17400-17425
FINANCIAL CODE
SECTION 17400-17425
17400. The commissioner may from time to time make, amend, and
rescind the rules, forms, and orders that are necessary to carry out
the provisions of this division, and define any terms, whether or not
used in this division, insofar as the definitions are not
inconsistent with the provisions of this division. For the purpose of
rules and forms, the commissioner may, among other things, classify
persons and matters within the commissioner's jurisdiction and may
prescribe different requirements for different classes. The
commissioner may, in the commissioner's discretion, waive any
requirement of any rule or form in situations where in his or her
opinion the requirement is not necessary in the public interest or
for the protection of the public.
17402. No person subject to this division or any officer thereof
shall advertise in any manner or publish any statement of its
capital, other than amounts fully paid in and accumulated surplus.
17403. (a) No person subject to this division shall issue,
circulate, or publish any advertisement by any means of
communication, or make use of or circulate any letterheads,
billheads, blank notes, blank receipts, blank escrow instructions,
certificates, circulars, or any written, printed, partially written
or printed paper containing any fictitious or corporate name or other
words indicating that the person is in the escrow business, unless
the person is a licensed escrow agent.
(b) If, in the opinion of the commissioner, any person has
violated this section, the commissioner may order that person to
desist and refrain from that violation. If, within 30 days after the
order is served, a request for hearing is filed in writing and the
hearing is not held within 60 days thereafter, the order is
rescinded.
17403.1. No person subject to this division shall describe as an
escrow, whether orally, in writing, or electronically, any
transaction that is not defined as such in Section 17003.
17403.2. (a) No person subject to this division shall solicit or
accept an escrow instruction or amended or supplemental escrow
instruction containing any blank to be filled in after signing or
initialing of the escrow instruction or amended or supplemental
escrow instruction, nor permit any person to make any addition to,
deletion from, or alteration of an escrow instruction or amended or
supplemental escrow instruction, unless the addition, deletion or
alteration is signed or initialed by all persons who had signed or
initialed the escrow instruction or amended or supplemental escrow
instruction prior to the addition, deletion or alteration.
(b) In addition to subdivision (a), no Internet escrow agent
subject to this division shall solicit or accept electronically over
the Internet an escrow instruction or amended or supplemental escrow
instruction containing any blank to be filled in after executing that
escrow instruction or amended or supplemental escrow instruction,
nor permit any person to electronically, over the Internet, make any
addition to, deletion from, or alteration of an escrow instruction or
amended or supplemental escrow instruction, unless that addition,
deletion or alteration is executed by all persons who had executed
the escrow instruction or amended or supplemental escrow instruction
prior to the addition, deletion, or alteration.
17403.3. (a) At the time of execution a copy of each escrow
instruction or amended or supplemental escrow instruction shall be
delivered to all persons executing the same.
(b) Internet escrow agents shall deliver electronically over the
Internet a copy of each executed escrow instruction or amended or
supplemental escrow instruction to all persons executing the same. In
the event a person is not able to electronically receive the
instructions, the Internet escrow agent shall mail a true and correct
copy of the instructions to the person within 24 hours of execution.
17403.4. All written escrow instructions and all escrow
instructions transmitted electronically over the Internet executed by
a buyer or seller, whether prepared by a person subject to this
division or by a person exempt from this division under Section
17006, shall contain a statement in not less than 10-point type which
shall include the license name and the name of the department
issuing the license or authority under which the person is operating.
This section shall not apply to supplemental escrow instructions or
modifications to escrow instructions.
This section shall become operative on July 1, 1993.
17403.5. (a) All records required by this chapter may be retained
by an Internet escrow agent and provided to the commissioner in
electronic format.
(b) All transfers by an Internet escrow agent between trust
accounts and interest-bearing accounts, and between escrow accounts,
may be made electronically.
(c) A statement of account may be delivered by an Internet escrow
agent to a customer by electronic mail or via the Internet, unless
otherwise requested by the customer.
17404. Every person subject to this division shall keep and use in
its business, books, accounts, and records which will properly enable
the commissioner to determine whether the escrow functions performed
by such person comply with the provisions of this division and with
all rules made by the commissioner under this division.
17405. (a) The business, accounts and records of every person
performing as an escrow agent, whether required to be licensed under
this division or not, are subject to inspection and examination by
the commissioner at any time without prior notice. The provisions of
this section shall not apply to persons specified in Section 17006.
(b) Any person subject to this division shall, upon request,
exhibit and allow inspection and copying of any books and records by
the commissioner or his or her authorized representative.
(c) (1) The commissioner shall conduct an examination of each
licensed escrow agent as described in subdivision (a) as often as the
commissioner deems necessary and appropriate, but not less than once
every 48 months.
(2) The examination shall be conducted for the 12-month period
immediately preceding the date that the examination is commenced
unless the commissioner finds, based on information uncovered in the
examination or in the most recent independent audit report, that the
examination should be extended beyond the 12-month period.
(3) In determining how often an examination shall be conducted,
the commissioner may consider each licensed escrow agent's compliance
with the requirements set forth in this division and other factors
the commissioner may by rule or order designate.
