May 2018

March 14, 2016 – Los Angeles’ Proposition D precludes the usage of an application to arrange for the delivery of medical marijuana by vehicle, and bans except in very limited circumstances the vehicle delivery of marijuana to patients.

California Finance Lender (CFL) Can Sell Loans to Non-Institutional Investors

In Montgomery v. GCFS, Inc., (June 12, 2015), the Court of Appeal of the State of California, First Appellate District, Division 5, upheld the trial court’s sustaining demurrers from a borrower who tried to evade repayment of a loan because the CFL licensee had sold the loan to a third-party who was not an ‘institutional investor.’  In its decision, the Court of Appeal made clear that Financial Code Section 22340 allows a CFL to sell loans to ‘institutional investors’ but does not prohibit a CFL from selling loans to non-institutional investors.

May 27, 2015 – SEC Approves Amendments to Arbitration Codes to Revise the Definitions of Non-Public and Public Arbitrator (Regulatory Notice 15-18)

ffective June 26, 2015, the SEC approved amendments to the definitions of non-public arbitrator and public arbitrator in the Customer and Industry Codes of Arbitration Procedure. The amended definitions provide, among other matters, that persons who worked in the financial industry for any duration during their careers will always be classified as non-public arbitrators, and persons who represent investors or the financial industry as a significant part of their business will also be classified as non-public, but may become public arbitrators after a cooling-off period. The amendments also reorganize the definitions to make them easier for arbitrator applicants and parties, among others, to determine the correct arbitrator classification.

May 13, 2015 – The National Adjudicatory Council (NAC) Revises the Sanction Guidelines Related to Misrepresentations and Suitability effective immediately

The NAC has revised the Sanction Guidelines related to misrepresentations and suitability. Specifically, the revisions:

• modify the guidelines related to fraud to advise adjudicators to strongly consider barring an individual respondent for intentional or reckless fraud, and expelling a firm where aggravating factors predominate the firm’s misconduct;
• modify the guidelines related to suitability to advise adjudicators to strongly consider barring an individual respondent where aggravating factors predominate the respondent’s misconduct and ordering expulsion of a firm in egregious cases;
• emphasize that FINRA’s disciplinary sanctions should be designed to protect the investing public by deterring misconduct and upholding high standards of business conduct;
• reiterate FINRA’s longstanding position that sanctions in disciplinary cases should be more severe for recidivists;
• index the high-end of the monetary sanctions to the Consumer Price Index starting from 1998; and
• reflect the new FINRA rule numbers for rules that have been adopted into the consolidated FINRA rulebook.

April 28, 2015 – The Sixth Appellate District of California found that plaintiff Cypress Semiconductor was liable for the attorney’s fees of defendant Maxim Integrated Products, Inc. under the Uniform Trade Secrets Act (California Civil Code Section 3426 et seq.) because its claim that Maxim’s hiring of its former employees constituted a bad faith claim for misappropriation of trade secrets.  In the decision, the court makes clear that a business is entitled to recruit the employees of a competitor in California.

February, 2015 Nickolay “Nick” Kotyrlo Appointed Deputy Commissioner for Broker Dealer/Investment Advisor Division at the California Department of Business Oversight

February 3, 2015, the Financial Industry Regulatory Authority (FINRA) issued a new report on cyber security, which details practices that firms can tailor to their business model as they strengthen their cyber security efforts.  The top 3 threats identified in the 2011 and 2014 surveys are:

1. hackers penetrating firm systems;
2. insiders compromising firm or client data; and
3. operational risks.

January, 2015 – The 2014 annual reports for Lenders and Brokers Licensed under the California Finance Lenders Law (CFLL), and licensees under the California Deferred Deposit Transaction Law (CDDTL) is due Mar. 15, 2015

January 6, 2015, FINRA notes that it observes shortcomings in five key areas of broker-dealer activity.

1. alignment of firms’ interests with those of their customers;
2. standards of ethical behavior;
3. development of strong supervisory and risk management systems;
4. development, marketing and sale of novel products and services; and
5. management of conflicts of interest.