Financial Code, 1951

Banks and credit unions under the commissioner’s examination authority must file an annual fee-revenue report by March 1, and the commissioner must publish the reported data.

Banks and credit unions covered by the commissioner may not charge a consumer an NSF fee when a transaction attempt is declined instantly or nearly instantly because of insufficient funds.

A person who willfully violates or fails to comply with this division commits a public offense and may be fined up to $10,000, jailed up to one year, or both, unless a different punishment applies.

The commissioner may refer evidence of certain violations to the Attorney General or the local district attorney, who may start civil or criminal proceedings. The commissioner’s staff may help at trial if requested.

This section sets criminal penalties for knowingly violating Section 6525.5(a) or (b), or for knowingly violating an order issued under Section 8201.

Certain officers, directors, employees, or agents of an association must not make false material entries, omit required material entries, or hide or destroy association records when done with intent to deceive. Violations can be fined or punished by imprisonment.

It is unlawful to corruptly give, offer, promise, solicit, demand, accept, or agree to accept anything of value to influence or reward an institution-affiliated party in connection with a savings association transaction.

An institution-affiliated party who misapplies or takes savings association money, funds, property, or credit commits a felony and faces fines, imprisonment, or both.

An institution-affiliated party who knowingly tries to defraud a savings association, or to get its money or property by false pretenses, can be fined, imprisoned, or both.

A person who willfully and knowingly spreads or allows false or malicious statements or rumors about an association may be fined, jailed, or both.

A person who knowingly makes a false statement or report, or willfully overvalues land, property, or security to influence an association’s action, can be fined or jailed.

A person meeting specified conditions must receive consecutive sentences for each violation of Sections 5303 to 5306, up to 20 years in state prison.

Violating or conspiring to violate Sections 5303 to 5306 can trigger a civil penalty, and the Attorney General may investigate and bring the recovery action.

Fines and civil penalties under this chapter must consider the defendant’s ability to pay, along with offense seriousness and pecuniary gain or loss. The chapter also bars a civil penalty after punishment by fine or imprisonment for the same violation, and bars a fine after a civil penalty for the same violation.

Property traceable to certain specified convictions must be forfeited under this article.

The prosecuting agency must file a forfeiture petition, give notice to interested persons, and follow extra steps for real property and early-filed petitions.

A claimant to seized property may file a verified claim in court within 30 days and must give a copy to the Attorney General or district attorney.

A prosecuting agency may ask the superior court for temporary orders to freeze or manage forfeiture property, but the court must give notice and hold a hearing before granting a preliminary injunction or receiver, and it cannot block payment of criminal defense fees.

This section tells the court to forfeit certain property or proceeds to the state or local government if the property is found forfeitable, and it sets rules for secured interests and public sale.

Forfeited money or sale proceeds must be distributed first to protected purchasers and lienholders, then to certain crime victims, with remaining funds going to the general fund.

The commissioner may impose civil penalties on savings associations and institution-affiliated parties for listed violations, unsafe practices, fiduciary breaches, and related misconduct.

Funds from proposed stockholders, members, or organizers of a proposed association cannot be collected until a verified organizing-permit application is filed and the commissioner issues a permit; collections must also follow the permit’s terms.

An organizing permit application must be written, filed with the commissioner, signed and verified by the chairman of the organizers, and include specified information and documents.

The commissioner may set conditions in an organizing permit, including rules about escrowed funds, how the funds are spent, and other reasonable conditions to protect the public, subscribers, and organizers.

An organizer must first file a name-reservation application with the Secretary of State before applying for an organizing permit, and the Secretary of State must issue the reservation certificate when any required fee is paid.

This section defines several terms used in the article, including “customer,” “subject institution,” “subject person,” and “violation.”

A person may ask to form a capital stock or mutual association within 60 days after an organizing permit is issued, but the filing must include specified petition materials, proposed bylaws, and any required fee or additional information requested by the commissioner.

When a petition for a certificate of authority is received, the commissioner must give written notice to each association, and any hearing must be scheduled within the stated timing rules.

Certain domestic associations incorporated after January 1, 1984 must put specified purpose statements in their articles of incorporation.

The commissioner may approve a petition for a certificate of authority only if the required prerequisites are met.

