Assembly Standing Committee on Banking and Finance

I also want to note that we are accepting written testimony through our position letter portal on the Committee's website. I do want to extend a warm welcome to our new Members of the Committee. Assembly Member Soria, Assembly Member Waldron, and Assembly Member Dixon. Welcome to the Banking and Finance Committee. I do look forward to working with you all and we'll have an exciting banking year. Not too exciting. Yes. I would like to extend my thanks to our Vice Chair, Assembly Member Chen.

The Vice Chair has been a great partner to work with and proud to be able to stand shoulder to shoulder with you on banking issues. And I do know that we will get a lot done this year. Exciting or not, we will do a lot. Speaking of exciting, a perfect segue into my next comments. I do want to make a few comments about the collapse of Silicon Valley bank and what it means for this Committee's work.

Silicon Valley Bank's failure raises serious, serious concerns about the bank's risk management practices, the efficacy of banking supervision, and the adequacy of banking regulations. We will be investigating what went wrong and the steps we can take to prevent a similar situation from happening again. This will take some time, but this work will be a major priority moving forward. And with that, it is time to move on in this hearing. And I do believe that we have enough for a quorum secretary. Would you please call roll for quorum?

[Roll Call]

So we do have a quorum. Quorum has been established. Our first order of official business is the adoption of Committee rules. These rules were distributed to each office of the Committee Members and were approved by the chief's Clerk office. Really? They are largely the same as the last session's rules. So do I have a motion for adoption of the Committee rules moved by Member Wicks and seconded by Assembly Member Fong. Secretary, please call the roll on the.

[Roll Call]

So the Committee rules have been adopted and we will leave it open for absent Members. Please note that these rules will be posted online on the Committee website. Before we proceed with bills, we do want to take up the consent calendar. We have one Bill on the consent calendar. File item number three, AB 1312, which is a Committee Bill. Do I have a motion for the consent? Second moved by Assembly Member Wicks. Seconded by Assembly Member Wilson. Secretary, please call the roll.

[Roll Call]

We have eight votes. The consent calendar is adopted. We will leave it open for absent Members as well. We will now go to Bill presentations. File item number one, AB 231. Vice Chair Chen, you are up front and center. You are presenting on AB 231, file item one, and the recommendation is do pass.

Thank you, Mr. Chair. Thank you, Members. First of all, I want to thank you, your Committee, for working so hard on this Bill. Restrictions imposed on group and travel activity as a result of COVID-19 pandemic have relayed and revealed that certain provisions of the code relating to the governance of California corporations have not kept up with technological advances, even in the absence of an emergency.

Last year, I carried legislation that authorized remote shareholder meetings to be held at any place and provide the members could participate remotely and vote by electronic transmission by and to the corporation. However, this year we want to expand on these provisions in two ways. One, we want to grant shareholder or proxy holder the right to choose whether to participate via audiovisual or audio-only means.

And two, we want to extend the aforementioned provisions to all nonprofit public benefit corporations, nonprofit mutual benefit corporations, nonprofit religious corporations, and cooperative corporations holding a meeting of members. AB 231 aims to address these provisions. Here to testify, we have Kaitlyn Saberin, representing the California Lawyer Associations.

Thank you. And we do have a motion and a second. Please go ahead.

Thank you. My name is Kaitlyn Saberin, and I'm a partner with the law firm Delfino Madden here in Sacramento. I'm a corporate attorney, and I represent both for-profit and nonprofit organizations. I'm here on behalf of the nonprofit organizations and corporations committees of the Business Law Section of the California Lawyers Association, a sponsor of AB 231.

AB 231 will amend the corporation's code to permit nonprofit, public benefit, mutual benefit, religious, and cooperative corporations to hold fully remote, regular, and special member meetings in the same way that existing law allows for for-profit corporations to hold shareholder meetings solely by electronic means. This right is subject to the same sunset date and conditions that apply to for-profits regarding the ability to participate, record keeping, and verification of individuals who vote.

Challenges in accessibility that arose during the pandemic demonstrated that although the law provided some flexibility for remote meetings during an emergency, existing law did not contemplate the ongoing need for such flexibility outside of the context of an emergency. Over the past few years, advances in technology and the ability to engage members and continue business operations remotely have been just as vital to furthering the good work of nonprofit and cooperative corporations as is the case for nonprofit or for-profits, excuse me.

But these advancements have outpaced what is permitted by existing law. The Committee's analysis of AB 231 elaborates on prior legislation and Executive orders, but I would like to mention AB 769, introduced by Assembly Member Grayson, enacted in 2022, which provided for-profit, nonprofit, and cooperative corporations the means to hold remote, non-emergency shareholder or member meetings. However, it was only effective from March 25 through June 30 of 2022.

AB 1780, introduced by Assembly Member Chen, also in 2022, enabled California for-profit corporations to hold fully remote nonemergency shareholder meetings through the end of 2025, but it did not similarly allow nonprofit or cooperative corporations to do the same. The impact of AB 231 would not be insignificant.

