Assembly Standing Committee on Banking and Finance

We do not obviously have a quorum. And just to say folks, this has been a very hectic day schedule.

Are pulling people in multiple different ways. So with that, welcome to the Assembly Banking and Finance Committee. Whether you're here in person, whether you're watching virtually, I am grateful that you have joined us here in room 444, and today we will allow testimony in person.

I also want to note that we are accepting written testimony through the position letter portal on the committee's website. Also, I do want to announce that Assembly Member Papan is filling in for Assembly Member Wilson today. Assembly Member Papan.

Welcome to the best committee. Anyway, glad to have you with us. I also want to announce that file item number two, SB 401 Limon, is pulled from the Committee by the author. Today's, again, today's schedule is hectic. So we are looking for a quorum. We don't have one yet.

Members, if you'll come and then also, we're waiting for presenters. Once they get here, we'll move on with the hearing. We'll give them a few more minutes to race over here from the swing space.

Welcome, Senator. We are so glad to see you.

I'm very glad to be here, even though we should be having a budget committee. But it's okay. Can my witnesses come to the table? Is that all right?

Absolutely.

Witnesses, you can come to the table. Thank you, Committee, for your patience. I'm here to present SB 54.

SP 54 recognizes that if you're an entrepreneur and you have a startup, you're dependent on venture capital investments to be successful with your startup. But if you are a black entrepreneur or a woman entrepreneur primarily, but also other entrepreneurs of color, your likelihood to get funding from a venture capital firm is pretty low, let's put it that way. Very low.

And I will let my witnesses give you some of those statistics. But what this Bill does is simple transparency measure. It asks that our venture capital firms report to us every year and give us data on their investments.

There's no penalty. We don't say, you must meet a certain investment profile. It's just for us to be able to see what's the portfolio diversity of their investments.

And by that, we're hoping that, as other transparency measures have, it will motivate such firms to do the right thing. So now I would like my witnesses to speak to it. And I'm going to allow them to introduce themselves, since I ran over here, and I will mess up their names. And I don't want to do that. So I will allow them to introduce themselves.

Thank you. Senator Skinner, just before the witnesses speak, just wanted to confirm that you do accept the amendments?

Yes, I do.

And this is for file item number one, SB 54.

Correct.

Witnesses, please introduce yourself in two minutes each.

Thank you. Thank you, Senator Skinner. Good afternoon, Chair and Members of the committee.

My name is Derek Ali. I am a self taught, multigrammy award winning audio engineer from the city of Gardena, California, mentored by the likes of legendary music producer Dr. Dre, I have been fortunate to have been part of some of the biggest and most influential hip hop albums over the past decade. I am also founder and CEO of EngineEars, a vertical software platform for recording artists, audio engineers, music producers, and record labels, facilitating discovery, communications, project management payments, and distribution solutions.

A music tech startup setting out to solve the problems that I experienced firsthand throughout my own career, from humble beginnings to worldwide acclaim and recognition. You can imagine the friction and adversity that I've had to overcome in order to make it here today. When I made the decision to put winning Grammys in the backseat to start my next chapter as a music technology startup founder, the support I received from my industry was overwhelming due to the fact that I am the perfect candidate to build in this space.

It was only until meeting with venture capital is when I was faced with questions that expressed doubt of my ability to lead and execute on our goals and visions, despite my deep background and personal success in the space that I am building in. As we all know, black entrepreneurs typically receive less than 2% of all VC dollars each year, while companies led by black women receive less than 1%. Now, knowing this type of data and experiencing firsthand the negative interactions with venture capital could, if not already, have discouraged the leaders of tomorrow, completely derailing their journeys that could very well be one that would change the world.

Now, EngineEars will enable millions of music creators across America to monetize their art and passion, democratizing music creation, making the music business more equitable for all. Now, I might be tenacious enough to go through the obstacles of raising venture capital, but how many of us aren't? I'm not here today asking to enable any handouts, but I'm also not asking for anything more or less than what we deserve, which is transparency that this Bill will offer to provide us a fair opportunity to add value to our communities. And that's why I'm here today to testify in support of Senate Bill 54.

