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CALIFORNIA CORPORATE & SECURITIES LAW

California Reverts To Former Securities Anti-Fraud Statute

Readers of this blog will recall my chariness of a 2013 amendment to California’s basic securities anti-fraud statute.  See California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?”  Although I identified a host of issues, my fundamental concern was that by rewriting California Corporations Code Section 25401, the legislature…

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Applying Today’s Statute To Yesterday’s Offer And Sale

In September 2013, Governor Jerry Brown signed SB 538 (Hill) into law.  This bill fundamentally rewrote a key anti-fraud provision of the Corporate Securities Law of 1968 – Corporations Code Section 25401.  At the time, I cast a chary eye on the amendment and predicted that it would lead to judicial confusion.  See California Creates Complete…

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Court Declines To Apply Rule 9(b) To Section 25401 Claim

A complaint alleging securities fraud under Rule 10b-5 must meet the stringent pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure as well as the requirements of the Private Securities Litigation Reform Act.  In re Verifone Holdings Securities Litig., 704 F. 3d 694, 701 (9th Cir. 2012).  These are the twin rocks on…

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The Securities Fraud Device That The Legislature Devised To Omit

Last year, Senator Jerry Hill authored a bill, SB 538, which rewrote Corporations Code Section 25401.  As I posted, the underlying premise was fanciful at best – that California’s statute “has failed to keep up with similar language in federal anti-fraud statutes”.   By metamorphosing Section 25401 from a statute based on Section 12(a)(2) of…

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Must Suits/Actions To Enforce Section 25401 Be Brought In The Federal Courts?

Suppose Congress enacts a statute providing that the federal courts will have exclusive jurisdiction of all lawsuits brought to enforce any liability or duty under a federal act or the rules adopted under that act.  If a state later enacts a statute that copies one of the rules adopted under the federal act, can lawsuits seeking to enforce…

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California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?”

In my very limited encounters with the late Harold Marsh Jr., I recall that he didn’t readily embrace proposed “fixes” to the Corporations Code.  As I too get older, I’ve come to appreciate his perspective.  For example, Governor Brown just signed SB 538 (Hill), a bill that fundamentally changes California’s securities fraud statute. Among other…

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The California Taxpayer and Shareholder Protection Act of 2003

Ten years ago, there was concern about so-called “expatriate corporations”.  These were corporations that incorporated in foreign jurisdictions to minimize their tax liability.  In reaction to this phenomenon, the legislature added The California Taxpayer and Shareholder Protection Act of 2003 to the Public Contract Code.  2003 Cal. Stats. ch. 657.  In general, this act prohibits a…

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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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California Bill Would Expand Liability For Securities Fraud, Impose New Fees, Expand Commissioner’s Powers

In late February, Senator Jerry Hill introduced a bill, SB 538, to substantially amend the Franchise Investment Law.  A few days later, the bill was read for the first time and set for hearing by the Senate Banking and Financial Institutions Committee on April 3.  Then something very fishy happened.   Two days before the hearing, Senator…

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