State Banking Department Public Employees Union

1(6) REGULATORY AGENCY ACTION

Psychiatric Workers' New Union. reintroduction this session, and would BANKING DEPARTMENT Judge Blubaugh, an administrative law create a Certified Nurse Assistant pro- Superintendent: Louis Carter judge, ruled that psychiatric technicians gram. The bill would prohibit people (415) 557-3232 in state mental hospitals may be repre- from holding themselves out as certified sented by a newly-formed independent nurse assistants unless they have a cer- The State Banking Department public employees union. The new union, tificate from the Board. The proposed administers all laws applicable to cor- California Association of Psychiatric effective date is June 30, 1987. porations engaging in the commercial Technicians, replaces the Communica- banking or trust business, including the FUTURE MEETINGS: tion Workers of America. establishment of state banks and trust To be announced. companies; the establishment, operation, LEGISLATION: relocation and discontinuance of various SB 1638 (Greene) is scheduled for types of offices of these entities; and the establishment, operation, relocation and discontinuance of various types of offices of foreign banks. The superintendent, the chief officer of the Department, is appointed by and holds office at the 3BUSINESSTRANSPORTATION AND AGENCY pleasure of the Governor. The superintendent approves applications for authority to organize and establish a corporation to engage in the DEPARTMENT OF ALCOHOLIC method which ABC plans to continue commercial banking or trust business. In BEVERAGE CONTROL and expand. acting upon the application, the superin- Director: Jay Stroh Aside from public health and welfare tendent must consider: matters, ABC is also involved in eco- (916) 445-3221 (1) the character, reputation and finan- nomic regulation. ABC, along with the cial standing of the organizers or incor- The Department of Alcoholic Bever- U.S. Bureau of Alcohol, Tobacco, and porators and their motives in seeking to age Control (ABC) is a constitutionally- Firearms, has developed a coordinated organize the proposed bank or trust authorized state department. The Alco- program to enforce regulations which company; holic Beverage Control Act vests the ban wholesaling of alcoholic beverages (2) the need for banking or trust facili- Department with the exclusive right and by retailers. ties in the proposed community; power to license and regulate the manu- Public Hearings. Senate Concurrent (3) the ability of the community to facture, sale, purchase, possession, and Resolution 65 (Russell) requested that support the proposed bank or trust conduct hearings on the elimina- transportation of alcoholic beverages ABC company, considering the competition within the state. In addition, the Act tion of specified marketing practices offered by existing banks or trust com- vests the Department with authority, which promote the overconsumption of panies; the previous banking history of alcoholic beverages. The Resolution subject to certain federal laws, to regu- the community; opportunities for profit- late the importation and exportation of asked that ABC consider the adoption of able use of bank funds as indicated by rules to prohibit these practices and alcoholic beverages across state lines. the average demand for credit; the ABC issues liquor licenses and investi- report to the legislature on the results of number of potential depositors; the gates violations of the Business and Pro- any action taken. Pursuant to this reso- volume of bank transactions; and the lution, ABC conducted its first hearing fessions Code and other criminal acts stability, diversity and size of the busi- which occur on premises where alcohol on December 17 in Sacramento. ABC nesses and industries of the community. will schedule the next hearing in Los is sold. Many of the disciplinary actions For trust companies, the opportunities Angeles and a third hearing in San Fran- taken by ABC, along with other infor- for profitable employment of fiduciary mation concerning the Department, are cisco, if necessary. services are also considered; printed in the liquor industry trade (4) the character, financial responsi- publications "Beverage Bulletin" and bility, banking or trust experience and Industry News." "Beverage LEGISLATION: business qualifications of the proposed ABC divides the state into two div- SB 1546 (Beverly), now law, provides officers; and isions with assistant directors in that no license or permit is required for (5) the character, financial responsibil- charge of each division. The state is the serving of alcoholic beverages in a ity, business experience and standing of further subdivided into 21 districts, with limousine by any person operating a the proposed stockholders and directors. two districts maintaining branch offices. limousine service regulated by the. Public The superintendent may not approve MAJOR PROJECTS: Utilities Commission, provide there is no any application unless he/she determines Alcohol Abuse Programs. ABC has extra charge or fee for the alcoholic that the public convenience and advan- recently formulated several strategies to beverages. tage will be promoted by the estab- fight alcohol abuse. One such strategy SB 124 (Mello), introduced Decem- lishment of the proposed bank or trust involves limitations on promotions ber 30, would prohibit any person company; conditions in the locality of sponsored by breweries aimed at college licensed by ABC from importing wine the proposed bank or trust company campuses. Another major focus will be into California that was produced out- afford reasonable promise of successful on increased training programs for side the United States unless that person operation; the bank is being formed for servers of alcoholic beverages. ABC has certifies that each shipment of wine legitimate purposes; the proposed name supported enforcement teams consisting meets the requirements of the Sherman does not so closely resemble as to cause of ABC officials and local police, a Food, Drug and Cosmetic Law. confusion the name of any other bank or

