Chapter 5 - Authority of the Commissioner

California Corporations Code — §§ 25140-25151

Sections (12)

Amended by Stats. 1990, Ch. 1035, Sec. 2.

(a)(1) The commissioner may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, any qualification of an underwritten offering of securities under Section 25111, 25112 or 25131 or may suspend or revoke any permit issued under Section 25113 or 25122 if he or she finds (A) that the order is in the public interest and (B) that the proposed plan of business of the issuer or the proposed issuance or sale of securities is not fair, just, or equitable, or that the issuer does not intend to transact its business fairly and honestly, or that the securities proposed to be issued or the method to be used in issuing them will tend to work a fraud upon the purchaser thereof.

(2)In the case of an application for or qualification of securities under Section 25111, 25112, or 25131 that is not an underwritten offering of securities, the commissioner may issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of the qualification unless he or she finds (A) that the stop order is not in the public interest and (B) that the proposed plan of business of the applicant or the proposed issuance of securities is fair, just, and equitable, that the issuer intends to transact its business fairly and honestly, and that the securities that the issuer proposes to issue or the method to be used in issuing them are not such as will work a fraud upon the purchaser thereof.

(b)The commissioner may refuse to issue a permit under Section 25113 unless he or she finds that the proposed plan of business of the applicant and the proposed issuance of securities are fair, just, and equitable, that the applicant intends to transact its business fairly and honestly, and that the securities which it proposes to issue and the methods to be used by it in issuing them are not such as, in his or her opinion, will work a fraud upon the purchaser thereof.

(c)The commissioner may refuse to issue a permit under Section 25122 unless he or she finds that the proposed plan of recapitalization or reorganization and the proposed issuance of securities are fair, just, and equitable to all security holders affected.

(d)Notwithstanding the provisions of subdivisions (a) and (b) of this section, the commissioner shall not have authority to issue any stop order or to refuse to issue or to suspend or revoke any permit on the basis that the price at which the security is to be offered is unfair, unjust or inequitable in any case where the security is being publicly offered for cash pursuant to a registration statement under the Securities Act of 1933 and the offering is the subject of a firm commitment underwriting by an underwriter or syndicate of underwriters all of whom are registered under the Securities Exchange Act of 1934. For the purposes of this subdivision a firm commitment underwriting means an underwriting pursuant to which the underwriter or syndicate of underwriters is committed to take up and pay for the securities subject only to the usual or customary conditions, but not including any “market out” or similar condition operative after the time of commencement of the offering. (A condition relating to the suspension of all trading on a national securities exchange, a banking holiday, war, civil insurrection, or the like is not a “market out” or similar condition within the meaning of this subdivision.) Nothing contained in this subdivision shall deny authority to the commissioner to issue a stop order or to refuse to issue or to suspend or revoke a permit because of unreasonable discounts, commissions or other compensation to underwriters, sellers or others, unreasonable promoters’ profits or participations or unreasonable amounts or kinds of options.

§ 25141

Amended by Stats. 1996, Ch. 41, Sec. 6. Effective May 6, 1996.

The commissioner may impose as a condition of qualification under Chapter 2 (commencing with Section 25110) or Chapter 3 (commencing with Section 25120) of this part conditions requiring the deposit in escrow of securities, imposing a legend condition restricting the transferability thereof, impounding the proceeds from the sale thereof, limiting the expense in connection with the sale thereof, requiring the waiver of assets, dividends or voting rights by the holders of promotional securities, or any other condition if the commissioner finds that without such condition the offering will be unfair, unjust or inequitable. The commissioner may in his or her discretion modify or remove any such conditions when in his or her opinion they are no longer necessary or appropriate.

§ 25142

Amended by Stats. 1977, Ch. 235.

When application is made for a permit to issue securities or to deliver other consideration (whether or not the security or transaction is exempt from qualification or not required to be qualified) in exchange for one or more bona fide outstanding securities, claims, or property interests, or partly in such exchange and partly for cash, the commissioner is expressly authorized to approve the terms and conditions of such issuance and exchange or such delivery and exchange and the fairness of such terms and conditions, and is expressly authorized to hold a hearing upon the fairness of such terms and conditions, at which all persons to whom it is proposed to issue securities or to deliver such other consideration in such exchange have the right to appear. The application for a permit to deliver consideration other than securities shall be in such form, contain such information and be accompanied by such documents as shall be required by rule of the commissioner or, in the absence thereof, in substantially the form of an application filed pursuant to Section 25121.

