Cal. Code Regs. Tit. 10, § 260.210 - Agent Procedures for Broker-Dealers

Current through Register 2021 Notice Reg. No. 52, December 24, 2021

The procedures set forth in this section are applicable to broker-dealers licensed pursuant to subdivisions (a) and (b) of Section 25211 of the Code.

(a) Upon employment of an individual as an agent, a broker-dealer shall (1) obtain a properly executed application for registration, on the Uniform Application for Securities Industry Registration, or Transfer Form ("Form U4"), (2) obtain for its records, evidence that such agent meets the qualification requirements of Section 260.217 of these rules, and (3) ascertain (by investigation) the character, business reputation and experience of any individual, prior to executing any transaction on behalf of the broker-dealer. Evidence of compliance with Section 260.217 and investigation of the agent, shall be maintained as a part of the records of the broker-dealer as required by Sections 260.241 of these rules.

(b) A broker-dealer who registers its agents with Financial Industry Regulatory Authority, Inc. ("FINRA"), shall:

(1) Upon the employment of an individual as an agent, file the Form U4, through the Central Registration Depository (the "CRD") of FINRA in accordance with its procedures, and pay, for transmission to the Commissioner, the fees prescribed by Section 260.608.2(a) of these rules. The filing of Form U4 with the CRD does not constitute an automatic "approval" through the CRD. Broker-dealers should not consider an agent "registration" through the CRD approved until approved by the Commissioner and the approval has been received through the CRD. If requested by the Commissioner, additional information, documentation or details pertaining to the Form U4 or properly executed fingerprint information of the agent must be filed directly with the Commissioner within 15 days from the date of the request. In accordance with Section 250.16, the Form U4 may be abandoned if the Commissioner does not receive the requested information within the time prescribed. The Commissioner shall "reject" through the CRD an abandoned Form U4.

(2) An agent registered through the CRD may comply with the requirements of this subsection through participation in the "Relicensing" program (the Relicensing program was formerly known as "Temporary Agent Transfer" or "TAT") adopted by the North American Securities Administrators Association ("NASAA"), provided that the agent is eligible and qualifies for registration through the Relicensing program and the broker-dealer has complied will all of the requirements of the Relicensing program with respect to the agent in a timely manner. Agent CRD registration through the Relicensing program shall not waive any rights of the Commissioner to proceed in any disciplinary proceeding or sanction provided for under the Code.

(3) File an amendment to the Form U4 through the CRD within 30 days when there are any changes to the information contained in the original Form U4. If the Form U4 is being amended due to a disciplinary occurrence, a copy of the amendment shall be filed with the Commissioner upon request.

(4) Within 30 days after the termination of an individual as an agent, file the Uniform Termination Notice for Securities Industry Registration Form ("Form U5") through the CRD. The Form U5 shall clearly state the reason(s) for termination. However, if an agent has been terminated for cause, the Form U5 shall, upon request, be filed directly with the Commissioner.

A broker-dealer shall be responsible for the acts, practices, and conduct of an agent in connection with the purchase or sale of securities until such time as they have been properly terminated and the Form U5 has been filed with the CRD of FINRA.

(c) A broker-dealer who is not subject to the provisions of subsection (b) shall:

(1) Upon the employment of an individual as an agent, file the Form U4 with the Commissioner. The filing of Form U4, with the Commissioner, does not constitute an automatic approval. Broker-dealers should not consider an agent registration approved until such approval has been received from this Department. If requested by the Commissioner, additional documentation or details pertaining to the Form U4 must be filed directly with the Commissioner within 15 days from the date of the request. In accordance with Section 250.16, the Form U4 may be abandoned if the Commissioner does not receive the requested information within the time prescribed.

(2) File an amendment to the Form U4 with the Commissioner within 30 days, when there are any changes to the information (including information relating to a disciplinary action) contained in the original Form U4.

(3) Within 30 days after the termination of employment of an individual as an agent, file the Form U5 with the Commissioner. The Form U5 shall clearly state the reason(s) for termination. A broker-dealer shall be responsible for the acts, practices, and conduct of an agent in connection with the purchase or sale of securities until such time as they have been properly terminated and the Form U5 has been filed with the Commissioner.

(4) If the fingerprints of an individual employed as an agent are not on file with the Commissioner, such broker-dealer shall file with the Form U4 required under subsection (c)(1), fingerprint information pursuant to California Penal Code Section 11077.1 for such individual. Information about whether an individual's fingerprints are on file with the Commissioner may be obtained from any office of the Commissioner.

(d) The following notices required by state and federal law are hereby incorporated as part of any uniform form:

NOTICES REQUIRED UNDER STATE AND FEDERAL LAW INFORMATION PRACTICES ACT OF 1977 (California Civil Code Section 1798.17)

(a) The Department of Business Oversight of the State of California, Securities Regulation Division, is requesting the information specified in the application for registration, qualification, a certificate or a license.

(b) The Chief Administrative Officer, the Department of Business Oversight, 1515 K Street, Suite 200, Sacramento, CA 95814, telephone (916) 445-5541, is responsible for the system of records and shall, upon request, inform individuals regarding the location of the Department of Business Oversight's records and the categories of persons who use the information in the records.

