(a) Whenever it appears to the commissioner that any of the conditions specified in subdivision (b) has occurred with respect to any broker-dealer or investment adviser subject to this division, the commissioner shall dispatch a written notice demanding remedial action and a summary of findings, as referred to in Section 25248, to the principal officer of that broker-dealer or investment adviser or to its manager of record.
(b) The conditions that require the commissioner to commence remedial action against a broker-dealer or investment adviser pursuant to subdivision (a) includes any of the following:
(1) The broker-dealer or investment adviser is in an insolvent condition.
(2) It is conducting its securities, broker-dealer, or investment advisory business in an unsafe or unauthorized manner.
(3) It has violated any rule or order adopted or issued pursuant to this division that is or has been necessary for the protection of any investor.
(4) It refuses to submit its books, papers, and affairs to the inspection of any examiner or investigator.
(5) It neglects or refuses to observe any order of the commissioner made pursuant to this division that is or has been necessary for the protection of any investor, within the time specified therein, unless the enforcement of the order is restrained in a proceeding brought by the broker-dealer or investment adviser.
(6) It has violated any provision of this division or any similar regulatory scheme of this state or a foreign jurisdiction relating to the protection of any investor.
(7) Any officer, director, stockholder, or partner of the broker-dealer or investment adviser, or attorney-in-fact of the broker-dealer or investment adviser has embezzled, misappropriated, or willfully diverted the assets or client or trust funds of the broker-dealer or investment adviser.
(8) It has permitted its capital to be lower than the minimum required by law, including any rule or order adopted or issued pursuant to this division.
(9) It has failed to comply with the bonding requirements of Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing with Section 25230) of this part.
(c) The broker-dealer or investment adviser shall be afforded a reasonable opportunity to comply or otherwise effect those remedies specified in the written notice or any other remedies that the commissioner may deem acceptable. However, if the broker-dealer or investment adviser fails to comply within five days of receipt of the notice, or as soon as it appears to the commissioner that no compliance is possible, or in the event prompt delivery of the written notice is impossible, the commissioner may take possession of the property and business of the broker-dealer or investment adviser and retain possession until the broker-dealer or investment adviser, subject to those conditions that the commissioner may prescribe, resumes its business or its affairs are finally liquidated.
(d) Whenever the commissioner has taken possession of any broker-dealer or investment adviser, the broker-dealer or investment adviser, within 10 days after the taking, may apply to the superior court to enjoin further proceedings in any California county or city and county in which the California office or offices of the broker-dealer or investment adviser is located. The court, after ordering the commissioner to show cause why further proceedings should not be enjoined and after a hearing and a determination of the facts upon the merits, may dismiss the application or enjoin the commissioner from further proceedings and direct the commissioner to surrender the property and business to the broker-dealer or investment adviser, or make any further order that may be just.
(e) If any facts occur that would entitle the commissioner under subdivision (b) to take possession of the property, business, and assets of a broker-dealer or investment adviser, the commissioner may appoint a conservator of the broker-dealer or investment adviser and require the conservator to post a bond. The conservator, under the direction of the commissioner, shall take possession of the property, business, and assets of the broker-dealer or investment adviser and take any action that the conservator deems necessary to conserve the assets of the broker-dealer or investment adviser pending further disposition of its business. The conservator shall retain possession until the property, business, and assets of the broker-dealer or investment adviser are returned to the broker-dealer or investment adviser or until further order of the commissioner.
(f) Subject to the other provisions of this section, a conservator, while in possession of the property, business, and assets of a broker-dealer or investment adviser, has the same powers and rights and is subject to the same duties and obligations as the commissioner while in possession of the property, business, and assets of a broker-dealer or investment adviser. During that time, the rights of a broker-dealer or investment adviser and of all persons with respect thereto, subject to the other provisions of this section, are the same as if the commissioner had taken possession of the property, business, and assets. A conservator, while in possession of the property, business, and assets of a broker-dealer or investment adviser shall have all the rights, powers, and privileges of the broker-dealer or investment adviser, its officers and directors or partners. All expenses of the conservatorship shall be paid out of the assets of the broker-dealer or investment adviser and shall be a lien thereon which shall be prior to any other lien.
(g) An investment adviser subject to Section 25230.1 is not subject to this section, unless that investment adviser or persons acting on behalf of that investment adviser committed any of the acts of fraud or deceit set forth in paragraph (7) of subdivision (b).
(Added by Stats. 1998, Ch. 391, Sec. 9. Effective January 1, 1999.)