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CALIFORNIA CORPORATE & SECURITIES LAW

Removing California Securities Legends

When I first started practicing law, the predominant exemption from qualification under the California Corporate Securities Law of 1968 was found in Corporations Code Section 25102(h).  Although that exemption remains on the books, its popularity has been eclipsed by Section 25102(f), which was added in 1981. One of the conditions to Section 25102(h) was the…

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The Politics Of Securities Enforcement

Historically, the Governor appointed California’s Commissioners of Corporations.  Cal. Corp. Code § 25600.  Today, the Governor still appoints the head of the new Department of Business Oversight.  Having served as a Commissioner, I believe that it is preferable to have securities enforcement decisions made by an appointed rather than an elected official.  An appointed Commissioner doesn’t need to raise money for his or her election or…

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California Gets Ready For SEC Hand-off of Midsized Advisory Firms

Department of Corporations Letter To Midsized Firms If you are an SEC registered investment adviser with assets under management of between $25 million and $100 million, you should check your mailbox for this October 7 letter from Commissioner Preston Dufauchard.  The Commissioner is sending this letter to those firms that are likely to be required to transition…

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California Broker-Dealer Safe Harbor Rule Approved

In People v. Cole, 156 Cal. App. 4th 452 (2007), a California Court of Appeal appeared to reach the surprising conclusion that corporate officers and directors of issuers are required to be licensed as broker-dealers unless they receive a commission for the sale of securities! As discussed in this post, Commissioner Preston DuFauchard responded to…

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Commissioner Previews Potential Private Fund Adviser Rule Changes

If you’re reading this blog, then you had a better Ides of March than Julius Caesar did in 44 B.C.E.  In this March 5 post, I reported that the Commissioner of Corporations would be seeking comments on proposed amendments to Rule 260.204.9.  Yesterday, the Commissioner issued this Invitation for Comments.  As discussed in several earlier posts,…

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Guest Post: Are Some California Fund Manager Performance Fees in Doubt?

By Matthew J. Ertman The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) repeal of the private adviser exemption could eliminate the ability of some California fund managers to charge performance fees (often referred to as the manager’s carried interest). Effective July 21, 2011, private equity, venture capital and hedge fund managers will…

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Commissioner To Ask For Comments On Rule 260.204.9

Look for the Commissioner of Corporations to be issuing a solicitation for comments on proposed changes to Rule 260.204.9.  As will be discussed in a Guest Blog to be posted on Monday, the Commissioner has announced that he is considering changes to Rule 260.204.9 in light of the enactment of the Dodd-Frank Act last summer.  Currently,…

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Fairness Hearings – Shell Companies Need Not Apply

In recent weeks, a number of stories have appeared in the press regarding “reverse mergers” involving shell corporations and Chinese companies.  For example, Joshua Gallu wrote this story for Bloomberg last December. After the Securities and Exchange Commission adopted rule amendments in 2005 governing the use of Forms S-8, 8-K and 20-F by shell companies,…

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The Commissioner’s Precedent Decisions – Another Route To Rulemaking?

The Commissioner of Corporations may issue desist and refrain orders under the Corporate Securities Law of 1968.  Cal. Corp. Code § 25532.  If the respondent wishes to contest the order, s/he must do so by filing a request for hearing within 30 days of service of the D&R order. A hearing must then be held…

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Commissioner Extends Comment Period On Investment Adviser Rule Changes

As posted last month, the Commissioner of Corporations has issued an invitation for comment on possible changes to California’s investment adviser rules.  The deadline for submitting comments was set to expire this week.  Just before year end, however, the Commissioner extended the comment period to January 21, 2011.  The Commissioner is seeking comments in accordance with Government Code § 11346.45 before formally…

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