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July 22, 2014

California Securities Law Takes Pity on Inter Vivos Trusts

Section 25019 of the Corporations Code defines “security” broadly by listing a broad range of items that is substantially, but not exactly, the same found in Section 2(a)(1) of the Securities Act of 1933.  See “Security” Definitions In CSL And ’33 Act – Similar But Not The Same.

While both lists include voting trust certificates, neither list includes beneficial interests in an inter vivos trust or a testamentary trust.  On the chance that interests in a trust may come within the meaning of Section 25019, the CSL provides that a “security” expressly excludes any beneficial interest in:

  • Any voluntary inter vivos trust that is not created for the purpose of carrying on any business or solely for the purpose of voting; and

  • Any testamentary trust.

Commissioner of Business Oversight (fka Commissioner of Corporations) has also adopted a rule, 10 CCR § 260.019.1 which provides an indeterminate definition of “voluntary inter vivos trust” and a presumption that trusts meeting specified conditions are “voluntary inter vivos trusts”.   The Commissioner has also adopted a rule that provides that a trust is not “created for the purpose of carrying on any business” within the meaning of Section 25019 ”merely because the trustee invests and reinvests the assets of the trust in passive investments, provided a primary purpose of the trust evidences an intent to presently or ultimately benefit one or more specified eleemosynary organizations.”  10 CCR 260.019.2.

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I’m in Japan and I’m pleased to report that lawyers have their own building here:

    

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About the Author

Keith Paul Bishop, Business Attorney, Allen Matkins Law Firm
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Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients on compliance,...

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