California Search Fee Waiver Law Now in Effect

The Commissioner of Business Oversight’s final rule creating a new exemption for intermediaries from the broker-dealer provisions of the Corporate Securities Act became effective on June 21, 2017. See 10 CCR §§ 260.211.4, 260.211.5, 260.211.6, and 260.211.7. The Commissioner adopted these new regulations in response to the enactment of AB 667 (Wagner) in 2015. AB 667 added Section 25206.1 to the California Corporations Code. This statute exempts finders, as defined, from the requirement to register as broker-dealers in California. Among other requirements, exempt finders are required to file a preliminary information statement with the Commissioner.

In response to comments received from the Corporations Committee of the Business Law Section of the California State Bar, myself, and others, the Commissioner has made several changes to the proposed regulations. One of the most significant is summarized in the Commissioner’s Final Statement of Reasons:

The proposed regulation, as originally made public, would require persons who do not qualify for the exemption as brokers to register with the Commissioner of Business Oversight (Commissioner) as broker-dealers or agents. In response to comments received from the author and sponsor of Assembly Bill 667 (AB 667), persons who were subject matter experts in AB 667, and members of the public who may be directly or indirectly affected by or otherwise interested in the proposed regulations, the Department has amended the language in subsections (f) and (g) to clarify that a person who does not qualify for the exemption must register as a broker-dealer or agent if the person is acting as a broker-dealer or agent as defined in the Corporations Code and is not otherwise exempt; and to remove language requiring broker-dealers and agents to register with the Commissioner. AB 667 created an exemption for intermediaries from the broker-dealer provisions of the Corporate Securities Law of 1968 (Corporate Securities Law).

(footnote omitted).

California’s exemption, while somewhat burdensome, is a welcome step in resolving a serious problem for many issuers. California’s exemption, of course, does not affect the registration requirements of the SEC or other states. However, California’s action may prompt Congress and the SEC to address this long-standing problem.

Commissioner resets comment period clock

Last week I wrote about the Commissioner’s proposal to withdraw the regulation requiring credit unions to submit any changes to their articles of association for approval. See 10 CCR § 30.105. Yesterday, the Commissioner announced that the Notice of Proposed Rulemaking originally published on the Department of Business Oversight website on June 23, 2017 contained incorrect comment period dates. The correct end date for the comment period is August 28, 2017. Readers can find the correct Notice, Preliminary Statement of Reasons, and proposed text here.

Agonistes Redux

Yesterday I heard from Mr. Holman Jenkins Jr. that the title of his editorial, “Trump Agonistes,” is a reference to Garry Wills’ book, “Trump Agonistes,” Nixon Agonistes: The Crisis of a Self-Made Man. The title of Mr. Wills’s book was itself an allusion to the works of John Milton and T. S. Eliot. In fact, Mr. Wills includes quotes from both authors at the beginning of his book: “O lastly over-strong against your self” (Milton) and “When you’re alone like he was alone . . ” (Eliot).