§ 25143

Amended by Stats. 1973, Ch. 390.

(a)The commissioner may by order summarily postpone or suspend the effectiveness of any qualification pending final determination of any proceeding under this chapter. Upon the entry of the order, the commissioner shall promptly notify each person specified in subdivision (b) of this section that it has been entered and of the reasons therefor and that upon the receipt of a written request the matter will be set down for hearing to commence within 15 business days after such receipt unless the applicant consents to a later date. If no hearing is requested and none is ordered by the commissioner, the order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after notice and hearing in accordance with subdivision (b) of this section, may modify or vacate the order or extend it until final determination.

(b)No stop order may be entered under this chapter except under subdivision (a) of this section without appropriate prior notice to the applicant, the issuer, and the person on whose behalf the securities are to be or have been offered and hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, in connection with which the commissioner shall have all of the powers granted thereunder. In the case of qualification by permit, such hearing shall be held upon such notice within 20 business days after a written request therefor by the applicant unless the permit is issued prior to the expiration of such period or the applicant consents to a later date.

§ 25144

Added by Stats. 1968, Ch. 88.

The commissioner may vacate or modify a stop order if he finds that the conditions which caused its entry have changed or that it is otherwise in the public interest to do so.

§ 25145

Added by Stats. 1968, Ch. 88.

Every issuer qualifying securities for sale in this state shall at all times keep and maintain a complete set of books, records, and accounts of such sales and the disposition of the proceeds thereof, and shall thereafter, at such times as are required by the commissioner, make and file in the office of the commissioner a report, setting forth the securities sold by it under such qualification, the proceeds derived therefrom and the disposition thereof.

§ 25146

Amended by Stats. 1988, Ch. 598, Sec. 2.

For a period of 18 months after the qualification is effective, the commissioner may by rule or order require an issuer who has filed an application to file reports not more often than semiannually for the purpose of keeping reasonably current the information contained in the application; provided, that the commissioner may not require the filing of any such report after completion of the offering if a nonissuer transaction in the security would be entitled to exemption under Section 25101.

§ 25147

Added by Stats. 1968, Ch. 88.

The commissioner may by rule or order require as a condition of qualification that any security qualified under Section 25113 be sold only on a specified form of subscription or sale contract, and that a signed or conformed copy of each contract be preserved for any period up to three years specified in the rule or order.

§ 25148

Amended by Stats. 1983, Ch. 442, Sec. 2.

Except in cases where the delivery of a prospectus or proxy statement is required under the Securities Act of 1933 or the Securities Exchange Act of 1934, the commissioner may by rule or order require as a condition of qualification under Section 25112, 25113, 25122 or 25131 that a prospectus or proxy statement containing any designated part of the information required in the application be given to each person to whom an offer is made before the sale of the security to be issued under the permit or order.

§ 25149

Added by Stats. 1968, Ch. 88.

The commissioner may act as escrow holder for securities required to be deposited in escrow by his order.

§ 25150

Repealed and added by Stats. 1968, Ch. 88.

The commissioner may accept and act upon the opinions, appraisements and reports of any engineers, appraisers, or other experts which may be presented by an applicant on any question of fact concerning or affecting the securities proposed to be offered and sold. In lieu of, or in addition to, such opinions, appraisements, and reports, the commissioner may have any or all matters concerning or affecting such securities investigated, appraised, passed upon and certified to him by engineers, appraisers, or other experts selected by him.

§ 25151

Amended by Stats. 1984, Ch. 577, Sec. 5.

(a)Upon the filing of a written request for the consent to transfer securities referred to in Section 25133, accompanied by such information and documents as the commissioner may by rule require, the commissioner shall issue such consent if the commissioner finds that the transfer requested will be fair, just, and equitable to the proposed transferees, and otherwise the commissioner shall deny such consent.

(b)The issuance of the commissioner’s consent pursuant to this section shall not be a qualification of the transaction pursuant to, nor an exemption from the qualification requirements of, Section 25110, 25120, or 25130.