If You Did This, It Would Be Fraud!

All fees, reimbursements, assessments, and other money or amounts charged and collected by the Department are required to be deposited into the the State Corporations Fund. Cal. Gov’t Code § 13978.6(b). The legislature created the fund to “effectively support the Department of Corporations” in its administration of the laws subject to its jurisdiction. Id.

In this recent post, I lamented the procedure by which SB 538 (Hill) was gutted and amended shortly before the key policy committee hearing in the Senate. Since that time, the bill has moved to the Third Reading stage and is eligible for eligible for floor debate and final vote. Among other things, SB 538 would for the first time impose annual renewal fees of up to $35 on licensed broker-dealer agents and investment adviser representatives. According to the analysis prepared by the Senate Appropriations Committee, this new fee is needed because historic funding shortfalls have prevented the Department of Corporations from performing regular, periodic regulatory examinations of its broker-dealers, their agents, or its investment advisers or their representatives.

It is estimated that this new fee would generate $7.8 million to $9.8 million for the Department. This all sounds plausible except when you consider that the Department is already required to assess broker-dealers fro their pro rata share of all costs and expenses incurred in the administration of the Department’s broker-dealer program. Cal. Corp. Code § 25608(0).

So, why the funding shortfall? It turns out that the legislature has borrowed $18.5 million from the Corporations Fund. The fees and assessments paid by the Department’s licensees into the fund established by law for the support of the Department have been taken. Now, those same licensees are in effect being asked to pay again.


Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.