(4) This subdivision shall apply only to examinations commenced
after the effective date established by the rule or order of the
commissioner for the factors described in paragraph (3).
(d) Notwithstanding subdivision (c), the commissioner may conduct
an indoctrination or preliminary examination, or both, under this
section of any new licensee within one year of the issuance of the
license under this division, and an examination described in
subdivision (a) within two years of the issuance of the license under
this division.
17405.1. The cost of every inspection and examination of a licensee
or other person subject to this division shall be paid to the
commissioner by the licensee or person examined, and the commissioner
may maintain an action for the recovery of these costs in any court
of competent jurisdiction. In determining the cost of an inspection
or examination, the commissioner may use the estimated average hourly
cost for all persons performing inspections or examinations of
licensees or other persons subject to this division for the fiscal
year.
For the purposes of this section only, no person other than a
licensee shall be deemed to be a person subject to this division
unless and until the person is determined to be a person subject to
this division by an administrative hearing in accordance with Chapter
5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2
of the Government Code or by a judicial hearing in any court of
competent jurisdiction.
17406. (a) Each licensee shall submit to the commissioner, at the
licensee's own expense, an audit report containing audited financial
statements covering the calendar year or, if the licensee has an
established fiscal year, then for that fiscal year, within 105 days
after the close of the calendar or fiscal year, as applicable. At
that time, each licensee shall also file additional relevant
information as the commissioner may require.
(b) Within 30 days after receipt of a request from the
commissioner, a licensee or other person subject to this division
shall submit to the commissioner, at the person's own expense, an
audit report containing audited financial statements covering the 12
calendar months next preceding the month of receipt of the request,
or for another period as the commissioner may require. Unless the
public interest shall otherwise require, the commissioner shall
exempt a licensee from the provisions of subdivision (a) in whole or
in part if the licensee has complied with a request pursuant to this
subdivision as of a date within the calendar or fiscal year for which
the exemption is granted.
(c) A licensee whose license has been revoked shall submit to the
commissioner, at its own expense, on or before 105 days after the
effective date of the revocation, a closing audit report as of that
effective date, or for another period as the commissioner may
specify. The report shall include the information specified by the
commissioner. A licensee who has complied with this subdivision is
exempt from subdivision (a) of this section.
(d) The reports and financial statements referred to in
subdivisions (a) and (b) shall include at least a balance sheet and a
statement of income for the year ended on the balance sheet date
together with other relevant information as the commissioner may
require. The reports and financial statements referred to in
subdivisions (a), (b), and (c) shall be prepared in accordance with
generally accepted accounting principles, and shall be accompanied by
a report, certificate, or opinion of, an independent certified
public accountant or independent public accountant. The audits shall
be conducted in accordance with generally accepted auditing standards
and the rules of the commissioner.
(e) A licensee shall make other special reports to the
commissioner as the commissioner may from time to time require.
(f) For good cause and upon written request, the commissioner may
extend the time for compliance with subdivisions (a) and (b).
(g) A licensee shall, when requested by the commissioner, submit
its unaudited financial statements, prepared in accordance with
generally accepted accounting principles and consisting of at least a
balance sheet and statement of income and expense as of the date and
for the period specified by the commissioner. The commissioner may
require the submission of these reports on a monthly or other
periodic basis.
(h) If the report, certificate, or opinion of the independent
accountant referred to in subdivision (d) is in any way qualified,
the commissioner may require the licensee to take action as he or she
deems appropriate to permit an independent accountant to remove the
qualifications from the report, certificate, or opinion.
(i) The commissioner may reject any financial statement, report,
certificate, or opinion by notifying the licensee or other person
required to make the filing of its rejection and the cause of the
rejection. Within 30 days after the receipt of the notice, the
licensee or other person shall correct the deficiency and the failure
so to do shall be deemed a violation of this division. The
commissioner shall retain a copy of all rejected filings.
(j) The commissioner may make rules specifying the form and
content of the reports and financial statements referred to in this
section, and may require that those reports and financial statements
be verified by the licensee in the manner as he or she may prescribe.
(k) Upon completion of the reports and financial statements
referred to in subdivisions (a), (b), and (c), the independent
accountant shall submit to the commissioner complete copies of the
reports and financial statements at the same time that copies of the
reports and financial statements are submitted to the licensee.
(l) A licensee who engages an independent accountant or other
third-party contractor to reconcile trust account records shall
request the independent accountant or third-party contractor, at a
minimum, to immediately notify the commissioner and Fidelity
Corporation in the event of any of the following:
(1) The termination or voluntary withdrawal of the independent
accountant or third-party contractor from the engagement.
(2) The discovery by the independent accountant or third-party
contractor of an unreconcilable trust account debit balance. A debit
balance exists if an escrow agent withdraws, pays out, or transfers
money from an escrow account in excess of the amount to the credit of
that account at the time of the withdrawal, payment, or transfer.
(3) The discovery by the independent accountant or third-party
contractor that trust account reconciliations have not been performed
for two months after the end of any calendar month.