The California Regulatory Law Reporter Vol. 7, No. 1 (Winter 1987) REGULATORY AGENCY ACTION

trust company transacting or which has Code sections 10.14800-10.14802. The Corporation (FDIC) the appointment as previously transacted business in the amendment requires subject institutions receiver of BNC, and the FDIC accepted state; and the applicant has complied to comply with Regulation Q of the the appointment. The FDIC, as receiver with all applicable laws. Federal Reserve System, 12 C.F.R. part of BNC, accepted the bid of PVB to If the superintendent finds that the 217, as amended in April 1986. The acquire all the deposits and certain assets proposed bank or trust company has ful- amendment prohibits payment of inter- of BNC in a purchase and assumption filled all conditions precedent to est on demand deposits, and enforce- transaction. The purchase and assump- commencing business, a certificate of ment of the order remains a significant tion transaction was approved by the authorization to transact business as a priority of the superintendent and the superintendent and the Santa Clara bank or trust company will be issued. Banking Department. Superior Court on November 15, 1986. The superintendent must also approve Problems of competitive advantage In connection with the approval of the all changes in the location of a head arose for California banks because the purchase and assumption transaction, office, the establishment or relocation of new regulations do not restrict suspect the superintendent approved a certificate branch offices and the establishment or institutions from paying interest on of authorization permitting PVB to open relocation of other places of business. A demand deposits. (See CRLR Vol. 6, and operate the branch office of BNC. foreign corporation must obtain a No. 4 (Fall 1986) for complete back- All depositors of BNC became deposi- license from the superintendent to ground information.) Suspect institu- tors of PVB, and an orderly transition of engage in the banking or trust business tions are banks outside the nation with banking services occurred, without in this state. No one may receive money total worldwide assets of one billion or financial loss or delay to the public. for transmission to foreign countries or less. The superintendent believes that an On October 9, 1986, the insured issue travelers checks unless licensed. unfair competitive advantage will result deposits of Independent National Bank The superintendent also regulates the if the new amendments to Regulation Q (Independent), Covina, were transferred safe-deposit business. are not applied to suspect institutions. to Chino Valley Bank, Chino. The Comp- The superintendent examines the con- Assets and Liabilities as of September troller of the Currency declared Inde- dition of all licensees. However, as the 30, 1986. At the close of business on pendent insolvent and appointed the result of the increasing number of banks September 30, 1986, the 286 state char- Federal Deposit Insurance Corporation and trust companies within the state and tered banks of deposit with 1,678 as receiver. The FDIC then entered into the reduced number of examiners follow- branches had total assets of $87.5 a Deposit Insurance Transfer and Asset ing passage of Proposition 13, the super- billion, an increase of $7.6 billion, of Purchase Agreement with Chino Valley. intendent now conducts examinations 9.6%, over September 30 a year ago. Under the agreement, the insured de- only when necessary, but at least once During this period, there was a net posits and any secured public deposits of every two years. The Department is co- decrease of two