Thank you for your time.

And thank you for your passionate testimony. Greatly appreciated. As chair, I would like to establish quorum.

Excellent.

You know how that goes around here.

I will introduce the second witness.

So we do have a quorum. And secretary, will you please call role?

Grayson? Grayson here. Chen? Chen here. Bauer-Khan? Cervantes? Dixon? Dixon here. Mike Fong? Mike Fong here. Gabriel? Gabriel here. Papan? Papan here. Petrie-Norris? Petrie-Norris here. Soria? Soria here. Waldron? Wicks?

Okay, we have established a quorum. And Senator Skinner, would you like to introduce your next witness here at the Dice?

Yes. Thank you. So I have Divya Reddy, who will be my next witness, and we'll let her proceed.

Good afternoon, chair and Members. My name is Divya Reddy. I am one of the founding partners of the F5 Collective, which is a venture Fund that invests solely in women founders.

I'm here to support SP Bill 54. Access to capital is the lifeblood of every entrepreneurial endeavor. Unfortunately, women entrepreneurs receive significantly less venture funding compared to the male counterparts, despite outperforming them, studies have shown.

According to TechCrunch, in 2021, teams with only women received only 1.9% of the venture funding. But when male team members were included, the percentage jumped to 17.2. And that trend has been consistent for over a decade.

I'm a woman of color with background in banking capital markets. I've consistently faced discrimination. When I've stepped up for leadership roles, I've been told consistently that I don't have the right experience.

But when my male counterparts were applauded for taking on new challenges right, or when I was assertive, I've been labeled as aggressive. These experiences and more have led me to start on my entrepreneurial journey two years ago. In addition to being a partner at the F5 Collective, I'm a co founder of Pyrium, which is a financial technology startup that lets entrepreneurs from diverse backgrounds raise capital. Funding disparities become even more evident at the cross section of gender and race.

Research by Project Diane revealed that black women founders received a mere 0.0006% of total venture funding between 2009 and 17. Such glaring inequalities perpetuate disparity stifling the potential for talented women entrepreneurs and hindering economic growth. I will wrap up by saying transparency and accountability are key to reform.

Venture funds play a critical role in driving innovation, job and wealth creation, and they hold the power to Fund these companies. This Bill urges these funds to join us in addressing these funding disparities. Take pride in their decisions, be transparent and share it with the world.

That's all we ask, nothing more, nothing less. Thank you.

So we have a motion seconded by Assembly Member Fong and thank you for your testimony. Do we have any additional witnesses in support in the hearing room? Just step up to the microphone. State your name, organization and position, please.

Good afternoon, Mr. Chair and Members. Tim Valderrama with the Weideman group. On behalf of Next Gen California, we want to thank the author and the sponsor for bringing this forward. We're in strong support.

Thank you. Seeing no other witnesses, and I don't believe we have any lead witnesses in opposition. Any witnesses in opposition in the room? Seeing none.

We'll bring it back to the committee. Any questions or comments from committee? Yes. Assembly Member Petrie-Norris.

Just want to say thank you, Senator, for bringing this Bill forward, and thank you to your witnesses for testifying. I think the statistics that you shared are really shocking, just shocking. And I think sometimes we know what gets measured, sometimes gets done.

And just shining a light on practices and making folks kind of scratch their head about why those numbers are so ridiculous can start to change some of those patterns. So thank you. Seeing

no other comments or questions from committee Members, this recommendation is do pass as amended to the Judiciary Committee. Those amendments are described in the analysis. And with that, Secretary, will you please call the role?

May I close?

Oh, I'm so sorry, Senator. You may close. Yes.

Thank you. I appreciate you've already gotten a motion, and I know not to talk past ones. Yes.