The commissioner must decide a petition for a certificate of authority within a reasonable time, and if approved must issue the required approvals and certificate; if denied, the petitioner may request the statutory reason and must stop using the reserved name.

The commissioner must attach and deliver the approval papers to the proposed association, and the association may not open its office for public business before the certificate of authority is issued.

A proposed association cannot file its articles of incorporation with the Secretary of State unless a commissioner-issued certificate of approval is attached.

After an association’s corporate existence begins, its directors must hold an organization meeting within 30 days and elect officers.

A subject person entitled to a hearing may waive that right at any time.

A person subject to an order may ask the commissioner for a hearing within 30 days, and the commissioner must act within set time limits or the order is rescinded.

The commissioner may issue certain enforcement orders that require the affected person to take remedial actions such as restitution, correcting violations, disposing of assets, hiring qualified staff, or limiting activities.

If the commissioner takes action without prior notice or hearing, the commissioner must promptly give a written order explaining the basis for the action.

A person without a commissioner certificate authorizing banking business may not take deposits, issue deposit certificates, make check payments, or operate like a bank or trust company.

The board of directors of an association being organized must choose a California financial institution to hold subscription funds, and that institution must safeguard and later deliver the funds under the stated conditions.

Before a certificate of authority is issued, the association must pay its capital into the association, and the commissioner sets the minimum required capital by regulation or instruction.

The commissioner may require extra paid-in surplus for capital stock, and the board of directors may allow other uses of minimum capital and surplus, so long as subscribed stock value stays the association’s permanent capital.

A stock association must file a statement with the commissioner before a certificate of authority is issued.

A stock association must issue the capital stock needed to meet minimum capital requirements, and it may not issue extra shares except as authorized. Issued capital stock is permanent capital and generally cannot be retired or withdrawn until liabilities are fully satisfied and outstanding capital certificates are retired.

An association must begin business within one year after its certificate of approval is issued, unless the commissioner approves more time first.

Associations must have FDIC insurance for their savings accounts before doing business in the state; foreign savings associations must also maintain that insurance.

A person without a commissioner’s certificate to do banking must not advertise banking activities or present its business as a bank or trust company, unless expressly authorized by this division.

This section defines “security” for this article.

An association generally cannot sell or issue its securities until it gets a permit from the commissioner.

Stock in an association generally cannot be sold or offered to the public, or have subscriptions taken, until the association or the selling stockholders get a permit from the commissioner.

An association or selling stockholders must file a written, verified application for a permit to sell securities with the commissioner.

After a permit application is filed, the commissioner must review it and may investigate the association; if the plan is fair, just, and equitable, the commissioner must issue a permit, and if not, must deny the application and notify the applicant in writing.

Every permit to sell securities must state in bold type that the permit is permissive only and is not a recommendation or endorsement of the securities.

The commissioner may change or revoke permits issued by the commissioner, and may temporarily suspend the association’s rights under a permit.

Unlicensed persons may not use bank- or trust-related names or advertising, and certain building and loan or savings associations must disclose their type on signs, letterheads, and advertising.

A stock association may issue common and preferred stock, including stock without par value, and may divide stock into classes and series.

A mutual association may amend its articles, with commissioner approval, to authorize and issue stock.

A stock association must issue capital stock under stated rules, keep stock value as permanent capital, and get commissioner approval for certain reductions, retirements, and stock purchases.

A mutual association may issue mutual capital certificates if it follows the commissioner’s regulations.

An association may issue net worth certificates if it follows applicable regulations of the Office of Thrift Supervision or the Federal Deposit Insurance Corporation.

Certain listed banks and corporations may conduct the covered business or activity when another law authorizes it and no other applicable law forbids it.

A person or bank that violates the earlier sections of this article is liable to the people of the state for $100 per day, or part of a day, while the violation continues.

A person must not mislead others into believing certain securities are legal investments for savings banks unless they actually are.

Every association’s name must include specified savings-association wording or another commissioner-approved designation, and any required words must be preceded by commissioner-approved descriptive words.

The commissioner generally may not issue approval for a proposed association name that matches or is too similar to an existing association’s name, and an association may not choose a name that would cause confusion or be unsuitable.

A person may not use restricted savings-association-style names or materials, or imply the business is an association, unless authorized and covered by the listed exception.

A court may issue an injunction to stop violations of Section 5652, and anyone who violates Section 5652 may be fined up to $5,000.

