Agent and Broker-Dealer Licensing

Corporations Code Title 4, Division 1, Part 3, Chapter 2 deals with licensing of agents and broker-dealers under the California Corporate Securities Law of 1968.

Section 25210 prohibits any broker-dealer from effecting any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless the broker-dealer has first applied for and secured from the commissioner a certificate, then in effect, authorizing that person to act in that capacity.

Section 25211 requires the application for a certificate as a broker-dealer to be accompanied by the consent to service of process and contain the required information in detail relating to the applicant and any persons associated with the applicant as the commissioner may by rule require.

A broker-dealer registered, and who has not had any certificate as a broker-dealer, investment adviser or agent denied or revoked under this law or any predecessor statute, may be licensed by notification pursuant to this subdivision by filing with the commissioner an application setting forth the specified information as the commissioner may by rule require.

Section 25211.5 provides that a broker-dealer acting pursuant to a certificate which is then in effect is exempt from the usury provisions of the State Constitution.

Section 25212 authorizes the commissioner, after appropriate notice and opportunity for hearing, by order censure, deny a certificate to, suspend for a period not exceeding 12 months or revoke the certificate of, any broker-dealer if the commissioner finds that the censure, denial, suspension, or revocation is in the public interest and that the broker-dealer, whether prior or subsequent to becoming a broker-dealer, or any partner, officer, director, or branch manager of the broker-dealer, whether prior or subsequent to becoming associated with the broker-dealer, or any person directly or indirectly controlling the broker-dealer, whether prior or subsequent to becoming such, or any agent employed by the broker-dealer while so employed has done any of the nine specified acts.

Section 25212.1 authorizes the commissioner to immediately revoke by order the certificate of any broker-dealer if the broker-dealer fails to comply with any currently effective order of the commissioner which is necessary for the protection of any investor, unless the broker-dealer secures a court order restraining the enforcement of the commissioner’s revocation order within 10 days of the date the order is issued.

Section 25213 allows the commissioner, after appropriate notice and opportunity for hearing, by order censure, or suspend for a period not exceeding 12 months, or deny or bar from any position of employment, management or control of any broker-dealer or investment adviser, any officer, director, partner, agent, employee of, or person performing similar functions for, a broker-dealer, or any other person, if the commissioner finds that the censure, suspension, denial, or bar is in the public interest and that the person has committed any act or omission as specified.

Section 25213.3 requires the commissioner, after appropriate notices and opportunity for hearing, by order suspend, for a period not exceeding 12 months, or bar from any position of employment, management or control of any broker-dealer.

Section 25214 makes it unlawful for any person, as to whom an order suspending or barring employment or control is in effect, willfully to become or to be employed by any broker-dealer or investment adviser, contrary to the terms of that order, without the consent of the commissioner.

Section 25215 prohibits any order from being entered except after notice to any 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 will be set down for hearing to commence within 15 business days after that receipt unless the person affected consents to a later date.

Section 25216 prohibits any broker-dealer or agent from effecting any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state by means of any manipulative, deceptive or other fraudulent scheme, device, or contrivance. The commissioner is required by rule to define such schemes, devices or contrivances as are manipulative, deceptive, or otherwise fraudulent.

Broker-dealers or agents are prohibited from effecting any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in contravention of such rules as the commissioner may prescribe as necessary or appropriate in the public interest or for the protection of investors to provide safeguards with respect to the financial responsibility of broker-dealers.

Section 25217 prohibits a broker-dealer licensed under this chapter from effecting any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state unless that broker-dealer and all agents employed by that broker-dealer meet specified and appropriate standards with respect to training, experience, supervision, terms of employment, and other qualifications as the commissioner finds necessary or desirable.

Section 25218 prohibits any licensed broker-dealer from effecting any transaction in, or induce or attempt to induce the purchase or sale of, any security in this state in contravention of the rules as the commissioner may prescribe designed to promote just and equitable principles of trade.

Section 25219 states that, if in his or her opinion the public interest and the protection of investors so require, the commissioner is authorized summarily to suspend all over-the-counter trading in this state by broker-dealers and agents in any security or summarily to suspend all trading on a national securities exchange located in this state in any security for a period not exceeding 90 days, and for successive periods of 90 days.

Section 25220 provides that any interested person may in writing request that the suspension of trading be rescinded. Upon the receipt of a written request, the matter must be set down for hearing to commence within 15 business days after such receipt unless the person making the request consents to a later date.

Section 25221 states that a broker-dealer licensed under this chapter, or any officer or employee thereof, may submit to the Department of Justice fingerprints of an applicant for employment for the purpose of obtaining information as to the existence and nature of a record of a conviction and of an arrest for which the Department of Justice establishes that the applicant was released on bail or on his or her own recognizance pending trial.