Governor’s Reorganization Plan Strips DOC Of Enforcement Authority

by Allen Matkins

The Governor’s reorganization plan provides for the demotion of the Departments of Corporations and Financial Institutions to the status of divisions within a newly created Department of Business Oversight.  As I discussed in post, the plan is likely to spell the end of the dual charter banking system in California and result in a further constriction of vitally need business credit. The plan is opposed by a very thoughtful and experienced group of former California regulators, including:

  • Two former Superintendents of Banks;
  • A former Commissioner of Financial Institutions;
  • A former Chief Deputy (and acting) Superintendent of Banks; and
  • A former acting General Counsel to the Department of Financial Institutions.

I also oppose the plan and submitted this comment letter to the Little Hoover Commission.  Recently, I received a copy of this thoughtful letter from Willie R. Barnes, who served as Commissioner of Corporation.  My letter focused primarily on the negative impacts of the plan on the chartering and regulation of banks.  Former Commissioner Barnes’ letter focuses on the impact of the plan on the Department of Corporations.  Most significantly, he notes that the plan will repeal Corporations Code Section 25602 which provides the statutory authority for the Commissioner to employ legal counsel.

Given that there are so many lawyers employed by state agencies, it may come as a surprise that state law closely circumscribes the authority of those agencies to be represented by their staff lawyers in proceedings.   Thus, Government Code Section 11042 provides:

"No state agency, commissioner, or officer shall employ any legal counsel other than the Attorney General, or one of his assistants or deputies, in any matter in which the agency, commissioner, or officer is interested, or is a party as a result of office or official duties."

The exclusive authority of the Attorney General to represent state agencies and their officers is further explicated in Government Code Section 12511:

"The Attorney General has charge, as attorney, of all legal matters in which the State is interested, except the business of The Regents of the University of California and of such other boards or officers as are by law authorized to employ attorneys."

Former Commissioner Barnes notes that during his administration the Department of Corporations successfully sponsored legislation, AB 783, that amended Section 25602 to permit the employment of legal counsel to act as the Commissioner’s attorney in actions and proceedings.  Governor Jerry Brown actually signed this bill into law when he first served as Governor. 

In my view, the repeal of Section 25602 will be great news for securities fraudsters and very bad news for investors.  The legislature is now considering the plan and either house could veto the plan.  Government Code Section 12080.5.


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 | Attorney Advertising

Written by:

Allen Matkins

Allen Matkins on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*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. Or, sign up using your email address.