2009 California Corporations Code - Section 28820-28829 :: Article 2. Conflicts Of Interest

28820.  In this article, unless the context otherwise requires:
   (a) "Adviser," when used with respect to a licensee, means any
person who regularly provides legal, accounting, investment, or
management services or advice to the licensee.
   (b) (1) "Associate," when used with respect to a licensee, means
all of the following:
   (A) Any principal shareholder, director, officer, manager, agent,
or adviser of such licensee.
   (B) Any director, officer, partner, general manager, agent,
employer, or employee of any person referred to in subparagraph (A).
   (C) Any person who controls, is controlled by, or is under common
control with, any person referred to in subparagraph (A), directly or
indirectly, through one or more intermediaries.
   (D) Any close relative of any person referred to in subparagraph
(A).
   (E) Any person of which any person referred to in subparagraphs
(A) to (D), inclusive, is a director or officer.
   (F) Any person in which any person referred to in subparagraphs
(A) to (D), inclusive, or any combination of persons acting in
concert owns or controls, directly or indirectly, a 10 percent or
greater equity interest.
   (2) For purposes of this subdivision, any person who is in any of
the relationships referred to in subparagraphs (A) to (F), inclusive,
of paragraph (1) within six months before or after a licensee
provides financing assistance shall be deemed to be in the
relationship as of the date when the licensee provides such financing
assistance.
   (3) For purposes of this subdivision, if a licensee, in order to
protect its interests, designates any person to serve as a director
of, officer of, or in any capacity in the management of, a small
business firm to which the licensee provides financing assistance,
the person shall not, on that account, be deemed to have any
relationship with the small business firm. However, this paragraph
shall not apply in any case where the person has, directly or
indirectly, any other financial interest in the small business firm
or where the person, at any time before the licensee provides the
financing assistance, served as a director of, officer of, or in any
other capacity in the management of, the small business firm for a
period of 30 days or more.
   (c) "Close relative" means ancestor, lineal descendant, brother or
sister and lineal descendants of either, spouse, father-in-law,
mother-in-law, son-in-law, brother-in-law, daughter-in-law, or
sister-in-law.
   (d) "Closing services" means services performed in connection with
the providing of financing assistance. "Closing services" includes,
but is not limited to, appraising property and preparing credit
reports. "Closing services" does not include any services performed
after the providing of financing assistance.
   (e) "Short-term financing assistance" means any financing
assistance with a term of not more than five years.

28821.  (a) The commissioner may, by regulation or order, either
unconditionally or upon specified terms and conditions and for
specified periods, exempt from the provisions of this article any
person or transaction or class of persons or transactions, if the
commissioner finds the action to be in the public interest and that
the regulation of the persons or transactions is not necessary for
the purposes of this division.
   (b) In exempting from the provisions of this article any person or
transaction or class of persons or transactions, the commissioner
shall give due consideration to any conflict of interest provision of
federal law or regulation applicable to the person or transaction
governing participants in federal financing programs.

28822.  It shall be unlawful for any licensee, directly or
indirectly, to provide financing assistance to any of its associates.

28823.  (a) It shall be unlawful for any licensee, directly or
indirectly, to provide financing assistance to any associate of
another licensee if any associate of the first licensee receives, has
received, or is about to receive, directly or indirectly, financing
assistance or a commitment for financing assistance from the other
licensee.
   (b) It shall be unlawful for any licensee, directly or indirectly,
to provide financing assistance to any associate of another licensee
if any associate of the first licensee receives, has received, or is
about to receive, directly or indirectly, financing assistance or a
commitment for financing assistance from a third licensee pursuant to
any contract, understanding, or arrangement among the licensees.

28824.  It shall be unlawful for any licensee or for any associate
of a licensee, directly or indirectly, to borrow money, or purchase
or otherwise receive securities, from any of the following:
   (a) Any person to which the licensee has provided, or has
committed to provide, financing assistance.
   (b) Any director of, officer of, or person who owns a 10 percent
or greater equity interest in, any person referred to in subdivision
(a).
   (c) Any close relative of any person referred to in subdivision
(b).

28825.  It shall be unlawful for any licensee, directly or
indirectly, to provide financing assistance to discharge, or to free
other funds for use in discharging, in whole or in part, an
obligation to any associate of the licensee. However, this section
shall not apply to any transaction effected by an associate of a
licensee in the normal course of the associate's business involving a
line of credit or short-term financing assistance.

28826.  It shall be unlawful for any licensee, directly or
indirectly, to provide financing assistance for the purchase of
property from any associate of the licensee.

28827.  It shall be unlawful for any licensee, directly or
indirectly, to provide financing assistance to any person to whom any
associate of the licensee provides financing assistance, either
contemporaneously with, or within one year before or after, the
providing of financing assistance by the licensee, if the terms on
which the licensee provides financing assistance are less favorable
to the licensee than the terms on which the associate provides
financing assistance to the associate. In any case where the
financing assistance provided by the associate of the licensee is of
a different kind from the financing assistance provided by the
licensee, the burden shall be on the licensee to prove that the terms
on which it provided financing assistance were at least as favorable
to it as the terms on which the associate provided financing
assistance to the associate. This section shall not apply to any
transaction effected by an associate of a licensee in the normal
course of the associate's business involving a line of credit or
short-term financing assistance.

28828.  It shall be unlawful for any associate of a licensee,
directly or indirectly, to receive from any person to whom the
licensee provides financing assistance, any compensation in
connection with the providing of the financing assistance or anything
of value for procuring, influencing, or attempting to procure or
influence, the licensee's action with respect to the providing of the
financing assistance. This section shall not apply to the receipt by
an associate of a licensee of fees for bona fide closing services
performed by the associate. If the associate is, with the consent and
knowledge of the person to whom the financing assistance is
provided, designated by the licensee to perform the services, the
services are appropriate and necessary in the circumstances, the fees
for the services are approved as reasonable by the licensee, and the
fees for the services are collected by the licensee on behalf of the
associate.

28829.  It shall be unlawful for any licensee, directly or
indirectly, to sell or otherwise transfer any of its assets to any of
its associates.