California Finders Exemption Regulations Are Now Effective
The Commissioner of Business Oversight’s final regulations implementing a new exemption for finders from the broker-dealer provisions of the Corporate Securities Law took effect on June 21, 2017. See 10 CCR §§ 260.211.4, 260.211.5, 260.211.6 and 260.211.7. The Commissioner adopted these new regulations in response to the enactment of AB 667(Wagner) in 2015. AB 667 added Section 25206.1 to the California Corporations Code. That statute exempts finders, as defined, from the requirement to register as broker-dealers in California. Among other requirements, exempt finders are required to file an initial statement of information with the Commissioner.
In response to comments received from the Corporations Committee of the Business Law Section of the California State Bar, myself and others, the Commissioner made several changes to the proposed regulations. One of the most significant is summarized in the Commissioner’s Final Statement of Reasons:
The proposed regulation as originally noticed to the public, would have required individuals who are ineligible for the exemption as finders to register with the Commissioner of Business Oversight (Commissioner) as broker-dealers or agents. In response to the comments received from the author and sponsor of Assembly Bill 667 (AB 667), individuals who were subject-matter experts for AB 667, and a member of the public who may be directly or indirectly affected by or otherwise interested in the proposed regulations, the Department has amended the language in subsections (f) and (g) to clarify that an individual who is ineligible for the exemption must register as a broker-dealer or agent if acting as a broker-dealer or an agent as defined under the Corporations Code and not otherwise exempt; and delete the language requiring broker-dealers and agents to register with the Commissioner. AB 667 established the exemption for finders from the broker-dealer provisions of the Corporate Securities Law of 1968 (Corporations Securities Law).
California’s exemption, while somewhat cumbersome, is a welcomed step in addressing what has been a significant problem for many issuers. The California exemption, of course, does not affect the registration requirements of the SEC or other states. However, California’s action may spur the Congress and the SEC to tackle this long-standing issue.
Commissioner Resets Comment Period Clock
Last week, I wrote about the Commissioner’s proposal to withdraw her regulation requiring credit unions to submit any bylaw amendments for approval. See 10 CCR § 30.105. Yesterday, the Commissioner announced that the Notice of Proposed Rulemaking originally posted on the Department of Business Oversight’s website on June 23, 2017 included incorrect dates for the written comment period. The correct ending date for the comment period is August 28, 2017. Readers can find the corrected Notice, Initial Statement of Reasons, and proposed text here.
I heard yesterday from Mr. Holman Jenkins, Jr. that the title to his Op-Ed, “Trump Agonistes”, was an allusion to Garry Wills’ book, Nixon Agonistes: The Crisis of the Self-Made Man. Mr. Wills’ title was itself an allusion to the works of John Milton and T.S. Eliot. In fact, Mr. Wills includes quotations from both authors in the front matter of his book: “O lastly over-strong against thy self” (Milton) and “When you’re alone like he was alone . . .” (Eliot).