(4) The discovery by the independent accountant or third-party
contractor of exception items in trust account exception reports,
that remain uncorrected for two months after the end of any calendar
month.
Notification pursuant to this subdivision may be accomplished by
transmitting to the commissioner and Fidelity Corporation, in either
electronic or paper form, copies of trust account reconciliation
exception reports. Nothing in this subdivision imposes any duty or
obligation on an independent accountant or third-party contractor to
Fidelity Corporation, members of Fidelity Corporation, or the
commissioner.
(m) Nothing in this section shall be deemed to require a licensee
to contract with a third party to reconcile trust account records.
17406.1. (a) Whenever the reports and financial statements required
pursuant to subdivision (a), (b), or (c) of Section 17406 are to be
reported upon or certified by an accountant other than the accountant
reporting upon or certifying the licensee's most recent reports or
financial statements, the licensee shall furnish the commissioner
with a written notice stating whether there was any disagreement with
the former accountant on any matter in connection with the
preparation of the most recent reports or financial statements
reported upon or certified by that former accountant. If there was
any disagreement, the licensee's written notice shall describe the
reasons for the disagreement. The written notice shall be signed by
the chief executive officer of the licensee. The licensee shall also
request, in writing, that the former accountant furnish the licensee
with a letter addressed to the commissioner stating whether the
former accountant agrees with the statements contained in the
licensee's written notice. If the former accountant disagrees with
any of the licensee's statements, the former accountant's letter
shall explain the reasons for disagreeing with the licensee's
statements. The written notice of the licensee, along with the former
accountant's letter shall be filed with the commissioner no later
than 30 days from the date of engagement of the new accountant.
(b) The written notice of the licensee required by subdivision (a)
shall be considered a notice for purposes of Section 17702.
17408. (a) If any person subject to this division fails to make any
report required by law or by the commissioner, the commissioner may
immediately cause the books, records, papers, and affairs of said
person to be thoroughly examined.
(b) The commissioner may impose, by order, a penalty on any person
who fails, within the time specified in any written demand of the
commissioner, (1) to make and file with the commissioner any report
required by law or requested by the commissioner, or (2) to furnish
any material information required by the commissioner to be included
in the report. The amount of the penalty may not exceed one hundred
dollars ($100) for each day for the first five days the report or
information is overdue, and thereafter may not exceed five hundred
dollars ($500) for each day the report or information is overdue.
(c) If, after an order has been made under subdivision (b), a
request for hearing is filed in writing within 30 days of the date of
service of the order by the person to whom the order was directed, a
hearing shall be held in accordance with the Administrative
Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, and the commissioner
shall have all the powers granted under that chapter.
(d) If the person fails to file a written request for a hearing
within 30 days of the date of service of the order, the order
imposing the penalty shall be deemed a final order of the
commissioner, and the penalty shall be paid within five business
days.
(e) If a hearing is requested, the penalty shall be paid within
five business days after the effective date of any decision in the
case ordering payment to be made.
17409. (a) All moneys deposited in escrow to be delivered upon the
close of the escrow or upon any other contingency shall be deposited
and maintained in a noninterest-bearing demand or checking account in
a bank, a state or federal savings bank, or a state or federal
savings association or in a noninterest-bearing account subject to
immediate withdrawal in an industrial loan company insured by the
Federal Deposit Insurance Corporation and approved to receive those
moneys by the commissioner. Thereafter, these moneys may be deposited
in an interest-bearing account in a bank, a state or federal savings
bank, a state or federal savings association, an industrial loan
company approved to receive those moneys by the commissioner, or a
state or federal credit union, if the depositor is qualified for
membership under the bylaws of that credit union, and the moneys are
maintained separate, distinct, and apart from funds belonging to the
escrow agent. Those funds, when deposited, are to be designated as
"trust funds," "escrow accounts," or under some other appropriate
name indicating that the funds are not the funds of the escrow agent.
Upon request of the commissioner, a licensee shall furnish to the
commissioner an authorization for examination of financial records of
any trust funds or escrow accounts, maintained in a financial
institution, in accordance with the procedures set forth in Section
7473 of the Government Code.
(b) A licensee engaged in the business of receiving escrows for
deposit or delivery of the types specified in subdivision (c) of
Section 17312 and of the types not specified therein shall maintain
separate escrow trust accounts, for both types of escrow business in
the same manner as provided in subdivision (a) of this section and
Sections 17409.1, 17410, 17411, and 17411.1.
(c) Any agreement with a financial institution to establish a
trust account pursuant to this section shall be accompanied by a
letter from the licensee authorizing and requesting that the
financial institution immediately notify the commissioner and
Fidelity Corporation, in either electronic or paper form, when it
becomes aware of either of the following:
(1) The closure of any account subject to this section, other than
to transfer the funds to another designated trust account at the
same financial institution in the name of the escrow agent or the
remittance of the funds to the Controller's office for escheat
purposes.
(2) The occurrence of any overdraft balance in an account subject
to this section.
