Should There Be “Bad Actor” Risk Factor?

I’ve devoted several recent posts to the Securities and Exchange Commission’s new “bad actor” rule because it is awash with a sea of troubles for issuers, both private and publicly traded.    The rule prevents issuers from relying on Rule 506 if they are or have been subject to any of a long list of

Ever Wonder Who’s In Charge At The Department Of Business Oversight?

I’m still adjusting to the fact that the Departments of Corporations and Financial Institutions have merged or morphed into the totalitarian sounding Department of Business Oversight.  See DOC and DFI – RIP.  Like each of its predecessors, the new Department is headed by a single Commissioner.  In July, Governor Brown appointed Jan Lynn Owen as the Department’s

Beware Of Fraudulent On-Line Escrows

From time to time, the Department of Business Oversight posts warnings about fraudulent on-line escrow companies.  According to the Department, these fraudsters use stolen identities and credit card numbers to open a Web hosting account.  They then upload content files to the Web hosting server to create a phony site.  These sites often claim to be

DOC And DFI – RIP

Effective today, the Department of Corporations and the Department of Financial Institutions have “merged” to form the Department of Business Oversight in accordance with the Governor’s reorganization of state departments.  The new website is www.dbo.ca.gov. This was an extremely ill-considered change that was opposed by many, including myself.  It is unlikely to save the state

Two Very Good Reasons To Visit The Department’s Website

When I joined the Department of Corporations, it had no website.  I remember reviewing possible designs for a site.  Now, it seems hard to imagine that there was a time when state agencies didn’t have websites.  Today, the Department’s website is a good source of information about enforcement actions, licensing requirements and procedures, as well

If You Did This, It Would Be Fraud!

All fees, reimbursements, assessments, and other money or amounts charged and collected by the Department are required to be deposited into the the State Corporations Fund.  Cal. Gov’t Code § 13978.6(b).  The legislature created the fund to “effectively support the Department of Corporations” in its administration of the laws subject to its jurisdiction.  Id. In

Does The Authorization Or Issuance Of A New Class Of Stock Require Qualification?

Corporations often amend their articles of incorporation to create one or more new classes of securities.  These newly created classes often have priority over the previously issued and outstanding shares.  Does the amendment or issuance of these shares require qualification under the Corporate Securities Law?  The answer is “yes” – and “no”. Of course, any

Where Have All The CAFA Notices Gone?

Class Action Fairness Act

On February 18 2005, Congress enacted the Class Action Fairness Act (CAFA), P.L. No. 109-2 (28 U.S.C. §§ 1332(d), 1453, and 1711 – 1715).  In enacting the CAFA, Congress sought to protect consumers and investors from settlements in which plaintiffs’ attorneys received significant fees but class members received little or even less.   In one (in)famous case, for example,

Facebook Fairness Hearing Back In The News

Last August, the Department of Corporations approved the acquisition of Instagram, Inc. by Facebook, Inc. following a fairness hearing.  See DOC Calls It Fair.  According to this Los Angeles Times story by Salvador Rodriguez, Facebook officially closed the acquisition a few days later.  Although I would have expected that to have been the end of the matter, the

DOC Warns Financial Services Licensees And Can A Theory Be A Tautology?

Last April, the Consumer Financial Protection Bureau issued this Bulletin cautioning supervised banks and certain non-depository financial services companies that they must have “an effective process for managing the risks of service provider relationships”.  Like many regulatory requirements, the Bulletin has given birth to both a new industry and unintended consequences.  The new industry is third-party risk management.  This is a