An association must get the commissioner’s prior approval before making certain office, name, corporate, subsidiary, or acquisition changes.

An association may not advertise or present itself to the public as a bank, unless it is a savings bank advertising itself as a savings bank.

The commissioner may sue in superior court to stop violations, force compliance, and collect penalties or other liability, and the court may appoint a receiver or similar officer.

If a person is doing, or is about to do, licensed business without the required license, the commissioner may order that person to stop that unauthorized business immediately, without prior notice or hearing.

A state association may convert itself into a federal association if it follows the procedure in Sections 5701 through 5708.

At a meeting called to consider conversion, eligible voters may approve converting an association into a federal association.

Several listed persons and institutions may, without court approval, vote on a conversion to a federal association and exchange certain interests for federal-association securities.

After a conversion meeting approving a move into a federal association, the association must promptly file a verified certificate with the commissioner and also file a like certificate with the Secretary of State.

A certified copy of the certificate filed with the Secretary of State counts as presumptive evidence of the meeting, the action taken, and shareholder and member approval.

After the stockholders’ and members’ meeting, the association must take the steps needed to become a federal association and then file the required charter or certificate with the commissioner and the Secretary of State.

When the conversion to a federal association becomes effective, the association stops being supervised by the state and its property transfers to the association in its new federal form by operation of law.

A converted federal association keeps the property from Section 5706 and remains responsible for the converted state association’s obligations.

Certain pre-September 13, 1941 conversions of a building and loan association into a federal association are validated if a federal charter copy was filed with the Secretary of State.

A federal association may convert itself into an association if it follows the procedure in Sections 5710 through 5718.

Stockholders and voting members may approve converting a federal association into an association at a regular or special meeting, if an affirmative majority of votes cast in person or by proxy supports it.

After a conversion vote, copies of the meeting minutes must be filed promptly with the commissioner and in duplicate with the association’s federal home loan bank.

Verified copies of meeting minutes, when filed as required, count as presumptive evidence that the meeting was held and what action was taken.

After the Section 5710 meeting, the federal association must take the steps needed to become an association under this division, and the elected directors must file the documents and fees and do any required proceedings. The approval or denial decision must be issued in writing. Converted associations are exempt from the capital-subscription rules tied to original incorporation.

Directors of an association converted from a federal association may add a specified conversion statement to the articles of incorporation.

After the articles of incorporation are filed with the Secretary of State, the association must promptly file two certified copies with its federal home loan bank.

When a federal association files articles of incorporation with the Secretary of State, it becomes an association under state law.

A converted association keeps the property listed in Section 5716 and remains responsible for the old federal association’s obligations.

The commissioner may issue permits and orders for a conversion involving stock issuance, and may require the initial stock to be fully subscribed and paid.

An association may reorganize, merge, consolidate, or transfer substantially all assets if the board and commissioner approve the plan, and certain member or stockholder approvals are also required.

The commissioner may, at the commissioner’s sole discretion, hold a public hearing on applications filed under this article.

Applications under this article must include any filing fee set by the commissioner under Section 9001.

Chapter 13 of the Corporations Code applies only to stockholders and their shares in the specified merger or asset-transfer situations.

In a merger, the agreement must state what parts of the surviving association’s articles are deemed amended, and the articles are amended accordingly when the merger becomes effective.

An association must notify stockholders or members before filing a merger or consolidation certificate, unless everyone entitled to vote gave written consent, and it must submit a certificate to the commissioner for written approval.

Stockholders or members may approve an amendment to a merger or consolidation agreement, using the same manner and vote as for the original agreement.

Approval of transactions under this article is not required from borrowers or from holders of savings accounts in stock associations.

Certain merger or consolidation documents must be filed with the Secretary of State, and filing is not allowed unless the commissioner’s written approval is attached.

An association may buy all or at least 90% of another association’s or corporation’s stock only with the commissioner’s prior written approval.

A savings association may merge a subsidiary if ownership and procedural requirements are met, but it must file approvals, give notice in some cases, and the subsidiary’s stockholders may demand cash for their shares.

Directors of an association may abandon a transaction under this article before it is completed.

The commissioner may adopt rules and regulations for transactions regulated by this article.

The commissioner may order a subject institution, subject person, or holding company to stop an act or violation after notice and an opportunity to be heard.