This subdivision does not impose any duty or obligation on a
financial institution to Fidelity Corporation, members of Fidelity
Corporation, or the commissioner.
17409.1. (a) Each person subject to this chapter shall maintain
separate escrow trust accounts for each licensed location. Transfers
between accounts are prohibited except by the actual writing of a
check from one escrow to the other, and by depositing the check for
the account of, and the writing of a receipt for the escrow to which
the funds are being transferred. Each transfer shall be properly
supported and documented in escrow files by inclusion of escrow
instructions executed by the principals authorizing the transfer.
(b) With regard to Internet escrow companies, transfers to trust
accounts by commercial banks and from operating accounts to cover
losses may be made through wire transfer. Receipts for all these
transactions may be maintained in electronic form.
17410. (a) Escrow or trust funds are not subject to enforcement of
a money judgment arising out of any claim against the licensee or
person acting as escrow agent, and in no instance shall such escrow
or trust funds be considered or treated as an asset of the licensee
or person performing the functions of an escrow agent.
(b) Interest paid or payable on funds deposited in escrow by a
licensee are not subject to enforcement of a money judgment arising
out of any claim against the licensee or person acting as escrow
agent.
17411. No person shall knowingly keep or cause to be kept any funds
or money in any bank or state or federal savings and loan
association under the heading of "trust funds" or "escrow accounts"
or any other name designating such funds or money as belonging to the
clients of any escrow agency, except actual escrow or trust funds
deposited with such agency.
17411.1. "Trust funds" or "escrow accounts" as used in Sections
17409, 17410, and 17411 shall include all funds required to be held
by an escrow agent pursuant to a federal or state law, or requirement
of a governmental agency.
17414. (a) It is a violation for any person subject to this
division or any director, stockholder, trustee, officer, agent, or
employee of any such person to do any of the following:
(1) Knowingly or recklessly disburse or cause the disbursal of
escrow funds otherwise than in accordance with escrow instructions,
or knowingly or recklessly to direct, participate in, or aid or abet
in a material way, any activity which constitutes theft or fraud in
connection with any escrow transaction.
(2) Knowingly or recklessly make or cause to be made any
misstatement or omission to state a material fact, orally or in
writing, in escrow books, accounts, files, reports, exhibits,
statements, or any other document pertaining to an escrow or escrow
affairs.
(b) Any director, officer, stockholder, trustee, employee, or
agent of an escrow agent, who abstracts or willfully misappropriates
money, funds, trust obligations or property deposited with an escrow
agent, is guilty of a felony. Upon conviction, of an offense under
this section or similar offenses specified in Chapter 4 (commencing
with Section 470), Chapter 5 (commencing with Section 484), or
Chapter 6 (commencing with Section 503) of Title 13 of Part 1 of the
Penal Code, the court shall, in addition to any other punishment
imposed, order the person to make full restitution, first to the
escrow agent and then to Fidelity Corporation, to the extent it has
indemnified the escrow agent. Nothing in this section shall be deemed
or construed to repeal, amend, or impair any existing provision of
law prescribing a punishment for such an offense.
(c) Any person subject to this division who knows of a person's
involvement in an abstraction or misappropriation of money, funds,
trust obligations, or property deposited with a licensed escrow agent
shall immediately report the abstraction or misappropriation in
writing to the commissioner and to Fidelity Corporation. No person
shall be civilly liable for reporting as required under this
subdivision, unless the information provided in the report is false
and the person providing false information does so with knowledge and
malice. The reports filed under this section, including the identity
of the person making the filing, shall remain confidential pursuant
to state law.
17414.1. (a) Any person who has been convicted of or pleaded nolo
contendere to any crime specified in subdivision (b) within the past
10 years, or has been held liable in any civil action by final
judgment or any administrative judgment by any public agency within
the past seven years, of any of the provisions specified in
subdivision (b), shall not serve in any capacity as an officer,
director, stockholder, trustee, agent, or employee of an escrow
agent, or in any position involving any duties with an escrow agent,
in this state. This subdivision shall not apply to any person whose
office, employment, ownership interest, or other participation in the
business of a licensed escrow agent commenced prior to January 1,
1992.
(b) Subdivision (a) applies to criminal convictions of, pleas of
nolo contendere to, or civil or administrative judgments entered for
offenses including the following:
(1) Offenses specified in Chapter 18 (commencing with Section
3350) of Division 1.
(2) Offenses specified in Article 4 (commencing with Section 5300)
of Chapter 1 of Division 2.
(3) Offenses specified in Article 8 (commencing with Section
14750) of Chapter 4 of Division 5.
(4) Offenses specified in Chapter 3 (commencing with Section
17400), and Chapter 7 (commencing with Section 17700) of Division 6.
(5) Offenses specified in Chapter 6 (commencing with Section
18435) of Division 7.
(6) Offenses specified in provisions of the laws of the United
States added or amended by the federal Financial Institutions Reform,
Recovery and Enforcement Act of 1989 (Public Law 101-73).