The magnitude of nonprofits to the State of California was noted in the June 2022 analysis from the Committee on Accountability and Administrative Review regarding SB 543, which was introduced by Senator Limon citing to the 2019 report from the California Association of Nonprofits, nonprofit organizations rank as the fourth largest industry in California by employment, with nearly 1 million people employed throughout the state, and they bring in approximately $40 billion in revenue to California from out of state sources.

Additionally, to help increase accessibility to nonprofit, cooperative, and for-profit corporations, AB 231 clarifies that with respect to fully remote meetings, the corporations may offer an audio-only means by which a shareholder, member, or proxy holder may participate in addition to a remote audiovisual feed. Importantly, a participant's use of either means must be their choice, and the corporation may not impose any barriers to either mode of participation.

This aligns with the existing provisions in the corporation's code, which reference electronic, video, and telephonic communication to participate in meetings. This concludes my remarks, and I'm available to answer any questions you might have. Thank you.

Thank you very much for your testimony. We will now move to witnesses in support. Are there additional witnesses in support in the hearing room? If there are, please step up to the microphone. State your name, organization and position.

Good afternoon. Is this on? Good afternoon. Emily Udell, with the California Credit Union League, in support.

Thank you. And I see no other rush toward the microphone. So we will now move to witnesses in opposition. Are there any witnesses in opposition that's in the hearing room? If there are, please step forward. Seeing none. To the Committee, let's ask. Are there any questions from Committee Members or comments? Seeing none. Author, would you like to offer a closing statement?

I respectfully ask for your Aye vote. Thank you, Mr. Chair.

All right. With that, we do have a motion and a second. Secretary, please call the roll.

[Roll call].

The Bill has nine votes. It gets out and we will hold it open for absent Members. And I will now pass the gavel over to Vice Chair.

Thank you. Next Bill and follow order is AB 1116. File item number two. The recommendations do pass to the Committee to Appropriations. Chairman Grayson, at your pleasure.

Thank you, Vice Chair. And thank you for that confidence from members. I am pleased to present AB 1116, which will update and modernize California's money transmission law. In response to the conference of state banking supervisors, they underwent a lengthy or. The conference for state banking supervisors underwent a lengthy stakeholder process to develop a model law titled the Money Transmission Modernization act. This process involves significant input from state regulators, including the Department of Financial Protection and Innovation, aka DFPI.

Here in California, this model law developed common standards and definitions that states can use to create consistency across money transmission programs. Once broadly adopted, this model law will empower state regulators to work together to protect consumers. AB 1116 will update the California Money Transmission act with provisions from the model law to make the program work better for DFPI and licensees.

The bill modifies our law in key ways, such as updating definitions, modifying the net worth calculation, and updating the types of eligible securities a licensee can own. Importantly, AB 1116 does not adopt the model law in its entirety. This is because there are consumer protections in California's Money Transmission act that are stronger than other states, and it is important to keep those protections in place. Let me give you an example.

Fellow member or committee member, Assemblymember Bauer-Kahan, authored a bill a few years ago to require money transmitters to have robust customer service. AB 1116 keeps that customer service requirement. In conclusion, AB 1116 is a good governance measure that embraces reasonable changes to California's Money Transmission law to make administration of the program easier for everyone.

Thank you. Thank you, Mr. Chair. We'll now move on to witnesses in support. Do we have any witnesses in support?

Vice Chair and members Rj Cervantes, on behalf of the Electronic Transactions Association, in support.

Thank you.

Thank you, Mr. Chair and Vice Chair, committee Members. Mike Villines, on behalf of Intuit, in support of this measure. Looking forward to working with the author as we move forward.

Thank you. Any other witness in support? Any witnesses in opposition? Seeing none, I'll go ahead and head to the committee. Any committee members with. Any questions for the author? No questions. Mr. Chair, would you like to close?

Thank you. For consideration. Simply ask for an aye vote. Thank you very much.

Thank you. We have a motion in a second, Madam Secretary. Please call the roll.

AB 1116. Do pass and refer to Committee on Appropriations. [Roll Call]

That bill has 12 votes and it is out. We will hold it open for absent. That bill has 12 votes. It does get out. We'll hold it open for absent Members and, Secretary, why don't we go back to the beginning with rules and we'll go through roll call for each item.

On the Committee rules. [Roll Call] That has 12 votes.

Committee rules has 12 votes. And it gets out. Consent.

On the consent calendar, AB 1312, do pass. [Roll Call] That has 12 votes.

Consent has 12 votes. It is out. Item number one, AB 231, Chen.

AB 231. The motion is do pass. [Roll Call] That has 12 votes.

AB 231 has 12 votes. It is out, and that is it. Super. We have taken care of and completed our agenda for today's hearing. We will be leaving the roll. Is there anyone else? Roll is done so with that Assembly Banking and Finance Committee is adjourned.