



1913.5.  (a) For the purposes of this section, the following
definitions are applicable:
   (1) "Account holder" includes, in the case of a deposit account,
the depositor; in the case of a trust account, each trustor and
beneficiary of the trust account; and, in the case of any other
fiduciary account, each person who occupies, with respect to the
account, a position that is similar to the position that a trustor or
beneficiary occupies with respect to a trust account.
   (2) "Bank" means the following:
   (A) Any commercial bank, industrial bank, or trust company
incorporated under the laws of this state.
   (B) Any foreign (other state) state bank that maintains a branch
office in this state, with respect to the branch office and any other
office in this state.
   (C) Any foreign (other state) state bank that is licensed by the
commissioner under Article 4 (commencing with Section 3860) of
Chapter 22 to maintain a facility (as defined in Section 3800) in
this state, with respect to that office.
   (D) Any foreign (other nation) bank that is licensed by the
commissioner under Chapter 13.5 (commencing with Section 1700) to
maintain an office in this state, with respect to that office.
   (E) Any corporation incorporated under the laws of this state that
is incorporated for the purpose of engaging in, or that is
authorized by the commissioner to engage in, business under Article 1
(commencing with Section 3500) of Chapter 19.
   (F) Any foreign corporation that is licensed by the commissioner
under Article 1 (commencing with Section 3500) of Chapter 19 to
maintain an office in this state and to transact at that office
business under Article 1 (commencing with Section 3500) of Chapter
19, with respect to that office.
   (3) "Order" means any approval, consent, authorization, permit,
exemption, denial, prohibition, or requirement applicable to a
specific case issued by the commissioner, including, without
limitation, any condition thereof.  "Order" does not include any
certificate of authority or license issued by the commissioner but
does include any condition of a license and any written agreement
made by any person with the commissioner under this division.
   (4) "Subject person of a bank" means any director, officer, or
employee of the bank, or any person who participates in the conduct
of the business of the bank.  However, "subject person of a bank"
does not include a controlling person of the bank that is registered
as a bank holding company with the Board of Governors of the Federal
Reserve System pursuant to the Bank Holding Company Act of 1956 (12
U.S.C. Sections 1841, et seq.).  "Subject person of a bank" does not
include an individual who is a director, officer, or employee of a
controlling person of the bank unless the individual is a director,
officer, or employee of the bank or participates in the conduct of
the business of the bank.  For purposes of this paragraph,
"controlling person" has the meaning set forth in Section 700.
   (5) "Violation" includes, without limitation, any act done, alone
or with one or more persons, for or toward causing, bringing about,
participating in, counseling, aiding, or abetting a violation.
   (b) If, after notice and a hearing, the commissioner finds the
following, the commissioner may issue an order suspending or removing
a subject person of a bank from his or her office with the bank and
prohibiting the subject person from further participating in any
manner in the conduct of the business of the bank, except with the
prior consent of the commissioner:
   (1) (A) That the subject person 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 the bank; or
   (B) That the subject person has engaged or participated in any
unsafe or unsound act with respect to the business of the bank; or
   (C) That the subject person has committed or engaged in any act
that constitutes a breach of his or her fiduciary duty as a subject
person; and
   (2) (A) That the bank has suffered or will probably suffer
substantial financial loss or other damage by reason of the
violation, act, or breach of fiduciary duty; or
   (B) That the interests of the bank's accountholders have been or
are likely to be seriously prejudiced by reason of the violation,
act, or breach of fiduciary duty; or
   (C) That the subject person has received financial gain by reason
of the violation, act, or breach of fiduciary duty; and
   (3) That the violation, act, or breach of fiduciary duty is one
involving personal dishonesty on the part of the subject person, or
one that demonstrates a willful or continuing disregard for the
safety or soundness of the bank.
