Sec. 260.211 - Application for Broker-Dealer Certificate

§ 260.211. Application for Broker-Dealer Certificate

(a) For any broker-dealer that participates in the Central Registration Depository ("CRD"), the application for a certificate as a broker-dealer shall be filed as follows:

(1) INITIAL APPLICATION: The application for a certificate as a broker-dealer pursuant to subsection (a) of Section 25211 of the Code and an amendment to such application pursuant to Section 260.241.4 shall be filed upon Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501) in accordance with the form instructions and by filing the form with CRD for transmission to the Commissioner.

(A) An applicant that files an application through CRD shall complete a Customer Authorization of Disclosure of Financial Records, set forth in Section 260.231(i) of these rules, and maintain the form in the applicant's books and records as provided in Section 25241 of the Code. The applicant shall provide the form to the Commissioner upon request.

(B) Upon reviewing the application, the Commissioner may require the applicant to submit the following information:

1.A balance sheet as of a date within 45 days prior to the filing of the application, which need not be audited. If the balance sheet is not audited, the applicant shall file, in addition, an audited balance sheet as of the end of applicant's last fiscal year.

2.A calculation of the net capital and the ratio of net capital to aggregate indebtedness of the applicant, in accordance with Section 260.216.12 of these rules, as of the same date as the balance sheets submitted under paragraph (B)1. above.

3.Copies of all currently effective subordination agreements. If any are substantially similar, attach one copy of the most standard form(s) and a schedule(s) showing the name and address of each lender and the dollar value of the subordinated items on each agreement.

(C) The Commissioner may request additional information, documentation or detail pertaining to Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501) to be filed directly with the Commissioner.

(2) FILING FEE: The fee for filing an initial application is $300 as prescribed in Section 25608(o) of the Code. The applicant shall remit the fee directly with CRD in accordance with its procedures for transmission to the Commissioner. Fees are not refundable except pursuant to Section 250.15 of these rules.

(3) COMPLETION OF FILING: For the purposes of Section 250.51, an application for a certificate as a broker-dealer is not deemed filed until the required fee and all required submissions are received by the Commissioner. The filing of Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501) with CRD does not constitute automatic approval. The broker-dealer shall not consider the application approved until approved by the Commissioner and the approval is received through CRD.

(b) For any broker-dealer that does NOT participate in the CRD, the application for a certificate as a broker-dealer shall be filed as follows:

(1) INITIAL APPLICATION: The application for a certificate as a broker-dealer pursuant to subsection (a) of Section 25211 of the Code and an amendment to such application pursuant to Section 260.241.4(a) of these rules shall be filed upon Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501) in accordance with the form instructions and by filing the form directly with the Commissioner at the Department of Business Oversight, 1515 K Street, Suite 200, Sacramento, CA 95814-4052. In addition to Form BD, the application shall include the additional documentation prescribed in subsections (b)(1)(A) through (b)(1)(D) of this rule.

(A) Financial Statements:

1.Attach a balance sheet as of a date within 45 days prior to the filing of the application, which need not be audited. If the balance sheet is not audited, the applicant shall file, in addition, an audited balance sheet as of the end of applicant's last fiscal year.

2.Attach a calculation of the net capital and the ratio of net capital to aggregate indebtedness of the applicant, in accordance with Section 260.216.12 of these rules, as of the same date as the balance sheets submitted under paragraph (A)1. above.

3.Attach copies of all currently effective subordination agreements. If any are substantially similar, attach one copy of the most standard form(s) and a schedule(s) showing the name and address of each lender, and the dollar value of the subordinated items on each agreement.

4.Furnish the date applicant's fiscal year ends.

5.Furnish applicant's minimum net capital requirement.

A broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 may file a copy of its most recent annual report of financial condition and its most recent quarterly financial report required under 17 CFR 240.17a-5 in lieu of paragraphs (A)1. and (A)2. above.

(B) Organizational Information and Other Exhibits.

1.If applicant is a corporation, attach copies of articles, by-laws, amendments and certification.

2.If applicant is a partnership, attach partnership agreement and amendments.

3.If applicant is a limited liability company, attach copies of its articles of organization and amendments.

4.If applicant will conduct business under a fictitious name, attach a certified copy of the Fictitious Business Name Statement required by Business and Professions Code Section 17910.

5.Attach a completed Customer Authorization of Disclosure of Financial Records, set forth in Section 260.231(i) of these rules.

(C) Exhibits Required by Applicants Not Registered Under The Securities Exchange Act of 1934 (15 U.S.C. 78 a et seq.) or Applicants Whose Agent Records are not on File with CRD.

1.Attach a statement demonstrating compliance with the examination requirements of Section 260.217 of these rules.

2.Attach fingerprint information pursuant to California Penal Code Section 11077.1 for each person listed on Schedule A, B or C of Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501).