This section defines key terms for savings and loan holding companies, subsidiaries, and completed applications.

A person cannot become a savings and loan holding company or register under Section 5804 unless the commissioner approves a completed application.

The commissioner must decide a completed application within 60 days, unless good cause prevents a decision in that time, and may approve it with conditions or deny it.

If an aggrieved person requests a hearing in writing within 30 days after the decision, the commissioner must hold a public hearing. The commissioner also may amend, suspend, or revoke an approval for acquisition of control if the applicant fails to meet approval conditions or if the approval rested on false or misleading facts.

Savings and loan holding companies must register with the commissioner within 60 days after approval, unless the commissioner extends the date, and must notify the commissioner in writing of changes in beneficial or legal ownership of stock.

Savings and loan holding companies that are not individuals must pay an initial and annual registration fee.

If a savings and loan holding company has met the article’s requirements, the commissioner must issue it a certificate of registration and send a copy to each relevant association subsidiary in this state.

An affected subsidiary association may not, without the commissioner’s consent, transfer stock, pay dividends, allow voting of its stock, make payments, or enter agreements with its savings and loan holding company.

The commissioner may require reports from savings and loan holding companies and their subsidiaries, and those entities must file reports and submit to examination as required.

If the commissioner makes the stated findings, the commissioner may order a subject institution or subject person to stop certain harmful conduct without prior notice or a hearing.

The commissioner has enforcement powers over savings and loan holding companies and their subsidiaries, as provided for associations in Section 8200.

This article does not apply to certain stock acquisitions made under a Section 5750 reorganization, merger, consolidation, or transfer plan or agreement.

If the commissioner finds a subject institution’s books or records are too incomplete or inaccurate to assess the institution’s condition, the commissioner may order the institution to stop the activity that caused the problem or take action to fix the books or records, without prior notice or hearing.

The commissioner must publish specified final orders and decisions on the department’s website, but may delay publication or redact identifying information in limited cases.

The commissioner may, after notice and an opportunity to be heard, suspend or remove a subject person and bar participation in the institution’s affairs if the listed findings are made.

An association may dissolve under the General Corporation Law. A mutual association’s voluntary wind-up and dissolution needs member approval by holders of at least 50% of the voting power required to elect directors. Dissolution-related certificates may not be filed with the Secretary of State unless the commissioner’s approval certificate is attached.

The commissioner may suspend a subject person and bar them from participating in the affairs of the subject institution or holding company if the section’s findings are met.

A mutual association may reorganize into a mutual holding company, but only with the commissioner’s prior approval.

After the asset transfer and liability assumption in Section 5860, affected account holders and creditors’ rights move to the reorganized stock association, while ownership, liquidation, and voting rights stay with the mutual association in its reorganized mutual holding company form.

A reorganization of a mutual association under this article must be approved by both the board of directors and the members.

An application for reorganization approval must include information the commissioner requires. The commissioner may disapprove the proposed mutual holding company formation and refuse a certificate of authority if, within 60 days after a completed application is filed, specified grounds are found.

A mutual association may keep capital assets at the holding company level when reorganizing under this article, but only with the commissioner’s approval and only for capital above adequate reserves required by law.

A mutual holding company is treated as a savings association for this division, may only do activities authorized for an association, and may not issue or accept savings accounts or other deposits.

For reorganizations under this article, Sections 5801, 5802, and 5803 do not apply.

A reorganized stock association may exercise the powers, rights, and privileges of stock associations, and it remains subject to applicable limitations that are consistent with this article.

A reorganized stock association may issue additional capital stock to its mutual holding company, and it may also issue capital stock and convertible securities to others, but the total issued to others cannot exceed 49% of the association’s issued and outstanding capital stock.

The commissioner may suspend or remove a subject person or former subject person and bar further participation in the institution’s affairs if specified criminal charges or convictions exist and the person’s continued service may threaten customers or public confidence.

Certain subject institutions or related persons may ask the commissioner to modify or rescind an order, and the commissioner must consider public interest and likely compliance before deciding.

A subject person or former subject person under an order may not do certain acts involving a subject financial institution without the commissioner’s approval while the order is in effect.

The commissioner may revoke or suspend a license after notice and an opportunity to be heard if listed grounds are found.

If the commissioner makes the required findings, the commissioner may immediately suspend or revoke a licensee’s license.

