Any financial institution doing business in this state, or any other person, that sells to the public at any retail branch office at which deposits are accepted, any security which is not a deposit, and which is not insured by an agency or instrumentality of the United States, or a private share insurance or guaranty arrangement, shall provide the customer a disclosure statement as defined in subdivision (a).
(a) For the purposes of this section:
Terms Used In California Financial Code 4981
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Person: includes any person, firm, partnership, association, corporation, company, limited liability company, syndicate, estate, trust, business trust, or organization of any kind. See California Education Code 18561
- Writing: includes any form of recorded message capable of comprehension by ordinary visual means. See California Education Code 18535
(1) “Disclosure statement” means, in addition to any other disclosure required by law, a disclosure in writing, in accordance with subdivision (b), provided to a customer each time the customer purchases securities from an employee or any other person in a retail branch office.
(2) “Financial institution” means a depository institution, the deposits of which are insured by a federal deposit insurance agency or instrumentality, or a private share insurance or guaranty arrangement, including, but not limited to, banks, savings banks, savings associations, credit unions, and industrial loan companies.
(3) “Security” means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, or any other security within the meaning of Section 25019 of the Corporations Code.
(4) “Public” means individuals and includes members of a credit union. “Public” does not include institutional investors as set forth in subdivision (i) of Section 25102 of the Corporations Code.
(5) “Retail branch office” means only that part of a financial institution’s premises open to the public for purposes of accepting insured deposits.
(6) “Deposit” includes shares of credit unions and investment certificates of industrial loan companies.
(b) Any disclosure statement provided pursuant to this section shall contain a sentence in at least 10-point bold type to the effect that: “I understand that the product or products I am purchasing or may purchase are not deposits and may not be insured by an agency or instrumentality of the United States such as the Federal Deposit Insurance Corporation (FDIC).” For credit unions, the disclosure statement provided pursuant to this section shall contain a sentence in at least 10-point bold type to the effect that: “I understand that the product or products I am purchasing or may purchase are not deposits and may not be insured by an agency of the United States such as National Credit Union Share Insurance Fund (NCUSIF), or a private share insurance or guaranty arrangement.” With respect to agreements for the purchase of securities executed by a customer at a retail branch office of the institution which accepts deposits, a customer shall be required to acknowledge in writing that he or she has received and read this statement.
(c) Notwithstanding the provisions of subdivision (b), in the case of account relationships opened, or securities sold, by telephone or electronic order, the requirements of this section are met if the disclosure statement is provided at the time the new account documents are sent to the customer.
(d) The provisions of this section shall not apply to sales of securities or contracts entered into for the purchase of securities prior to January 1, 1991.
(Added by Stats. 1990, Ch. 1545, Sec. 1.)