Authority of the Corporations Commissioner

Chapter 5 of Part 2 of Division 1 of Title 4 of the Corporations Code deals with the authority of the Commissioner of the Department of Corporations in California.

Section 25140 authorizes the commissioner to issue a stop order denying effectiveness to, or suspending or revoking the effectiveness of, any qualification of an underwritten offering of securities or may suspend or revoke any permit issued if he or she finds that the order is in the public interest and that the proposed plan of business of the issuer or the proposed issuance or sale of securities is not fair, just, or equitable, or that the issuer does not intend to transact its business fairly and honestly, or that the securities proposed to be issued or the method to be used in issuing them will tend to work a fraud upon the purchaser thereof.

Section 25141 authorizes the commissioner to impose as a condition of qualification conditions requiring the deposit in escrow of securities, imposing a legend condition restricting the transferability thereof, impounding the proceeds from the sale thereof, limiting the expense in connection with the sale thereof, requiring the waiver of assets, dividends or voting rights by the holders of promotional securities, or any other condition if the commissioner finds that without the condition the offering will be unfair, unjust or inequitable.

Section 25142 states that, when application is made for a permit to issue securities or to deliver other consideration in exchange for one or more bona fide outstanding securities, claims, or property interests, or partly in the exchange and partly for cash, the commissioner is expressly authorized to approve the terms and conditions of the issuance and exchange or delivery and exchange.

Section 2543 allows the commissioner to by order summarily postpone or suspend the effectiveness of any qualification pending final determination of any proceeding under this chapter. Upon the entry of the order, the commissioner promptly notifies each person specified that it has been entered and of the reasons and that upon the receipt of a written request the matter will be set down for hearing to commence within 15 business days after such receipt unless the applicant consents to a later date.

Section 25144 authorizes the commissioner to vacate or modify a stop order if he finds that the conditions which caused its entry have changed or that it is otherwise in the public interest to do so.

Section 25145 states that every issuer qualifying securities for sale in this state must at all times keep and maintain a complete set of books, records, and accounts of the sales and the disposition of the proceeds thereof.

Section 25146 states that, for a period of 18 months after the qualification is effective, the commissioner may by rule or order require an issuer who has filed an application to file reports not more often than semiannually for the purpose of keeping reasonably current the information contained in the application.

Section 25147 allows the commissioner to by rule or order require as a condition of qualification that any security qualified is to be sold only on a specified form of subscription or sale contract, and that a signed or conformed copy of each contract be preserved for any period up to three years specified in the rule or order.

Section 25148 states that, except in cases where the delivery of a prospectus or proxy statement is required under federal law, the commissioner may by rule or order require as a condition of qualification that a prospectus or proxy statement containing any designated part of the information required in the application be given to each person to whom an offer is made before the sale of the security to be issued under the permit or order.

Section 25149 allows the commissioner to act as escrow holder for securities required to be deposited in escrow by his order.

Section 25150 authorizes the commissioner to accept and act upon the opinions, appraisements and reports of any engineers, appraisers, or other experts which may be presented by an applicant on any question of fact concerning or affecting the securities proposed to be offered and sold.

Section 25151 provides that, upon the filing of a written request for the consent to transfer securities, accompanied by information and documents as the commissioner may by rule require, the commissioner is required to issue consent if the commissioner finds that the transfer requested will be fair, just, and equitable to the proposed transferees, and otherwise the commissioner must deny such consent.