(7) Offenses involving robbery, burglary, theft, embezzlement,
fraud, fraudulent conversion or misappropriation of property,
forgery, bookmaking, receiving stolen property, counterfeiting,
controlled substances, extortion, checks, credit cards, or computer
violations specified in Section 502 of the Penal Code.
For the purpose of this section, but not Section 17423, an offense
does not include a conviction for which the person has obtained a
certificate of rehabilitation from a court of competent jurisdiction
under Section 1203.4 or 4852.13 of the Penal Code or a similar
certificate of rehabilitation obtained in a foreign jurisdiction.
(c) On and after January 1, 1992, any person who seeks employment
by, or an ownership interest in, or other participation in the
business of a licensed escrow agent shall, as a condition to
obtaining that employment, interest, or participation, authorize
Fidelity Corporation and the commissioner, or both, to have access to
that person's state and federal summary criminal history
information, as defined in Section 11105 of the Penal Code, for
purposes of determining whether the person has a prior conviction of,
or pleaded nolo contendere to, a criminal offense specified in
subdivision (b).
(d) On or before the 10th day of employment, each escrow agent
shall obtain and forward to the commissioner the fingerprint images
and related information of persons seeking employment by an escrow
agent. The fingerprint images and related information may be
submitted by certified mail, return receipt requested, or transmitted
electronically, using the process established by the Department of
Justice for requesting state and federal summary criminal history
information. Persons who have previously submitted fingerprints or
fingerprint images and related information to the commissioner may so
notify the commissioner and need not submit additional fingerprint
images and related information unless requested to do so by the
commissioner. The commissioner shall provide written notice to both
the escrow agent and to the person if any of the information received
pursuant to this division shows that the person's employment would
be in violation of Section 17414.1, and the escrow agent shall deny
the person the employment. No person whose employment is in violation
of subdivision (a) shall have access to trust funds or sign checks
or otherwise perform any activities related to the processing of
escrow transactions after the licensed escrow agent has been notified
by the commissioner that the person's employment is in violation of
subdivision (a).
(e) Any state and federal summary criminal history information
obtained pursuant to this section shall be kept confidential and no
recipient shall disclose the contents other than for the purpose of
determining eligibility for employment by, or acquisition of an
ownership interest in, or other participation in the business of a
licensed escrow agent.
(f) The authority granted by this section to the commissioner or
to Fidelity Corporation shall be in addition to any other authority
granted by law to obtain information about any person who is subject
to this division. Nothing in this section shall be construed to limit
any authority of the commissioner or Fidelity Corporation otherwise
provided by law.
(g) Any person who knowingly violates subdivision (a) or (d),
including, but not limited to, any escrow agent who permits
employment by, or an ownership interest in, or other participation in
the business of an escrow agent in violation of subdivision (a) or
(d) shall, upon conviction, be subject to punishment as set forth in
Section 17700. Any person who knows of a violation of subdivision (a)
or (d) shall immediately report the violation in writing to the
commissioner. No person shall be civilly liable for reporting as
required under this subdivision, unless the information provided in
the report is false and the person providing false information does
so with knowledge and malice. The reports filed under this section,
including the identity of the person making the filing, shall remain
confidential pursuant to state law.
(h) Nothing in this section shall be construed to permit the
reinstatement of any person barred by the commissioner pursuant to
Section 17423 nor to prohibit the commissioner from bringing any
action pursuant to Section 17423.
(i) If any provision of this section or the application thereof to
any person or circumstances is held invalid, that invalidity shall
not affect other provisions or applications of this section which can
be given effect without the invalid provision or application, and to
this end the provisions of this section are severable.
17414.2. (a) In response to any written request by an escrow agent
or by Fidelity Corporation, any bank, savings association, credit
union, any other financial institution, or any other exempt person
specified in Section 17006, an escrow agent or Fidelity Corporation
may provide a written employment reference that advises of the person'
s involvement in a crime or act specified in Section 17414 or
subdivision (b) of Section 17414.1, or any theft, embezzlement,
misappropriation, or other defalcation which has been reported to
federal authorities pursuant to federal banking guidelines, or that
has been reported to the commissioner or Fidelity Corporation,
pursuant to this division. In order for the immunity provided in
subdivision (b) to apply, a copy of the written employment reference
shall be sent concurrently by the Fidelity Corporation, person,
entity, escrow agent, bank, savings association, credit union, any
other financial institution, or exempt person specified in Section
17006 providing the reference, to the last known address of the
person concerning whom the reference is provided.
(b) No licensed escrow agent, bank, savings association, credit
union, any other financial institution, exempt person specified in
Section 17006, or Fidelity Corporation shall be civilly liable for
providing an employment reference as specified in subdivision (a),
unless the information provided is false and the licensed escrow
agent, bank, savings association, credit union, any other financial
institution, or exempt person specified in Section 17006, or Fidelity
Corporation providing false information does so with knowledge and
malice.
