SB 972: California Financing Law: commercial loans: investment advisers.

Existing law, the California Financing Law, generally regulates the business of finance lenders and brokers and prohibits any person from engaging in those businesses without obtaining a license from the Commissioner of Financial Protection and Innovation. Existing law also imposes various requirements on licensees who offer or sell commercial loans, as defined.

This bill would authorize an investment adviser that is registered with the United States Securities and Exchange Commission, known as an SEC-registered investment adviser, to apply for and obtain a finance lender license to act on its own behalf and on behalf of any client account if all lending activity conducted pursuant to the license is limited to commercial loans, in accordance with certain requirements. The bill would provide that a license obtained by an SEC-registered investment adviser to act as a finance lender covers any affiliate of the SEC-registered investment adviser that is also an SEC-registered investment adviser. The bill would require the SEC-registered investment adviser to maintain and file with the commissioner an appendix to its license application and renewals, listing each client account, as defined. Under the bill, as a condition of licensure, the SEC-registered investment adviser would be required to obtain and maintain a surety bond, complete background checks, meet minimum net worth and commercial loan threshold requirements, and file specified information with the commissioner under oath, subject to penalty of perjury. The bill also would authorize the commissioner to adopt rules and regulations as necessary to implement and administer these provisions. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program.

The California Constitution prohibits usury, which is the loan or forbearance of any money, goods, or things at a rate of interest in excess of specified rates, but exempts certain transactions and lenders from these provisions, and allows the Legislature to exempt additional classes of persons by statute. Existing law, the California Financing Law, establishes a class of exempt persons pursuant to the constitutional provision on usury that includes personal property brokers and specified lenders.

This bill would provide that the class of exempt persons under the California Financing Law includes each person within the meaning of client account, as defined, to which the above-described provision on investment advisors applies.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.