Licensing of Investment Advisers 

Title 4, Division 1, Part 3, Chapter 3 of the Corporations Code deals with licensing and notice filing requirements of investment adviser representatives and investment advisers under the California Corporate Securities Law of 1968. 

Section 25230 provides that it is unlawful for any investment adviser to conduct business as an investment adviser in this state unless the investment adviser has first applied for and secured from the commissioner a certificate authorizing the investment adviser to do so or unless the investment adviser is exempted. 

No person, on behalf of an investment adviser that has obtained a certificate, may in this state do any of the specified actions. The commissioner may review the disciplinary history of an investment adviser representative upon the filing of notice of any of the specified information. 

Section 25230.1 states that a person that is registered as an investment adviser is not subject to the requirement of obtaining a certificate, but may not conduct business in this state unless the person has fewer than six clients or unless the person first complies with specified laws. An investment adviser representative that has a place of business in this state may be required to obtain a certificate.  

Section 25231 provides that any investment adviser, or any person who contemplates becoming an investment adviser, may apply for a certificate to act as an investment adviser by filing with the commissioner an application. The application has to be accompanied by the consent to service of process contain information as the commissioner may by rule prescribe.  

Section 25232 authorizes the commissioner to order, after appropriate notice and opportunity for hearing, censure, deny a certificate to, or suspend for a period not exceeding 12 months or revoke the certificate of, an investment adviser, if the commissioner finds that the censure, denial, suspension, or revocation is in the public interest and that the investment adviser, whether prior or subsequent to becoming such, or any partner, officer or director thereof or any person performing similar functions or any person directly or indirectly controlling the investment adviser, whether prior or subsequent to becoming such, or any employee of the investment adviser while so employed has done any of the eight specified acts.  

Section 25232.1 allows the commissioner to order, after appropriate notice and opportunity for hearing, censure, or suspend for a period not exceeding 12 months, or bar from any position of employment, management or control of any investment adviser, broker-dealer or commodity adviser, any officer, director, partner, employee of, or person performing similar functions for, an investment adviser, or any other person, if he or she finds that the censure, suspension or bar is in the public interest and that the person has committed any act or omission enumerated in law.  

Section 25232.2 states that it is unlawful for any person, as to whom an order suspending or revoking the person’s certificate as an investment adviser is in effect, willfully to become or to be employed by any investment adviser, broker-dealer or commodity adviser, without the consent of the commissioner. 

Section 25232.3 authorizes the commissioner to immediately revoke the certificate of any investment adviser if the investment adviser fails to comply with any currently effective order of the commissioner which is necessary for the protection of any investor, unless the investment adviser secures a court order restraining the enforcement of the commissioner’s revocation order within 10 days of the date the order is issued.  

Section 25233 states that no order may be entered except after notice to the person affected thereby of the intention of the commissioner to enter that order and of the reasons therefor and that upon receipt of a request the matter must be set down for hearing to commence within 15 business days after that receipt unless the person affected consents to a later date.  

Section 25234 prohibits any investment adviser licensed under this chapter entering into, extending, or renewing any investment advisory contract, or in any way performing any investment advisory contract entered into, extended or renewed on or after the effective date of this law, if that contract does three specified items. The term “investment advisory contract”is defined. 

Section 25235 makes it unlawful for any investment adviser, directly or indirectly, in this state to do any of five specified actions. 

Section 25236 prohibits any investment adviser licensed under this chapter from conducting any business as an investment adviser in this state unless the investment adviser and all natural persons associated with such investment adviser meet specified and appropriate standards with respect to training, experience and other qualifications as the commissioner finds necessary or desirable. The commissioner may establish these standards by rule, which may take three specified actions.  

Section 25237 requires the commissioner to prescribe rules with respect to investment advisers licensed under this chapter who have custody of their clients’ securities or funds or who have any power of attorney from their clients to execute transactions as he or she finds to be necessary or appropriate in the public interest or for the protection of investors.  

Section 25238 provides that non investment adviser licensed under this chapter and no natural person associated with the investment adviser is permitted to engage in investment advisory activities, or attempt to engage in investment advisory activities, in this state in contradiction of rules as the commissioner may prescribe designed to promote fair, equitable and ethical principles.