Financial regulation

The law shifts many Department of Financial Protection and Innovation communications to electronic delivery and changes which securities can receive surplus state funds. It also eliminates the State Enterprise Loan Fund framework.

What the law does ​

• Requires financial licensees and registrants to maintain an electronic service address for communications from the Commissioner of Financial Protection and Innovation.
• Allows electronic delivery of fee and assessment notices, including through the Nationwide Multistate Licensing System and Registry, while preserving notice methods required for matters carrying hearing rights.
• Requires use of Nationwide Multistate Licensing System and Registry forms and instructions when that system is required for licensing or registration.
• Permits franchise brokers to electronically provide required disclosure documents to prospective franchisees.
• Repeals the State Assistance Fund for Enterprise Act and its State Enterprise Loan Fund structure.
• Limits state surplus-fund investments in specified local-government and corporate debt to securities rated A or equivalent or better, and updates commercial-paper standards and maturities.
• Requires deferred-deposit lender assessment invoices to itemize their calculation if the bill's contingent provision tied to AB 2028 becomes operative.

Who it affects ​

• Banks, money transmitters, escrow agents, industrial loan companies, deferred-deposit lenders, residential mortgage lenders and servicers, broker-dealers, investment advisers, and other financial businesses regulated by the department.
• Franchise brokers and prospective franchisees.
• Local governments and corporations whose debt securities may be considered for investment of state surplus funds.
• Small businesses previously covered by the repealed enterprise-assistance framework.

Breakdown ​

Repeal of Small Business Fund Act ​

This part repeals the State Assistance Fund for Enterprise Act of 1989. As a result, it eliminates the law authorizing the nonprofit corporation created to expand financial assistance for small businesses and the related State Enterprise Loan Fund provisions.

Key takeaways

• The bill repeals the State Assistance Fund for Enterprise Act of 1989.
• It removes statutory authorization for the nonprofit corporation established under that act to support small-business financial assistance.
• It eliminates the act's provisions requiring a separate State Enterprise Loan Fund account in the General Fund.

State Surplus Fund Investments ​

This part changes which local government, corporate, and commercial paper securities can receive investments of surplus state funds. It replaces the general top-three-rating standard for certain local and corporate debt with an “A” rating or equivalent or better. It also expands the allowed maturity for top-rated commercial paper from 270 to 397 days and removes the requirement for certain collateral when requested by the Pooled Money Investment Board.

Key takeaways

• Local government bonds, notes, and other obligations must be rated “A” or its equivalent or better to qualify for surplus state fund investments.
• Corporate bonds, debentures, and notes must be rated “A” or its equivalent or better to qualify for surplus state fund investments.
• Eligible commercial paper must have the highest available prime rating, or the highest letter-and-number rating, under a recognized rating organization’s standards.
• The maximum maturity for eligible commercial paper increases from 270 days to 397 days.
• The bill removes the condition that an issuer provide specified collateral for commercial paper investments when requested by the Pooled Money Investment Board.

Electronic Notices and NMLS Processing ​

This part lets the Commissioner of Financial Protection and Innovation send fee and assessment notices electronically instead of by mail. It also allows notices to be sent through the Nationwide Multistate Licensing System and Registry (NMLS) for people licensed or registered through that system. When a law requires licensing or registration through NMLS, the commissioner must require use of NMLS forms and instructions.

Key takeaways

• The bill removes mail-delivery requirements for various department and commissioner notices and information.
• The commissioner may send fee or assessment notices to a licensee’s or registrant’s specified electronic service address.
• For licensees and registrants using NMLS, the commissioner may provide fee and assessment notices electronically through NMLS.
• When licensure or registration is required through NMLS, the commissioner must require use of NMLS forms and instructions.

Conditional Section 23016 Changes ​

This part adds further changes to Financial Code Section 23016 that depend on AB 2028 also becoming law. The changes take effect only if both bills are enacted and AB 2795 is enacted after AB 2028.

Key takeaways

• The bill makes additional changes to Financial Code Section 23016.
• These additional changes apply only if AB 2028 is also enacted.
• AB 2795 must be enacted after AB 2028 for the changes to take effect.