   (c) If, after notice and a hearing, the commissioner finds the
following, the commissioner may issue an order suspending or removing
a subject person of a bank from his or her office with the bank and
prohibiting the subject person from further participating in any
manner in the conduct of the business of the bank, except with the
prior consent of the commissioner:
   (1) That the subject person's conduct or practice with respect to
another bank or business institution has resulted in substantial
financial loss or other damage; and
   (2) That the conduct or practice has evidenced personal dishonesty
or willful or continuing disregard for the safety and soundness of
the other bank or business institution; and
   (3) That the conduct or practice is relevant in that it
demonstrates unfitness to continue as a subject person of the bank.
   (d) If the commissioner finds the following, the commissioner may
immediately issue an order suspending or removing a subject person of
a bank from his or her office with the bank and prohibiting the
subject person from further participating in any manner in the
conduct of the business of the bank, except with the prior consent of
the commissioner:
   (1) That it is necessary for the protection of the bank or the
interests of the bank's accountholders that the commissioner issue
the order immediately; and
   (2) (A) That any of the factors set forth in paragraph (1) of
subdivision (b), any of the factors set forth in paragraph (2) of
subdivision (b), and any of the factors set forth in paragraph (3) of
subdivision (b) are true with respect to the subject person; or
   (B) That any of the factors set forth in paragraph (1) of
subdivision (c), any of the factors set forth in paragraph (2) of
subdivision (c), and the factor set forth in paragraph (3) of
subdivision (c) are true with respect to the subject person.
   (e) (1) If the commissioner finds the following, the commissioner
may immediately issue an order suspending or removing a subject
person of a bank from his or her office with the bank and prohibiting
the subject person from further participating in any manner in the
conduct of the business of the bank, except with the prior consent of
the commissioner:
   (A) That the subject person 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 that is punishable by imprisonment for a term exceeding
one year and that involves dishonesty or breach of trust; and
   (B) That the person's continuing to serve as a subject person of
the bank may pose a material threat to the interests of the bank's
accountholders or may threaten to materially impair public confidence
in the bank. In case the criminal proceedings are terminated other
than by a judgment of conviction, the order shall be deemed
rescinded.
   (2) If the commissioner finds the following, the commissioner may
immediately issue an order suspending or removing a subject person of
a bank, or a former subject person of a bank, from his or her
office, if any, with the bank and prohibiting the person from further
participating in any manner in the conduct of the business of the
bank, except with the prior consent of the commissioner:
   (A) That the person has been finally convicted of a crime that is
punishable by imprisonment for a term exceeding one year and that
involves dishonesty or breach of trust; and
   (B) That the person's continuing to serve or resumption of service
as a subject person of the bank may pose a material threat to the
interests of the bank's accountholders or may threaten to materially
impair public confidence in the bank.
   (3) The fact that any subject person of a bank charged with a
crime involving dishonesty or breach of trust is not finally
convicted of that crime shall not preclude the commissioner from
issuing an order regarding the subject person pursuant to other
provisions of this division.
   (f) (1) Within 30 days after an order is issued pursuant to
subdivision (d) or (e), the person to whom the order is issued may
file with the commissioner an application for a hearing on the order.
  The commissioner shall, upon the written request of the person,
extend the 30-day period by an additional 30 days provided the
request is filed with the commissioner within 30 days after the order
is issued.  If the commissioner fails to commence the hearing within
15 business days after the application is filed, or within a longer
period to which the 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 (d) or (e) to petition for judicial review of the order
shall not be affected by the failure of that person to apply to the
commissioner for a hearing on the order pursuant to this subdivision.

