2010 California Code
Business and Professions Code
Article 6. Real Property Securities Dealers

10237.  A real property securities dealer within the meaning of this
article is any person, acting as principal or agent, who engages in
the business of:
   (a) Selling real property securities as defined by subdivision (a)
or (b) of Section 10237.1, to the public, or
   (b) Offering to accept or accepting funds for continual
reinvestment in real property securities, or for placement in an
account, plan or program whereby the dealer implies that a return
will be derived from a specific real property sales contract or
promissory note secured directly or collaterally by a lien on real
property which is not specifically stated to be based upon the
contractual payments thereon.



10237.1.  The term real property security as used in this article
means:
   (a) An agreement made in connection with the arranging of a loan
evidenced by a promissory note secured directly or collaterally by a
lien on real property or made in connection with the sale of a
promissory note secured directly or collaterally by a lien on real
property or a real property sales contract wherein the real property
securities dealer or his principal expressly or impliedly agrees to
do any of the following:
   1. Guarantee the note or contract against loss at any time, or
   2. Guarantee that payments of principal or interest will be paid
in conformity with the terms of the note or contract, or
   3. Assume any payments necessary to protect the security of the
note or contract, or
   4. Accept, from time to time, partial payments for funding the
loan or purchasing the note or contract, or
   5. Guarantee a specific yield or return on the note or contract,
or
   6. Pay with his own funds any interest or premium for a period
prior to actual purchase and delivery of the note or contract, or
   7. Repurchase the note or contract.
   (b) A promissory note secured directly or collaterally by a lien
on real property or a real property sales contract on which the real
estate broker who arranged the loan evidenced by the note, negotiated
the sale of a note or contract or who is servicing the note or
contract for the owner, knowingly causes any payment on the note or
contract to be made to the owner, directly or indirectly, with funds
other than funds of the obligor while the obligor is delinquent on
the note or contract.
   Payments of principal or interest made in good faith to the owner
by a broker, when made after receipt by the broker of the obligor's
remittance, shall not be deemed a payment with funds other than the
funds of the obligor.
   The provisions of this subdivision shall not be applicable in the
case of a promissory note which the obligor as purchaser of the real
property securing the note has given to the holder of the note as
seller of the real property for purposes of financing the purchase
nor shall the provisions of this subdivision be applicable in the
case of a real property sales contract under the terms of which the
obligor is making installment payments to acquire title to the real
property from the vendor.
   (c) One of a series of promotional notes secured by liens on
separate parcels of real property in one subdivision or in contiguous
subdivisions.
   (d) One of a series of real property sales contracts pertaining to
separate parcels of real property in one subdivision or in
contiguous subdivisions, all of which are executed by one person or
persons associated together as owners.
   Except as provided in subdivisions (a) or (b), performance of
services in connection with loans or promissory notes secured
directly or collaterally by a lien on real property or a real
property sales contract, as agent for and at the direction of the
lender, borrower, or purchaser, including but not limited to the
payment of taxes, debt service on an obligation secured by the same
real property having priority over any mortgage or deed of trust
securing the promissory note serviced by the agent, insurance
premiums or costs of foreclosure, if all such costs (excluding
routine office expenses) of such services are paid by or payable by
borrower, lender, or purchaser shall not be construed to be a real
property security as defined in subdivision (a) of this section, or
as a security for the purposes of the Corporate Securities Act.
   As used in subdivision (c) "promotional note" means a promissory
note secured by a trust deed executed on unimproved real property, or
executed after construction of an improvement of the property but
before the first sale of the property as so improved, or executed as
a means of financing the first purchase of the property as so
improved, and which is subordinate or which by its terms may become
subordinate to any other trust deed on the property; provided that
the term "promotional note" does not include (i) a note which was
executed in excess of three (3) years prior to being offered for sale
or (ii) a note secured by a first trust deed on real property in a
subdivision, which evidences a bona fide loan made in connection with
the financing of the usual costs of the development of a
residential, commercial, or industrial building or buildings on the
property under a written agreement providing for the disbursement of
the loan funds as costs are incurred or in relation to the progress
of the work and providing for title insurance insuring the priority
of the security as against mechanic's and materialmen's liens or for
the final disbursement of at least 10 percent of the loan funds after
the expiration of the period for the filing of mechanics' and
materialmen's liens.
   As used in subdivision (d), the term "real property sales contract"
does not include a contract executed more than three years prior to
being offered for sale.
   The term real property security does not include any bond or
debenture or note which is one of a series of notes of equal priority
secured by an interest in the same real property.



10237.2.  As used in this article "sale" or "sell" includes every
issuance, creation for resale, disposition or attempt to dispose of
any interest in a real property security for value and includes all
of the following, whether done directly or by circular letter,
advertisement, radio or television broadcast or otherwise: an offer
to sell, an attempt to sell, a solicitation of a sale, a contract of
sale or an exchange. A sale shall be complete upon delivery of the
promissory note evidencing a transaction arranged pursuant to a
permit issued under this article to the purchaser or an agent
designated by the purchaser.
   In connection with a completed sale made pursuant to this article
the purchaser shall be the owner of the note, irrespective of other
potential characterizations of the purchaser's interest in the
transaction.



10237.25.  (a) Except as provided in subdivision (b), sale to
pension, retirement or similar trust funds, to corporations, to
institutional lending agencies, to real estate broker licensees, to
general building contractor licensees, or to attorneys shall not be
deemed a sale to the public for the purpose of this article.
   (b) The sale to a self-employed individual retirement plan or
individual retirement account shall be deemed not to be a sale to the
public for the purpose of this article only if the plan or account
is for the exclusive benefit of an individual who is a real estate
broker licensee, general building contractor licensee, or attorney.