17415. (a) If the commissioner, as a result of any examination or
from any report made to him or her, shall find that any person
subject to this division is in an insolvent condition, is conducting
escrow business in such an unsafe or injurious manner as to render
further operations hazardous to the public or to customers, has
failed to comply with the provisions of Section 17212.1 or 17414.1,
has permitted its tangible net worth to be lower than the minimum
required by law, has failed to maintain its liquid assets in excess
of current liabilities as set forth in Section 17210, or has failed
to comply with the bonding requirements of Chapter 2 (commencing with
Section 17200) of this division, the commissioner may, by an order
addressed to and served by registered or certified mail or by
personal service on such person and on any other person having in his
or her possession or control any escrowed funds, trust funds or
other property deposited in escrow with said person, direct
discontinuance of the disbursement of trust funds by the parties or
any of them, the receipt of trust funds, the delivery or recording of
documents received in escrow, or other business operations. No
person having in his or her possession any of these funds or
documents shall be liable for failure to comply with the order unless
he or she has received written notice of the order. Subject to
subdivision (b), the order shall remain in effect until set aside by
the commissioner in whole or in part, the person is the subject of an
order for relief in bankruptcy, or pursuant to Chapter 6 (commencing
with Section 17621) of this division the commissioner has assumed
possession of the escrow agent.
(b) Within 15 days from the date of an order pursuant to
subdivision (a), the person may request a hearing under the
Administrative Procedure Act, Chapter 5 (commencing with Section
11500) of Division 3 of Title 2 of the Government Code. Upon receipt
of a request, the matter shall be set for hearing to commence within
30 days after such receipt unless the person subject to this division
consents to a later date. If no hearing is requested within 15 days
after the mailing or service of such notice and none is ordered by
the commissioner, the failure to request a hearing shall constitute a
waiver of the right to a hearing. Neither the request for a hearing
nor the hearing itself shall stay the order issued by the
commissioner under subdivision (a).
17416. Whenever in the opinion of the commissioner any person,
except as named in Section 17006, is engaged, either actually or
through subterfuge, in the business of receiving escrows for deposit
or delivery as defined in this division, without a license from the
commissioner the commissioner may order that person to desist and to
refrain from engaging in that business. If, within 30 days after such
an order is served, a request for a hearing is filed in writing and
the hearing is not held within 60 days thereafter, the order is
rescinded.
17419. On and after January 1, 1992, any person seeking employment
with an escrow agent shall complete an employment application on or
before the first day of employment which includes, at least, the
following information. A copy of the employment application shall be
forwarded to the commissioner on or before the first day of the
applicant's employment. Persons required to file a statement of
identity and questionnaire pursuant to subdivision (g) of Section
17209 or Section 17212.1 are not required to file the employment
application set forth in this section. Each person completing the
employment application shall be given the notice required by the
Information Practices Act (Section 1798.17 of the Civil Code), copies
of which may be obtained from the commissioner. Nothing in this
section shall limit an escrow agent from requesting additional
information from an applicant.
STATEMENT OF
IDENTITY
AND EMPLOYMENT APPLICATION
Name of Escrow Company:__________________________
Escrow Agent License Number:_____________________
1. Exact Full
Name:
_________________________________________________
(Please Print or Type) First Name Middle Name
Last Name
(Do not use initials or nicknames)
Title of position to be filled in connection
with the preparation of this employment
application.
_________________________________________________
2. Employment for the
last 10 years:
Employer Occupation and
From To Name and Duties
Address
Present
NOTE: Attach separate
schedule if space is not
adequate.
3. Residence addresses
for the last 10
years:
From To Street City State
Present
NOTE: Attach separate
schedule if space is not
adequate.
4. Have you ever been named in any order,
judgment, or decree of any court or any
governmental agency or administrator,
temporarily or permanently restraining or
enjoining you from engaging in or continuing any
conduct, practice, or employment?
( ) Yes ( ) No
If the answer is "Yes," please complete the
following:
Date of Suit:_____________________________________
Location of Court (City, County, State):__________
Nature of Suit:___________________________________
Note: Attach a certified copy of any order,
judgment, or decree.
5. Have you ever been refused a license to
engage in any business in this state or any
other state, or has any such license ever been
suspended or revoked?
( ) Yes ( ) No
If the answer is "Yes," please complete the
following:
State:_____________________________ Title of State
Department:_______________________________________
Nature of License and
Number:___________________________________________
Note: Attach a certified copy of any order,
judgment, or decree.
6. Have you ever been convicted of or pleaded
nolo contendere to a crime other than minor
traffic citations that do not constitute a
misdemeanor or felony offense?
NOTE: A conviction is a plea or verdict of
guilty or a conviction following a plea of
nolo contendere. A conviction also includes
an order granting probation and suspending
the imposition of sentence, notwithstanding
a subsequent order pursuant to Section
1203.4 or 1203.4a of the Penal Code
permitting the person to withdraw his or her
plea of guilty, or dismissing the
accusation, information, or indictment.
( ) Yes ( ) No
If the answer is "Yes," please complete the
following:
Date of Case:_____________________________________
Location of Court (City, County, State):__________
Nature of Case:___________________________________
Note: Attach a certified copy of any order,
judgment, or decree.
7. Have you ever been a defendant in a civil
court action other than divorce, condemnation,
or personal injury?