(c) The records are maintained pursuant to the Corporate Securities Law of 1968 (Corporations Code Section 25000, et seq.).

(d) The submission of all items of information is mandatory unless otherwise noted. The Department of Business Oversight is required to collect from all applicants social security numbers under Family Code Section 17520, and social security numbers or federal taxpayer identification numbers under Business and Professions Code Section 494.5. The Privacy Act of 1974 prohibits a state agency from denying an individual any right, benefit or privilege provided by law because of the individual's refusal to disclose the individual's social security account number.

(e) Failure to provide all or any part of the information requested may preclude the Department of Business Oversight from approving the application.

(f) The principal purposes within the Department of Business Oversight for which the information is to be used are to determine whether (1) a license, qualification, registration, certificate or other authority should be accepted, granted, approved, denied, revoked or limited in any way; (2) business entities or individuals licensed or otherwise regulated by the Department of Business Oversight are conducting themselves in accordance with applicable laws; and/or (3) laws administered by the Department of Business Oversight are being or have been violated and whether administrative action, civil action, or referral to appropriate federal, state or local law enforcement or regulatory agencies, or to a self-regulatory organization, as authorized by law, is appropriate.

(g) Any known or foreseeable disclosures of the information pursuant to subdivision (e) or (f) of Civil Code Section 1798.24 may include transfers to other federal, state, or local law enforcement or regulatory agencies, or to a self-regulatory organization, as authorized by law.

(h) Subject to certain exceptions or exemptions, the Information Practices Act grants an individual a right of access to personal information concerning the requesting individual that is maintained by the Department of Business Oversight.

FEDERAL PRIVACY ACT OF 1974 ( Public Law 93-579 )

In accordance with Section 7 of the Privacy Act of 1974 (found at 5 U.S.C. § 552a note (Disclosure of Social Security Number)), the following is information on whether the disclosure of a social security account number is voluntary or mandatory, by what statutory or other authority such number is solicited, and what uses will be made of it.

(1) The Department of Business Oversight is required to collect from all applicants social security numbers under Family Code Section 17520, and social security numbers or federal taxpayer identification numbers under Business and Professions Code Section 494.5. The Privacy Act of 1974 prohibits a state agency from denying an individual any right, benefit or privilege provided by law because of the individual's refusal to disclose the individual's social security account number.

(2) A social security account number or federal taxpayer identification number is solicited pursuant to one or more of the following authorities: Sections 25210, 25211,25230, 25230.1, 25231, and 25241 of the Corporations Code; Sections 260.210, 260.211,260.211.1, 260.231, 260.231.2, 260.236.1, and 260.236.2 of Title 10, California Code of Regulations; Section 17520 of the Family Code; and Section 494.5 of the Business and Professions Code.

(3) For all persons disclosing a social security account number or federal taxpayer identification number, the number is used to match the information to the names on the list provided by the Department of Child Support Services under Family Code Section 17520, and the lists of tax delinquencies provided by the State Board of Equalization and the Franchise Tax Board under Business and Professions Code Section 494.5. The social security number may be used, in addition to other information provided, to conduct a background investigation of the individual by the Department of Justice's Identification and Information Branch or by other federal, state or local law enforcement agencies, or a self-regulatory organization, as authorized by law. The social security number may also be used to respond to requests for this number made by child support agencies.

NOTICES REGARDING TAXPAYER INFORMATION

(4) The State Board of Equalization and the Franchise Tax board are authorized to share taxpayer information with the Department of Business Oversight and in the event the state tax obligation is not paid by a certificate holder after a certificate is issued, the Department of Business Oversight may be required to suspend the certificate.

Notes

Cal. Code Regs. Tit. 10, § 260.210

Note: Authority cited: Section 25610, Corporations Code. Reference: Sections 31 and 494.5, Business and Professions Code; Sections 25210, 25213,25213.3, 25217 and 25612.3, Corporations Code; and Section 11077.1, Penal Code.

1. New section filed 11-29-79 as an emergency; designated effective 1-1-80. Certificate of Compliance included (Register 79, No. 48).
2. Amendment filed 3-16-84; designated effective 3-26-84 pursuant to Government Code section 11346.2(d) (Register 84, No. 11).
3. Amendment filed 4-23-90; operative 5-23-90 (Register 90, No. 20).
4. Amendment of section and Note filed 6-1-98; operative 6-1-98 pursuant to Government Code section 11343.4(d) (Register 98, No. 23).
5. Amendment of subsection (b)(1), new subsection (b)(2), subsection renumbering, and amendment of newly designated subsection (b)(4) filed 1-23-2001; operative 1-23-2001 pursuant to Government Code section 11343.4(c) (Register 2001, No. 4).
6. Change without regulatory effect amending subsections (b)-(b)(1), (b)(4), (c)(1) and (c)(4) and amending Note filed 11-23-2005 pursuant to section 100, title 1, California Code of Regulations (Register 2005, No. 47).
7. Amendment of section and Note filed 9-24-2009; operative 10-24-2009 (Register 2009, No. 39).
8. New subsection (d) and amendment of Note filed 1-7-2014; operative 1-7-2014 pursuant to Government Code section 11343.4(b)(3) (Register 2014, No. 2).