But I just wanted to-- I think our witnesses spoke for themselves. But I think you can see from the caliber of the witnesses that Mr. Ali, having given the success he's had in the industry which has given him then the ability to earn the type of money that could reinvest in himself. Had he not, where would he have gotten the investments to do the kind of the software and the other work that he's done? And then, as we heard with the F6 Collective forming, what these are two examples of is where either women or black entrepreneurs who are able to generate some wealth against all odds, then in seeing that there's no other investments for colleagues like them, they start their own investment firms.

And that helps, but it's not enough. And so this Bill is aimed at correcting that. And just in my I said that there was no penalty.

There's no requirement on the firms for meeting any kind of diversity of investments, but they are expected to report, so there is a consequence if they do not report, but there is no requirement on what they meet. It's purely transparency. With that, I ask for your aye vote.

Thank you so much, Senator, for those closing comments. And with that, we will go to Secretary to call roll.

SB 54. The motion is do pass as amended and refer to Committee on a Judiciary. Grayson? Grayson aye. Chen? Chen not voting. Bauer-Kahn? Cervantes? Dixon? Dixon no. Mike Fong? Mike Fong aye. Gabriel? Gabriel aye. Papan? Papan aye. Petrie-Norris? Petrie-Norris aye. Soria? Soria aye. Waldron? Wicks? Wicks aye. Has seven votes.

The Bill has seven votes. We will keep the roll open for absent Members, and it does get out. Great.

Thank you. Next. I see. Senator. Is that Senator Newman? Yes, please.

Senator, yes, if you would like to do that, file item number three, SB 455. The recommendation is due pass as amended to Judiciary Committee. Those amendments are described in the analysis. Senator Newman, you are presenting on behalf of Senator McGuire, please.

Sure. Thank you, Mr. Chair. This is my way of taking the temperature, seeing if you're in good mood here. I'll do my Bill after this. So, thank you for your and your staff on behalf of Senator McGuire, for your staff's incredible work on SB 455. If you know Senator McGuire, that's the word he would use. SB 455 is a common sense piece of legislation that will protect fire and other disaster survivors and help keep their home rebuilds on track.

Tens of thousands of Californians have lost their homes and businesses to wildfires over the last eight years. Since 2015, over 42,000 homes, businesses and other structures have been damaged or destroyed by megafires. Not only do these survivors have to deal with the traumatic and life changing experience of losing their homes, but they also have to begin the challenging task of rebuilding their homes and lives.

These survivors have to balance coordinating with their insurance company on settlements, organizing contractors, and getting sign off from their mortgage company during the rebuild process. Survivors work closely with their mortgage company to negotiate the terms of the rebuild, working out important details like the size of the home's footprint, which helps dictate the payment schedule. After these logistics are agreed upon by both the survivor and the mortgage company, the survivor enters into contracts with a building contractor to begin the rebuilding process.

It is a common practice for a mortgage company to sell or transfer homeowner mortgages to other mortgage companies during the rebuild process. The majority of these mortgage sales and transfers are straightforward and seamless, but not all. There have been hundreds of cases where a rebuild is underway and the mortgage is sold and the new mortgage company changes the terms.

For example, some new mortgage companies have added additional terms to existing rebuild agreements, such as requiring more information and inspection, significantly delaying the payout and delaying the rebuild for months. In other cases, where the homeowner was underinsured and the original mortgage company had signed off on a rebuild of a smaller house, the new mortgage company did not honor that agreement. The new company refused to release all the remaining funds because the rebuild was different from the lost home.

These delays just had insult to injury for these disastrous survivors that have already been through hell and back. Survivors have been forced to liquidate pensions and use up their hard earned savings to finish rebuilding their homes when their insurance funds are withheld by the mortgage company or default on their contracts when they enter into them in good faith after discussions with their original mortgage company. Even if they eventually receive all of their insurance funds, which does not always happen, survivors often are not made whole.

SB 455 will make sure any agreements made between homeowners and their mortgage company on the rebuilding of their home after a disaster are disclosed to the new company. If the mortgage is sold and requires that the new financial institution honor the original agreement. Ensuring that these existing rebuild agreements are honored when mortgages are sold is just common sense.