(D) The Commissioner may request additional information, documentation or detail pertaining to Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501) to be filed with the Commissioner.

(2) FILING FEE: The fee for filing an initial application is $300 as prescribed in Section 25608(o) of the Code. Checks shall be made payable to the DEPARTMENT OF BUSINESS OVERSIGHT. Fees are not refundable except pursuant to Section 250.15 of these rules.

(3) COMPLETION OF FILING: For the purposes of Sections 250.51 of these rules, an application for a certificate as a broker-dealer is not considered filed until the required fee and all required submissions are received by the Commissioner.

(c) AMENDMENTS TO FORM BD: Any amendments to Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501) shall be filed pursuant to Section 260.241.4 of these rules.

(d) ANNUAL ASSESSMENT: The annual assessment shall consist of the fee prescribed in Section 25608(o) of the Code. The minimum assessment of $75 shall be filed through CRD in accordance with its procedures by the 31st of December for transmission to the Commissioner. This fee shall keep the certificate in effect for an additional period. Broker-dealers not filing through CRD shall pay the minimum assessment of $75 directly to the Commissioner by the 31st of December.

(e) SUCCESSIONS: In the event that a broker-dealer succeeds to and continues the business of a broker-dealer holding a current certificate, both the predecessor broker-dealer and the successor broker-dealer shall follow Rule 15b1-3 under the Securities Exchange Act of 1934 (17 C.F.R. § 240.15b1-3) for the filing of Form BD (Uniform Application for Broker-Dealer Registration, 17 C.F.R. § 249.501), an amendment to Form BD, or Form BDW (Uniform Application for Broker-Dealer Withdrawal, 17 C.F.R. § 249.501a), as applicable. Form BD shall be filed in the manner set forth in subsection (a) or (b) of this section, as applicable. An amendment to Form BD shall be filed in the manner set forth in subsection (c) of this section. Form BDW shall be filed in the manner set forth in Section 260.242 of these rules.

(f) 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 260.211, 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.

(1. Amendment filed 6-18-76 as an emergency; effective upon filing. Certificate of Compliance included (Register 76, No. 25). For prior history, see Register 76, No. 18. 2. Amendment of subsection (b), Part II-A, Items II and VII, and Part II-B, No. 2 filed 11-14-78; effective thirtieth day thereafter (Register 78, No. 45). 3. Amendment filed 11-29-79 as an emergency; designated effective 1-1-80. Certificate of Compliance included (Register 79, No. 48). 4. Repealer and new section filed 1-3-84 as an emergency; effective upon filing (Register 84, No.2). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 5-3-84. 5. Amendment filed 4-27-84; effective thirtieth day thereafter (Register 84, No. 18). 6. Editorial correction repealing 4-27-84 order and readopting 1-3-84 text filed 5-7-84 (Register 84, No. 18). 7. Certificate of Compliance as to 1-3-84 order transmitted to OAL 4-27-84 and filed 5-29-84 (Register 84, No. 22). 8. Amendment filed 12-19-85 as an emergency; designated effective 1-1-86 (Register 85, No. 51). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 5-1-86. 9. Certificate of Compliance transmitted to OAL 4-10-86 and filed 5-8-86 (Register 86, No. 19). 10. Change without regulatory effect filed 3-2-89 (Register 89, No. 11). 11. Change without regulatory effect amending subsection (b) Part I and Part IV filed 11-19-93 pursuant to title 1, section 100, California Code of Regulations (Register 93, No. 47). 12. Change without regulatory effect amending subsection (b) filed 2-16-95 pursuant to section 100, title 1, California Code of Regulations (Register 95, No. 7). 13. Amendment of section and Note filed 1-23-2001; operative 1-23-2001 pursuant to Government Code section 11343.4(c) (Register 2001, No. 4). 14. Amendment of section heading, section and Note filed 3-27-2003; operative 4-26-2003 (Register 2003, No. 13). 15. Change without regulatory effect amending subsection (b)(1)(C)2. and amending Note filed 11-23-2005 pursuant to section 100, title 1, California Code of Regulations (Register 2005, No. 47). 16. Amendment of subsections (a)(1)(A), (b)(1)(B)5. and (e) and amendment of Note filed 9-24-2009; operative 10-24-2009 (Register 2009, No. 39). 17. Amendment of subsections (b)(1), (b)(2) and (e), new subsection (f) 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).)

Note: Authority cited: Sections 25211 and 25610, Corporations Code. Reference: Sections 31 and 494.5, Business and Professions Code; Section 1798.17, Civil Code; Sections 25210,25211, 25216, 25217, 25241, 25608, 25612.3, 25612.5 and 25613, Corporations Code; Section 17520, Family Code; and Section 11077.1, Penal Code.

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