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CALIFORNIA CORPORATE & SECURITIES LAW

Something Appears To Be Awry With California’s Insider Trading Statute

I trust that by now most quotidian readers of this blog should be familiar with Corporations Code Section 25402 which declares insider trading to be unlawful.  Although the statute has been on the books since the enactment of the Corporate Securities Law of 1968, it doesn’t make a great deal of sense.  Here’s the unabridged text of the statute: It is…

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District Court Rules Plaintiff Failed To Plead Real Estate Investment Was A “Security”

Both the Securities Act of 1933 and the California Corporate Securities Law of 1968 provide similar, but not the same, definitions of a “security”.  See Making A List Of Securities And Checking It Twice.  Although these lists are expansive, courts continue to explain why some items on the lists are not securities and why some…

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Did Ethiopian Electric Power Violate California’s Corporate Securities Law?

Last week, the Securities and Exchange Commission announced a $6.5 million settlement with Ethiopian Electric Power, which was described in the SEC’s order as “a government-owned power utility headquartered in Addis Ababa, Ethiopia”.  According to the order, Ethiopian Electric Power offered and sold bonds to U.S. residents of Ethiopian origin in Washington D.C. and other…

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Bill Aims To Put The Kibosh On Alleged Hedge Fund Stock Price Manipulation

The California Corporate Securities Law has long declared a number of manipulative devices to be unlawful.  See Cal. Corp. Code § 25400.  Now, a California legislator wants to add to the list.  As amended last week, SB 726 (Hueso) would insert a new Section 25401.2 to the Corporations Code declaring: It is unlawful for any person, directly or indirectly,…

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California’s Secured Promissory Note Exemption

The line between real property transactions and securities transactions is not always clear.  California Corporations Code Section 25100(p) provides an exemption for a promissory note secured by a lien on real property provided it is neither: (a) one of a series of notes of equal priority secured by interests in the same real property; or…

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No Rescission Without Privity

California Corporations Code Section 25401 declares unlawful the sale or purchase of a security by means of a written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were…

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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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“Time Cools, Time Clarifies” – The CSL’s Cooling Off Statute

The Corporate Securities Law of 1968 does not provide for a general “cooling off” period in which a purchaser of securities may cancel the transaction for any reason.  However, the Department of Corporations in 2000 sponsored legislation, SB 1837 (Figueroa), that added Corporations Code Section 25508.5 establishing a seven calendar day cooling off period with…

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Thinking About Converting? You May Need The Commissioner’s Approval!

In 1999, the Business Law Section of the California State Bar sponsored AB 197 (Ackerman).  That bill established a comprehensive scheme under the California Corporations Code for the conversion of limited partnerships and limited liability companies into other forms of business entities.  The bill, however, did not address the application of the Corporate Securities Law…

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CCP § 1029.8: “Let Him Make Treble Satisfaction”

Recently, I’ve been writing about Section 25501.5 of the California Corporations Code, which was added to the Corporate Securities Law of 1968 by AB 2167 (Correa).  That wasn’t the only statutory change effected by AB 2167, however.  AB 2167 also amended California Code of Civil Procedure § 1029.8 and that amendment should be of particular interest to unregistered…

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