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These Loans Can Be Problematical Even When The Borrower Isn’t An Officer or Director

I spent most of last week discussing California Corporations Code Section 315.  As a reminder, that statute prohibits a corporation (Section 162) from making a loan of money or property to, or guaranteeing the obligation of, an officer or director without specified shareholder approval. Section 315, however, isn’t concerned only with loans to officers and…

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Are LLC Interests Securities in California?

Does California consider membership interests in a limited liability company to be securities?  There are two correct answers to this question – yes and no. As I discussed a few years back, the California Corporate Securities Law preceded even the idea of limited liability companies.  When California’s first LLC law (the Beverly-Killea Act) was adopted,…

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“Sweat Equity” Means No Security

There was no such thing as a limited liability company in 1933, 1934 or even 1968.  Thus, Congress and the California legislature had no reason to consider whether a membership interest in an LLC constitutes a security when they drafted the Securities Act, the Exchange Act and the Corporate Securities Law.  When California enacted the Beverely-Killea Limited…

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DOC Finds A Reorganization Can Include A Rehabilitation

Until last year, Ambac Assurance, a Wisconsin domiciled insurer, was one of the largest monoline insurers in the world.  Originally it insured low-risk, public finance bonds.  However, in the 1990s it started to offer financial guarantee insurance on residential mortgage backed securities and collateralized debt obligations of asset-backed securities.  Not surprisingly, Ambac was a casualty of the…

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CA AG Files Criminal Complaint Against Sellers of Movie Loans

Last week, the California Attorney General filed this 89 count criminal complaint against three individuals.  The complaint alleges that these individuals offered and sold securities without qualification under the Corporate Securities Law of 1968.  An interesting aspect of this cases is that it involved the alleged offer and sale of securities in the form of loans.  According…

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Life Settlement Contracts Are Securities in CA

Broc Romanek also mentions in his blog today that the Securities and Exchange Commission issued a task force report on life settlement contracts.  Among other things, the task force recommends that Congress amend the definition of “security” under the federal securities laws to include life settlements.  The task force defines a “life settlement” as “a…

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