If specified conditions exist, the commissioner may take possession of a licensee’s property and business without prior notice or a hearing.

If the commissioner takes possession under Section 592, the licensee may ask the superior court to stop further proceedings within 10 days, and may later resume business only with the commissioner’s approval.

When the commissioner takes possession of a licensee’s property and business, the commissioner must notify persons holding the licensee’s assets. Anyone who knows of the taking, or has been notified, cannot place a lien or charge on the licensee’s assets for later payments or liabilities.

The commissioner is deemed to take possession of a licensee’s entire property and business when the commissioner takes possession of the business and property of the licensee’s head office.

A deputy or authorized person may exercise a power or perform a duty assigned to a person or board, unless the code expressly says only that person or board may do it.

This section defines “Federal Insurance Agency” for this chapter.

Each mutual association must hold an annual meeting of its members at the time and place set in its bylaws.

Special meetings of a mutual association may be called by the president or board of directors, and must be called by certain officers when qualified members make a written request.

The association must give notice of annual and special member meetings by publication or mailing, post a similar notice at each office, and include required meeting details; members may waive notice in writing.

Members of a mutual association may vote based on the withdrawal value of their savings accounts, with one vote for each $100 or fraction of $100, subject to a 1,000-vote cap and no vote cumulation for electing directors.

The association’s board of directors may set a record date in advance for determining which members are entitled to notice, to vote, to receive distributions, or to exercise other lawful rights.

Members may vote in person or by proxy, but a proxy must be filed with the association secretary before the meeting to be used.

At a members’ meeting, any number of members present is enough for a quorum, and a majority of votes cast decides questions unless this division says otherwise.

After taking possession of a licensee’s property and business, the commissioner must collect money owed to the licensee and take necessary or expedient steps to conserve or protect the licensee’s assets, property, and business.

No attachment may be issued against the property of a licensee that is under conservation or liquidation under this article.

After taking possession of a licensee’s property and business under Section 592, the commissioner may liquidate or conserve the licensee.

If the commissioner takes possession of a licensee’s property and business under Section 592, the commissioner may offer appointment as a conservator, liquidator, receiver, or liquidating committee.

The commissioner must supervise the conservator, liquidator, receiver, or liquidating committee appointed under this article, and may remove them at their discretion.

Certain stockholders, members, and directors may inspect specified association records, but there are share, holding-period, purpose, and confidentiality limits.

An association must provide mailing information and an estimated forwarding cost when members or stockholders want to communicate with others about a meeting question, and the commissioner decides whether the communication may be sent.

A savings account holder who is not a stockholder or member may not bring or keep an action for the association’s benefit. A stockholder or member may do so only if the stated complaint, notice, and commissioner findings are satisfied.

After a mutual association converts to a stock association, special meetings may be called by the president or board at any time for up to five years, and must be called by certain officers if qualifying stockholders make a written request.

If the commissioner requires it, the conservator, liquidator, receiver, or liquidating committee members must provide proof of bond coverage, and the bond premium must be paid from the licensee’s assets.

If the commissioner takes possession of a licensee’s assets for liquidation or conservation, the commissioner should use civil service employees where possible and may appoint special deputy commissioners, hire counsel and experts, and retain certain licensee personnel.

The commissioner fixes compensation and supervision/liquidation expenses for appointed assistants, and those amounts are paid from the licensee’s funds held by the commissioner.

If a licensee is not insured by a Federal Insurance Agency and the commissioner takes possession of the licensee’s business and property, the specified superior court has exclusive original jurisdiction, and damages cannot be awarded in that proceeding.

Each association must publish an annual financial-condition statement in a newspaper of general circulation in the county where its home office is located, and must provide the statement to a member or stockholder upon request.

An association’s business must be run by a board of directors elected by ballot, and directors and officers owe a fiduciary duty to manage the association soundly.

A person convicted of a criminal offense involving dishonesty or breach of trust cannot serve as a director or officer of an association.

A director stops serving if they are placed in bankruptcy relief or convicted of a dishonesty/trust offense. After a mutual-to-stock conversion, a director generally cannot be removed for up to five years except for cause and by majority vote at a legal meeting.

Directors are elected for three-year terms, and replacements must be elected and qualified before terms end; the board must be arranged so about one-third of directors are elected each year.