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The DBO Wants Your Social Security Number, But Is It Legal?

Readers will recall that last year the California legislature created a statutory exemption for finders from the California’s registration requirement for broker-dealers (Chap. 743, Stats. 2015).  That exemption, codified at Corporations Code Section 25206.1, requires persons relying on the exemption to file a statement of information with the Department before engaging in activities described in the statute.  The Department has published for comment proposed regulations implementing this requirement, including the requisite statement of information.  The comment period ends this Friday.

Although the statute does not authorize the Department to require the disclosure of social security numbers, the Department has proposed to mandate this disclosure.  The Department in its Initial Statement of Reasons gives the following reasons for requiring disclosure:

The Department’s purpose for collecting social security numbers in this proposed rulemaking is to verify the identity of the individual seeking the exemption and to investigate the individual’s disciplinary history as necessary for purposes of the exemption.

This begs the question, however, of whether the Department can legally require finders to disclose their social security numbers.  Section 7(a)(1) of the Privacy Act of 1974 (found at 5 U.S.C. § 552a note (Disclosure of Social Security Number)) provides:

It shall be unlawful for any Federal, State or local government agency to deny to any individual any right, benefit, or privilege provided by law because of such individual’s refusal to disclose his social security account number.

The Department is quite clear that it is proposing to require disclosure.  It even mentions the Privacy Act.  Yet it does not cite any exemption from Section 7(a)(1).

“Patriots and friends, we are ready! The Bastille!”

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