( ) Yes ( ) No
If the answer is "Yes," please
complete the following:
Date of Suit:_____________________________________
Location of Court (City, County, State):__________
Nature of Suit:___________________________________
Note: Attach a certified copy of any order,
judgment, or decree.
8. Have you ever changed your name or ever been
known by any name other than that herein
listed?
(Including a woman's maiden name)
( ) Yes ( ) No
If so, explain. Change in name through marriage
or court order should also be listed.
EXACT DATE OF EACH NAME CHANGE MUST BE
LISTED.
__________________________________________________
__________________________________________________
9. Have you ever done business under a
fictitious firm name either as an individual or
in the partnership or corporate form?
( ) Yes ( ) No
If the answer is "Yes," set forth particulars:
___________________________________________________
___________________________________________________
10. Have you ever been a subject of a bankruptcy
or a petition in bankruptcy?
( ) Yes ( ) No
If the answer is "Yes," give date, title of case,
location of bankruptcy filing:
__________________________________________________
__________________________________________________
__________________________________________________
11. Have you ever been refused a bond, or have
you ever had a bond revoked or canceled?
( ) Yes ( ) No
If the answer is "Yes," give details:
__________________________________________________
__________________________________________________
12.In what capacity will you be employed?_________
(e.g., Clerk, Escrow Officer,
Receptionist, etc.)
13. Do you expect to be a party to, or broker or
salesperson in connection with escrows
conducted by the escrow company which is
employing you?
( ) Yes ( ) No
If the answer is "Yes," please
explain:
___________________________________________________
___________________________________________________
___________________________________________________
NOTE: Attach separate schedule if space is not
adequate.
VERIFICATION
I, the undersigned, state that I am the
person named in the foregoing Statement of
Identity and Employment Application; that I have
read and signed the Statement of Identity and
Employment Application and know the contents
thereof, including all exhibits attached
thereto, and that the statements made therein,
including any exhibits attached thereto, are
true.
Any person who knows or should have known of a
violation of this section shall immediately
report the violation in writing to the
commissioner.
I certify/declare under
penalty of perjury under
the laws of the State of
California that the
foregoing is true and
correct.
Executed at______________
(City)
_________________________
(County) (State)
this_______day of , 20__.
_________________________
(Signature of Declarant)
17420. Except for the normal compensation of his own employees, it
shall be a violation of this division for any person subject to this
division to pay over to any other person any commission, fee, or
other consideration as compensation for referring, soliciting,
handling, or servicing escrow customers or accounts.
It shall also be a violation for any person to enter into any
arrangement, either of his own making or of a subsidiary nature, or
through any other person having a dual capacity, or through any
person having a direct or indirect interest in the escrow, or other
device permitting any fee, commission, or compensation which is
contingent upon the performance of any act, condition, or instruction
set forth in an escrow to be drawn or paid, either in whole or in
part, or in kind or its equivalent, prior to the actual closing and
completion of the escrow.
17421. Notwithstanding the provisions of Section 17420, a
disbursal, other than for a fee, commission or compensation may be
advanced or paid out prior to the close of an escrow if the written
instructions of all parties to the transaction so provide.
17421.5. (a) Notwithstanding Section 17420, a licensee may charge a
fee for administering an escrow that has been postponed for at least
two months from the most recent closing date agreed upon by the
parties in the written instructions or has been canceled if all of
the following requirements are met:
(1) The postponement or cancellation resulted from the acts or
omissions of the parties to the escrow transaction.
(2) The fee was disclosed in the written instructions in not less
than 8-point bold type on the face or front page of the instructions.
(3) The principal parties to the escrow transaction have executed
the written fee instructions by initialing those instructions.
(b) This section shall apply to written instructions made on and
after January 1, 2008.
17422. A joint control agent, unless acting pursuant to written
instructions of his principals, shall not disburse funds for the
payment of the cost of labor, materials, services, permits, fees, or
other items of expense incurred in the construction of improvements
upon real property until such time as he determines that the person
furnishing such labor, materials, services, permits, fees, or other
items has substantially complied with the specifications contained in
the control agreement.
17423. (a) The commissioner may, after appropriate notice and
opportunity for hearing, by order, censure or suspend for a period
not exceeding 12 months, or bar from any position of employment,
management, or control any escrow agent, or any other person, if the
commissioner finds either of the following:
(1) That the censure, suspension, or bar is in the public interest
and that the person has committed or caused a violation of this
division or rule or order of the commissioner, which violation was
either known or should have been known by the person committing or
causing it or has caused material damage to the escrow agent or to
the public.
(2) That the person has been convicted of or pleaded nolo
contendere to any crime, or has been held liable in any civil action
by final judgment, or any administrative judgment by any public
agency, if that crime or civil or administrative judgment involved
any offense specified in subdivision (b) of Section 17414.1, or any
other offense reasonably related to the qualifications, functions, or
duties of a person engaged in the business in accordance with the
provisions of this division.
