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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…

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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…

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Eureka! Bill Introduced To Homologate Finders

Questions about the use of finders have bedeviled transactional lawyers for years.  The need for finders is the unintended consequence of the federal and state securities law exemptions that are conditioned on the absence of a general solicitation.  Most start-ups don’t have preexisting relationships with rich people (aka accredited investors).  Thus, they are sorely tempted…

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What Do It [§ 25501.5] Mean?

I’ve received several responses to my post last week concerning the meaning of California Corporations Code Section 25501.5.  Alan Parness, Chairman of the ABA Business Law Section’s Committee on State Regulation of Securities, observes that the remedies of rescission or damages can be “legislative overkill”.  He notes that investors will typically pursue these remedies only…

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Section 25501.5 – What Do It Mean?

In 2004, the California Legislature added Section 25501.5 to the Corporate Securities Law of 1968.  Ever since then, I’ve been asked “What do it mean?” Corporations Code Section 25501.5 generally authorizes an action for rescission (or damages, if the security is no longer owned) by any person “who purchases a security from or sells a security to a broker-dealer…

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Usury Exemption Bites Back

Last week, I wrote about the oft overlooked California Finance Lenders (CFL) law.  In general, that law provides that anyone engaged in the business of making consumer or commercial loans must obtain a license from the Department of Corporations (unless an exemption is available). CFL licensees do enjoy one benefit.  They constitute a class of “exempt persons”…

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