banks and a net increase Independent were transferred to Chino ordinating its examinations with the of three branches. Valley, and Chino Valley purchased FDIC so that every other year each New Banks. Two applications for new certain assets of Independent. agency examines certain licensees. New banks were filed with the superintendent On October 9, 1986, the superintend- and problem banks and trust companies by Bank Audi, Los Angeles, and Bank of ent took the following actions regarding are examined each year by both agencies. Petaluma, Sonoma. Certificates of the agreement between the FDIC and The superintendent administers the authority were issued to two banks that Chino Valley: Chino Valley's purchase Small Business Loan Program, designed opened for business: Bank of Encino, of part of the business of Independent to provide long-term capital to rapidly Los Angeles, and First Citizens Bank, was approved; Chino Valley's applica- growing small businesses whose growth Sherman Oaks. tion for authority to establish and exceeds their ability to generate internal Mergers. National Intercity Bank, maintain a branch office at the location earnings. Under the traditional stand- Santa Clara, merged with and into Sil- of the former head office of Independent ards used by banks, these small busi- icon Valley Bank, San Jose. Silicon was filed and approved; and a certificate nesses cannot provide adequate security Valley Bank will operate all existing of authorization permitting Chino Valley to qualify for regular bank loans. offices of National Intercity Bank as to open and operate the branch office The superintendent licenses Business branch offices of Silicon Valley Bank. was issued. and Industrial Development Corpora- The superintendent also approved and On November 20, 1986, all deposits of tions which provide financial and effected the merger application of First National Bank, Willows, were management assistance to business firms Lloyd's Bank California, Los Angeles, to assumed by First Interstate Central in California. be merged with and into Golden State Bank, Willows. First Interstate Central Acting as Administrator of Local Sanwa Bank, San Francisco. Bank, a new bank organized by First Agency Security, the superintendent Bank Closings. On November 15, Interstate Bancorp, is providing con- oversees all deposits of money belonging 1986, all deposits of the Bank of North- tinued banking services at the locations to a local governmental agency in any ern California (BNC), San Jose, were of the head office and branch offices of state or national bank or savings and assumed by Pacific Valley Bank (PVB), First National Bank. The Comptroller of loan association. All such deposits must San Jose. PVB opened a branch office the Currency appointed the FDIC as be secured by the depository. at the location of the head office of receiver. The FDIC accepted the bid of MAJOR PROJECTS: BNC on the next business day, Novem- First Interstate Bancorp for First Inter- Emergency Regulations. As reported ber 17, 1986. state Central Bank to acquire all the in Volume 6, No. 4 of the 9RLR, the At the close of business on November deposits, certain other liabilities, and superintendent filed an emergency order 14, 1986, the superintendent took pos- certain assets of First National Bank in a with the Secretary of State. The order, session of BNC and ordered that BNC be purchase and assumption transaction. effective May 5, 1986, amends Chapter 1 liquidated. The superintendent then ten- The superintendent took the following of Title 10 of California Administrative dered to the Federal Deposit Insurance actions on November 20, 1986 in connec-