(b) Within 15 days from the date of a notice of intention to issue
an order pursuant to subdivision (a), the person may request a
hearing under the Administrative Procedure Act (Chapter 5 (commencing
with Section 11500) of Division 3 of Title 2 of the Government
Code). Upon receipt of a request, the matter shall be set for hearing
to commence within 30 days after such receipt unless the person
subject to this division consents to a later date. If no hearing is
requested within 15 days after the mailing or service of such notice
and none is ordered by the commissioner, the failure to request a
hearing shall constitute a waiver of the right to a hearing.
(c) Upon receipt of a notice of intention to issue an order
pursuant to this section, the person who is the subject of the
proposed order is immediately prohibited from engaging in any escrow
processing activities, including disbursing any trust funds in the
escrow agent's possession, custody or control, and the financial
institution holding trust funds shall be so notified by service of
the notice, accusation and other administrative pleadings. The
prohibition against disbursement of trust funds may be set aside, in
whole or in part, by the commissioner for good cause.
(d) Fidelity Corporation shall disclose to all licensees the
identity of persons who have been censured, suspended, or barred from
any position of employment, management, or control.
(e) Persons suspended or barred under this section are prohibited
from participating in any business activity of a licensed escrow
agent and from engaging in any business activity on the premises
where a licensed escrow agent is conducting escrow business. This
subdivision shall not be construed to prohibit suspended or barred
persons from having their personal escrow transactions processed by a
licensed escrow agent.
(f) This section shall apply to any violation, conviction, plea,
or judgment occurring at any time prior to and after the enactment of
this section.
(g) The provisions of Section 17414.1 exempting convictions for
which a person has obtained a certificate of rehabilitation from the
prohibition against serving as an officer, director, stockholder,
trustee, agent, or employee of an escrow agent, or in any position
involving any duties with an escrow agent, shall not apply to permit
the reinstatement of any person barred by the commissioner pursuant
to this section, nor to prohibit the commissioner from bringing any
action pursuant to this section.
(h) If any provision of this section or the application thereof to
any person or circumstances is held invalid, that invalidity shall
not affect other provisions or applications of this section which can
be given effect without the invalid provision or application, and to
this end the provisions of this section are severable.
17423.1. (a) (1) Whenever the commissioner takes any enforcement or
disciplinary action pursuant to Section 17423, upon the action
becoming final the commissioner shall notify the Real Estate
Commissioner and the Insurance Commissioner of the action or actions
taken. The purpose of this notification is to alert the departments
that enforcement or disciplinary action has been taken, if the person
seeks or obtains employment with entities regulated by the
departments.
(2) The commissioner shall provide the Real Estate Commissioner
and the Insurance Commissioner, in addition to the notification of
the action taken, with a copy of the written accusation, statement of
issues, or order issued or filed in the matter and, at the request
of the Real Estate Commissioner or Insurance Commissioner, with any
underlying factual material relevant to the enforcement or
disciplinary action. Any confidential information provided by the
commissioner to the Insurance Commissioner or the Real Estate
Commissioner shall not be made public pursuant to this section.
Notwithstanding any other provision of law, the disclosure of any
underlying factual material to the Insurance Commissioner or the Real
Estate Commissioner shall not operate as a waiver of confidentiality
or any privilege that the commissioner may assert.
(b) The commissioner shall establish and maintain, on the Web site
maintained by the Department of Corporations, a separate and readily
identifiable database of all persons who have been subject to any
enforcement or disciplinary action that triggers the notification
requirements of this section. The database shall also contain a
direct link to the databases, described in Section 10176.1 of the
Business and Professions Code and Section 12414.31 of the Insurance
Code and required to be maintained on the Web sites of the Department
of Real Estate and the Department of Insurance, respectively, of
persons who have been subject to enforcement or disciplinary action
for malfeasance or misconduct related to the escrow industry by the
Insurance Commissioner and the Real Estate Commissioner.
(c) There shall be no liability on the part of, and no cause of
action of any nature shall arise against, the State of California,
the Department of Corporations, the Commissioner of Corporations, any
other state agency, or any officer, agent, employee, consultant, or
contractor of the state, for the release of any false or unauthorized
information pursuant to this section, unless the release of that
information was done with knowledge and malice, or for the failure to
release any information pursuant to this section.
17424. (a) For any licensee, a disciplinary action taken by the
State of California, another state, an agency of the federal
government, or another country for an action substantially related to
the activity regulated under this division may be grounds for
disciplinary action by the commissioner. A certified copy of the
record of the disciplinary action taken against the licensee by the
State of California, other state, agency of the federal government,
or other country shall be conclusive evidence of the events related
therein.
(b) Nothing in this section shall preclude the commissioner from
applying a specific statutory provision in this division providing
for discipline against a licensee as a result of disciplinary action
taken against a licensee by the State of California, another state,
an agency of the federal government, or another country.
17425. Any person subject to this division or any director,
stockholder, trustee, officer, agent, or employee of that person who
violates any provision of the federal Real Estate Settlement
Procedures Act, as amended (12 U.S.C. Sec. 2601 et seq.), or any
regulation promulgated thereunder, violates this division.