10237.3.  It is unlawful for any person to act as a real property
securities dealer in this state without first having obtained a real
estate broker's license.



10237.4.  Every person selling a real property security shall
personally sign and deliver to the purchaser a statement in writing,
containing all the information required by Section 10232.5, before
the purchaser shall be obligated to complete the transaction. No
seller shall permit the purchaser to sign the statement if any
information required by Section 10232.5 is omitted. The seller shall
retain an executed copy of the statement for four years.



10237.6.  An appraisal of each parcel of real property which relates
to a transaction subject to this article shall be made by the real
property securities dealer or by an independent appraiser unless the
purchaser of the obligation to which the parcel relates states in
writing to the broker that he will obtain his or her own appraisal.
An appraisal by the dealer or his or her agent made pursuant to this
section shall be kept on file for four years and a copy of the
appraisal shall be delivered to the purchaser prior to the time the
purchase becomes obligated.



10237.7.  Every real property securities dealer shall file, ten (10)
days prior to use, true copies of all material subject to Section
10235 which pertains to activities subject to this article with the
commissioner. No dealer shall use any such material in any way after
the commissioner gives notice in writing that such material contains
any statement that is false or misleading or omits to state material
information that is necessary to make the statement therein complete
and accurate. Failure to give notice within the ten (10) days shall
be deemed to indicate the material is not disapproved.



10237.8.  Every real property securities dealer shall file and
maintain with the commissioner a cash deposit, cash equivalent, or
bond in the penal sum of ten thousand dollars ($10,000), executed by
an admitted surety insurer approved by the commissioner, and running
to the people of the State of California, for the use and benefit of
interested persons. The bond shall be conditioned upon the dealer
complying with all the provisions of this article, performing and
complying with all obligations assumed by the dealer, and honest and
faithful application of all funds received.



10237.9.  When an action is commenced on the bond of a real property
securities dealer the commissioner may require the filing of a new
bond. Immediately upon the recovery in any action on the bond the
dealer shall file a new bond. Failure to file a new bond within seven
(7) days after notification that a new bond is required or after
recovery on a bond constitutes failure to comply with Section
10237.8.



10238.1.  (a) Every real property securities dealer shall file with
the commissioner, annually, a report containing financial statements
in accordance with generally accepted accounting principles,
accompanied by an opinion thereon by a certified public accountant or
a public accountant, based upon an audit of the dealer's business
subject to this article which is not materially restricted in scope.
The report shall include, but not be limited to the receipt and
disposition of all funds handled in connection with transactions
subject to this article. The report shall be filed with the
commissioner within sixty (60) days after the close of the period of
the report unless, for good cause shown, the commissioner, in
writing, extends the time therefor. The report shall contain at least
the following:
   1. Total number of sales, as principal or agent, subject to this
article during the period, and
   2. Total dollar volume of such sales.
   (b) The commissioner may, by rule or regulation adopted pursuant
to Chapter 4.5 (commencing with Section 11371) of Part 1, Division 3,
Title 2 of the Government Code, require such additional information
as he deems necessary.
   (c) In the event that a real property securities dealer fails to
file a report pursuant to this section the commissioner may cause an
audit to be made and shall charge and collect the cost of the audit
from the dealer.



10238.2.  Whenever the commissioner finds that any person is
violating the provisions of this article, that he is conducting his
business in an unsafe or injurious manner, that the further sale of
real property securities under the provisions of this article would
be unfair, unjust or inequitable, or that the method used by him in
such sales would work a fraud upon the purchasers, he may order the
person to desist and refrain from violating the provisions of this
article or from further sales in accordance with the procedures set
forth in Section 10086.



10238.6.  Any person who does any of the following acts is guilty of
a public offense punishable by a fine not exceeding ten thousand
dollars ($10,000) or by imprisonment in the state prison, or in a
county jail not exceeding one (1) year or by both such fine and
imprisonment.
   (a) In any application to the commissioner or in any proceeding
before him, or in any examination, audit or investigation made by him
or on his authority, knowingly makes any false statement or
representation, or, with knowledge of its falsity, files or causes to
be filed in the office of the commissioner any false statement or
representation in a required report.
   (b) Issues, circulates or publishes, or causes to be issued,
circulated or published any advertisement, pamphlet, prospectus or
circular concerning any real property security which contains any
statement that is false or misleading, or otherwise likely to deceive
a reader thereof, with knowledge that it contains such false,
misleading or deceptive statement.
   (c) In any respect willfully violates or fails to comply with any
provision of this article, or willfully violates or fails, omits or
neglects to obey, observe or comply with any order, decision, demand,
requirement or permit, or any part or provisions thereof, of the
commissioner under this article.
   (d) With one or more other persons, conspires to violate any
permit or order issued by the commissioner of any provision of this
article.



10238.7.  Every person sustaining an injury resulting from a
transaction subject to this article which was in violation of the
provisions of the article may recover in a civil action the amount of
the damages with interest, as awarded by the court, from the date of
the injury, and shall be entitled to be awarded a reasonable
attorney's fee. Any such action shall be brought within three years
from the date of the transaction notwithstanding the date the injury
was discovered.



10238.8.  (a) This article shall remain operative as long as a
conservatorship or liquidation proceeding pursuant to Article 6.5
(commencing with Section 10239) of Chapter 3 of Division 4, that was
commenced prior to the effective date of the act enacting this
section, remains active.
   (b) Notwithstanding any other provision of this article, no
conservatorship or liquidation proceeding shall be commenced on or
after the effective date of the act enacting this section.
   (c) The commissioner shall determine when the last pending
proceeding described in subdivision (a) is terminated. The
commissioner shall submit a notice of that determination to the
Secretary of State, and this article shall be repealed upon the
receipt of that notice by the Secretary of State.