The author has been actively engaged with all stakeholders, including the California Bankers Association, the California Mortgage Bankers Association, and California Community Banking Network, about refining the language in the Bill. Disaster survivors already faced tremendous challenges to recover from the impacts of a disaster, and SB 455 will give homeowners certainty and peace of mind when they rebuild their homes and lives. Here with me in support is Kendall Jarvis, lead disaster relief attorney with the Legal Aid of Sonoma County. I am respectfully asking for your aye vote on behalf of Senator McGuire.

Thank you. Senator Newman, for every word of that testimony.

That's what he gave me. That's what I gave you. I don't want to shortchange the author or his staff for all of their--

Well done.

But I promise to be brief.

That was the single longest sentence I've ever heard in my life. Yes?

Is it all right if I touch the microphone so you can hear me?

Please. If you'd like to come up to the table to testify, that'd be great. We need a little lighten it up a little bit. Thank you.

Committee Members. Thanks for having me today. So, my name is Kendall Jarvis, and I've been the lead disaster relief attorney for Legal Aid of Sonoma County for the past five and a half years. I'm here today to express legal aid support for Senate Bill 455. The intent of SB 455 is to ensure that survivors of declared disasters who experience the total loss of their home are able to rebuild without the transfer of their mortgage, causing additional unnecessary delays during the rebuild or repurchase process. I will now read a statement from a client that demonstrates how this issue impacts survivors.

My name is Nina Hugh Gill and I am writing today to express my sincere support for Senate Bill 455. My husband, our three sons and I lost our home as the result of the Sonoma Complex fires in 2017. Shortly after suffering that loss, we discovered that we were significantly underinsured.

After working with numerous contractors, we were finally able to identify a plan that would allow us to rebuild. Subsequently, we presented our plan to our mortgage company and they agreed to release the funds accordingly. When we decided to rebuild, we knew that we would have to use all of our insurance proceeds and cut costs to do so.

For this reason, my family and I moved into an RV on our friend's parcel while we were rebuilding, because we did not have the financial resources to pay for temporary housing that would allow us to keep our children in the same schools. It is important to understand that we spent significant time, effort and energy negotiating with our insurance company and identifying a way forward that would allow us to rebuild. Once we identified a way forward.

Our insurance and mortgage company were both made well aware of the fact that we would have to use all of our insurance proceeds to rebuild and be left precariously housed until the rebuild was complete. Unfortunately, after my family and I entered into a rebuild contract and began the process of rebuilding with the approval of our mortgage company, our mortgage was then transferred to a new mortgage servicer. At the time our mortgage was transferred, our rebuild was roughly 80% completed and our projected move in day was on the horizon.

Unfortunately, our new mortgage provider refused to release the funds as previously agreed, which caused significant delays and ultimately put my family and me in a position where we were forced to remain precariously housed and fearful that we may not be able to complete our rebuild. It is my strong belief that my family and I never should have gone through the trauma associated with losing our home and then facing obstacles like this that were entirely preventable. Mortgages should not be transferred in a manner that jeopardizes a survivor's ability to rebuild according to an existing contract.

The loss of our home itself was incredibly painful, but honestly, it is largely the pain and secondary trauma from issues like this that has nearly broken us. This is why my family and I wholeheartedly support SB 455.

We do not want to see another family face the same unnecessary trauma, delay, and financial hardship when it should be so easy to prevent. Sincerely, Nina Hugh Gill, and I'm happy to answer any questions if anyone has any. Thank you so much for your time.

Thank you so much for your testimony. Additional witnesses in the room? Seeing none? I don't believe there's registered opposition, so any opposition in the room? Seeing none. We'll bring it back to the committee.

Any questions or comments from Committee Members? We do have a motion and a second seeing no questions or comments. This again is due pass as amended to the Judiciary Committee, and those amendments are described in the analysis. Would you like to close, Senator?

I respectfully ask for your aye vote.

Thank you so much for every word of that closing; with that secretary, please call the roll.