   (g) (1) Any person to whom an order is issued under subdivision
(b), (c), (d), or (e) may apply to the commissioner to modify or
rescind that order.  The commissioner shall not grant that
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
bank, comply with all applicable provisions of this division and of
any regulation or order issued thereunder.
   (2) The right of any person to whom an order is issued under
subdivision (b), (c), (d), or (e) to petition for judicial review of
that order shall not be affected by the failure of the person to
apply to the commissioner pursuant to paragraph (1) to modify or
rescind the order.
   (h) (1) A notice issued under this section shall state the facts
constituting the grounds for removal, suspension, or prohibition.
   (2) A hearing held before the commissioner pursuant to this
section shall be private unless the commissioner, in his or her
discretion, after fully considering the view of the party afforded
the hearing, determines that a public hearing is necessary to protect
the public interest.
   (i) (1) It is unlawful for any subject person of a bank or former
subject person of a bank to whom an order is issued under subdivision
(b), (c), (d), or (e) to do any of the following, except with the
prior consent of the commissioner, so long as the order is effective:

   (A) To serve or act as a director, officer, employee, or agent of
any bank.
   (B) To vote any shares or other securities of a bank having voting
rights, for the election of any person as a director of the bank.
   (C) Directly or indirectly, to solicit, procure, or transfer or
attempt to transfer, or vote any proxy, consent, or authorization
with respect to any shares or other securities of any bank having
voting rights.
   (D) Otherwise to participate in any manner in the conduct of the
business of any bank.
   (2) Any person who violates paragraph (1) shall, upon conviction,
be punished by a fine of not more than five thousand dollars (,000)
or imprisoned in the state prison, or in a county jail not to exceed
one year, or by both that fine and imprisonment.
   (3) If, after notice and a hearing, the commissioner finds that
any person has violated paragraph (1), the commissioner may order
that person to pay to the commissioner a civil penalty in an amount
as the commissioner may specify, provided that the amount of the
civil penalty shall not exceed one thousand dollars (,000) for each
violation or, in the case of a continuing violation, one thousand
dollars (,000) for each day for which the violation continues.
   In determining the amount of a civil penalty to be paid to the
commissioner under this paragraph, the commissioner shall consider
the financial resources and good faith of the person charged, the
gravity of the violation, the history of previous violations by the
person, and other factors that in the opinion of the commissioner may
be relevant.


1914.  Whenever he or she deems it expedient, the commissioner may
call a meeting of the stockholders of any bank or trust company.
Notice of the time and place of the meeting shall be given to each
stockholder by a notice mailed to the stockholder by registered mail
at the stockholder's last known address at least 15 days before the
date of the meeting.  Any expenses of such meeting shall be borne by
the bank or trust company.



1915.  During any emergency period declared by the President of the
United States, each bank shall conform to any order of the
commissioner directed to it, relating to and conforming with
regulations, limitations, or restrictions which are applicable
thereto prescribed by the Secretary of the Treasury, the Comptroller
of the Currency, or the Board of Governors of the Federal Reserve
System regulating or governing the operations of banks which are
members of the Federal Reserve System.



1916.  During any emergency period declared by the Governor no bank
shall transact any banking business except to such extent and subject
to such regulations, limitations, or restrictions as may be
prescribed by the commissioner, which, as to member banks, shall be
as consistent as the exigencies of the situation permit with the
provisions of the Federal Reserve Act and regulations issued
thereunder or, as to insured banks, shall be as consistent as the
exigencies of the situation permit with the rules and regulations
governing banks whose deposits are insured by the Federal Deposit
Insurance Corporation.



1917.  (a) The commissioner may, in his or her discretion, bring an
action in the name of the people of this state in a superior court to
enjoin a violation of, to enforce compliance with, or to collect a
penalty or other liability imposed under, this division or any
regulation or order issued under this division.  The amount of any
penalty or liability collected shall be deposited into the State
Banking Account in the Financial Institutions Fund.  Upon a proper
showing, a permanent or preliminary injunction, restraining order, or
writ of mandate shall be granted, and a monitor, receiver,
conservator, or other designated fiduciary or officer of the court
may be appointed for the defendant or the defendant's assets, or
other appropriate relief may be granted.
   (b) A receiver, monitor, conservator, or other designated
fiduciary officer of the court appointed by the superior court
pursuant to this section may, with the approval of the court,
exercise all of the powers of the defendant's officers, directors,
partners, trustees, or of 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 a receiver, monitor, conservator,
or any other designated fiduciary officer of the court by reason of
their exercising these powers or performing these duties pursuant to
the order of, or with the approval of, the superior court.
   (c) If the commissioner determines it is in the public interest,
the commissioner may include in an action authorized by subdivision
(a), a claim for ancillary relief, including, but not limited to, a
claim for restitution, disgorgement, or damages on behalf of the
person injured by the act or practice that is the subject matter of
the action.  The court has jurisdiction to award additional  relief.

   (d) The provision of subdivision (a) that authorizes the
appointment of a monitor, receiver, conservator, or other designated
fiduciary or officer of the court, and subdivisions (b) and (c) do
not apply to any of the following:
   (1) A state bank that is authorized by the commissioner to
transact commercial banking or trust business.
   (2) A national bank.
   (3) A foreign (other state) bank that maintains a branch office in
this state in accordance with federal law, the law of this state,
and the law of the bank's domicile.
   (4) A foreign (other nation) bank that is licensed by the
commissioner to maintain a branch office or agency, as defined in
Section 1700, in this state.
   (5) A foreign (other nation) bank that maintains a federal branch
or agency, as defined in Section 1700, in this state.
   (e) The provisions of this section that authorize the commissioner
to bring actions and seek relief are not intended to, and do not,
affect any right that any other person may have to bring the same or
similar actions, or to seek the same or similar relief.