the California Regulatory Law Reporter Vol. 7, No. 1 (Winter 1987) 1REGULATORY AGENCY ACTION

tion with the organization of First securities sold in California. "Securities" Property Brokers Law, Health Care Ser- Interstate Central Bank and the pur- are defined quite broadly, and may vice Plan Law, Escrow Law, Check chase and assumption transaction: an include business opportunities in Sellers and Cashiers Law, Securities application by First Interstate Bancorp addition to the traditional stocks and Depositor Law, California Finance for authority to organize the bank with bonds. Many securities may be "quali- Lenders Law and Security Owners Pro- capital of $4 million was filed and fied" through compliance with the tection Law. approved; a certificate of authorization Federal Securities Acts of 1933, 1934 A Consumer Lenders Advising Com- permitting the bank to transact commer- and 1940. If the securities are not under mittee advises the commissioner on cial banking at the location of the head federal qualification, the commissioner policy matters affecting regulation of office of First National Bank was issued; must issue a "permit" for their sale consumer lending companies licensed by and First Interstate Central Bank's in California. the Department of Corporations. The purchase of part of the business of First The commissioner may issue a "stop committee is composed of leading execu- National Bank under the purchase and order" regarding sales or revoke or tives, attorneys and accountants in con- assumption transaction was approved. suspend permits if in the "public inter- sumer finance. All depositors of First National Bank est" or if the plan of business underlying became depositors of First Interstate the securities is not "fair, just or MAJOR PROJECTS: Central Bank, and there was an orderly equitable." Proposed Exemption. On March 10, transition of banking services without The commissioner may refuse to grant 1986, Commissioner Tom published a financial loss or delay to the public. a permit unless the securities are prop- notice of proposed changes concerning Counterfeiting. The superintendent erly and 'publicly offered under the the adoption of section 260.105.37 of warned all bankers that counterfeit cash- federal securities statutes. A suspension Title 10 of the California Administra- ier's checks drawn on Imperial Bank are or stop order gives rise to Administrative tive Code. being used to obtain property by fraud- Procedure Act notice and hearing rights. Section 260.105.37 was proposed to ulent means. The perpetrator of the The commissioner may require that exempt transactions in certain securities scheme answers newspaper ads for expen- records be kept by all securities issuers, included in the NASO's National sive cars and visits the seller to inspect may inspect those records, and may Market System from the registration the car and set the price. He then returns require that a prospectus or proxy requirements of the law. A significant with the counterfeit check, usually after statement be given to each potential feature of the proposed exemption re- the close of business. The checks, buyer unless the seller is proceeding quired that the outstanding voting secur- numbered 090589, are green with a under federal law. ities of an issuer eligible for the basket weave background. The protec- The commissioner also licenses agents, exemption meet specified voting rights tographed amount does not say "Imperi- broker-dealers and investment advisors. standards. As indicated in the Initial al Bank." There are outstanding Those brokers and advisors without a Statement of Reasons, the proposal warrants. For further information, place of business in the state and oper- arose as a result of a request for regula- please call Imperial Bank at (213) ating under federal law are exempt. tory parity between National Market 417-5747. Deception, fraud or violation of any System securities and securities listed LEGISLATION: regulation of the commissioner is cause on the American Stock Exchange and AB 2 (Reyes) calls for a ceiling on for license suspension of up to one year the New York Stock Exchange. The credit card interest rates on all credit or revocation. voting rights standards rights of the pro- cards issued by California banks. If The commissioner also has the author- posed exemption were patterned after enacted, the ceiling will be five points ity to suspend trading in any securities the voting rights rules of the New York above the current six-month treasury bill by summary proceeding and to require and American Stock Exchanges. Subse- rate. securities distributors or underwriters to quent to the public notice of the file AB 4 (Brown) will allow out-of-state all advertising for sale of securities proposed exemption, however, the New with the banks to acquire any California bank Department before publication. York Stock Exchange announced an The with assets of $50 billion or more. commissioner has particularly important amendment to its voting broad civil investigative discovery pow- rights standards. ers; he/she can compel the deposition of In view of this substantial change, the witnesses and require production of commissioner solicited additional com- documents. Witnesses so compelled may ments on the concept of the voting rights DEPARTMENT OF be granted automatic immunity from standards included in proposed rule CORPORATIONS criminal prosecution. 260.105.37. The comment period ended Commissioner: Franklin Tom The commissioner can also issue on November 28, 1986. Presently, sec- (916) 445-7205 "desist and refrain" orders to halt unli- tion 260.105.37 is undergoing in-house (213) 736-2741 censed activity or the improper sale of drafting by the Department. securities. A willful violation of the Proposed Changes to California The Department of Corporations is a securities law is a felony, as is securities Credit Union Law Regulations. A public part of the cabinet-level Business and fraud. These criminal violations are hearing was held by Commissioner Tom Transportation Agency. A Commis- referred by the Department to local dis- on the proposed amendments to section sioner of Corporations, appointed by the trict attorneys for prosecution. 922, regarding investments, as well as Governor, oversees the Department. The commissioner also enforces a proposed new section 932, regarding The Department administers several group of more specific statutes involving investments in fixed assets and service major statutes. The most important is similar kinds of powers: Franchise corporations, under the California the Corporate Securities Act of 1968, Investment Statute, Credit Union Credit Union Law (Financial Code sec- which requires the "qualification" of all Statute. Industrial Loan Law, Personal tion 14000 et seq.) (see CRLR Vol. 6,

The California Regulatory Law Reporter Vol. 7, No. 1 (Winter 1987)