Please call the role SB 455. The motion is due pass as amended and referred to Committee on Judiciary. [Roll Call] That has nine votes.

Bill has nine votes. We'll keep the roll open for absent members and the Bill does get out. Thank you. And Senator Newman. Just stay right there. Oh, I will. I have a lot more to say. Mr. Chair.

Chair, the next bill. Alright, you have about three or four motions and the same number in seconds. This is SB 484, file item number four. Recommendation is due, pass as amended to the Appropriations Committee. Those amendments are described in the analysis. Mr... Senator Newman, please.

Mr. Chair, I was under the impression that you folks got paid by the hour. I am now corrected, and I am pleased to present SB 484, which would allow escrow agents in California to work remotely. With that, let me present my witness. In the interest of time, Mr. Ron Kingston, who has a statement and is happy to answer questions of the bill, I am respectfully asking for an aye vote. Thank you.

Mr. Chair, members of the committee. Ron Kingston, representing the Escrow Institute of California. They are principally women-owned small businesses. Women run businesses. In the spirit of time, I'll remind everybody that Mr. Newman must have completed a course in Evelyn Wood about 50 years ago when it started, and unfortunately, I didn't quite get there. But I want to thank the committee, notably the committee staff, Mr. Chairman and also our regulator, the Department of DFPI, that has been, in the spirit of cooperation, defining the guardrails of remote work. I don't want to waste the committee's time if we are here to answer any detailed questions, should the committee have that. Thank you.

Thank you to the witness. And any additional witnesses in the room like to step up? Seeing none. No lead opposition. Any witnesses in the room opposed? Seeing none. Bring it back to the committee. Questions? Comments? Seeing none. Alright, Senator, please.

Again, glad to thank you to the committee for the amendments. Happy to accept those amendments, asking for an aye vote. Thank you.

Thank you very much. We do have a motion and a second. A recommendation due, pass as amended to Appropriations Committee. Amendments are described in the analysis. Secretary, please call the role.

SB 484. The motion is due, pass as amended and refer to the Appropriations Committee. Grayson. Aye. Grayson, aye. Chen. Chen, aye. Bauer-Khan. Cervantes. Cervantes, aye. Dixon. Aye. Dixon, aye. Mike Fong. Mike Fong, aye. Gabriel. Papan. Papan, aye. Petrie-Norris. Petrie-Norris, aye. Soria. Soria, aye. Waldron. Wicks. That has eight votes.

Thank you. I look forward to seeing you all in front of my committee at some point.

Thank you, Senator Newman. We look forward to being there. That bill does have eight votes. It gets out. We will keep the roll open for absent members. Let's open.

Secretary, would you please go through the list? Item number one SB 54.

SB 54. Motion is due, pass as amended. Referred to Committee on Judiciary. Bauer-Khan. Cervantes. Cervantes, aye. Waldron. That has eight votes.

It has eight votes. It does get out. We'll continue to keep it open. Assemblymember Wicks. Item number one, SB 54. Oh, you did? Okay. SB 455. Item number three.

SB 455. The motions is due, pass as amended and refer to Committee on Judiciary. Bauer-Khan. Waldron. Wicks. Wicks, aye. Has ten votes.

The bill has ten votes. It is out. And we'll continue to hold it open. Item number four.

SB 44. The motion is due, pass as amended and referred to Committee on Appropriations. Bauer-Khan. Gabriel. Waldron. Wicks. Wicks, aye. It has nine votes.

The bill has nine votes. It does get out as well. We'll keep the roll open for absent members. Thank you. Madam Secretary, item number four. Item number four.

SB 484. Motion due, pass as amended to refer to Committee on Appropriations. Bauer-Khan. Gabriel. Gabriel, aye. Waldron. Has ten votes.

Item number four, SB 484 has ten votes. It gets out of committee, and we... Secretary item number three, SB 455. We are finished. Thank you very much. We have completed our agenda for today's hearing. We will now adjourn. Secretary we're good there.