(1) Existing law, the Franchise Investment Law, generally provides for the regulation of the offer and sale of franchises and requires the Commissioner of Financial Protection and Innovation to maintain a risk-based process of reviewing franchise applications with emphasis on risks associated with the franchisor’s financial condition, the franchisor’s compliance record, and significant deficiencies with the franchisor’s application. Existing law requires certain written disclosures under that law to be signed and verified, under penalty of perjury.

Existing law makes it unlawful for a person to effect or attempt to effect a sale of a franchise in this state unless the person meets certain criteria, including being identified in Item 2 of a franchise disclosure document submitted with an application or amended application filed with the commissioner, as specified.

This bill would remove the above-described specific reference to Item 2 of a franchise disclosure document.

Existing law creates an exception to this unlawful franchise sale provision for specified transactions that are separately identified as exemptions under the Franchise Investment Law. These exemptions extend to transactions for which a franchisor complies with certain minimum net worth, experience, disclosure, and notice filing requirements.

This bill would recast that provision to, instead, specify that it does not apply to those exempt transactions, unless the person effecting or attempting to effect the sale of a franchise in this state is a franchise broker. The bill would make other related changes. By expanding the crime of perjury, the bill would impose a state-mandated local program.

(2) The State Assistance Fund for Enterprise Act of 1989 authorizes the creation of a nonprofit corporation called the State Assistance Fund for Enterprise, Business and Industrial Development Corporation for the general purpose of enhancing the availability of financial assistance for small businesses in California. The act requires the State Controller to establish a separate account in the General Fund entitled the State Enterprise Loan Fund, which is continuously appropriated for purposes of the act.

This bill would repeal that act.

(3) Existing law specifies the types of securities that are eligible for the investment of surplus state funds, which include, among other things, bonds, notes, or other obligations of a local government of this state. Existing law requires those local bonds, notes, or other obligations to be within the top 3 ratings of a nationally recognized statistical rating organization.

Existing law also provides that an eligible security for the investment of surplus state funds includes bonds, debentures, and notes issued by corporations organized and operating with the United States and requires that those securities be within the top 3 ratings of a nationally recognized statistical rating organization.

This bill would instead require those local bonds, notes, or other obligations and corporate bonds, debentures, and notes to be rated in a rating category of “A” or its equivalent or better by such an organization to be eligible for investment.

Existing law provides that an eligible security for the investment of surplus state funds includes bonds, notes, warrants, and other securities not in default that are the direct obligations of the government of a foreign country, as described, if the securities are rated investment grade, or its equivalent or better, by a nationally recognized statistical rating organization.

This bill would instead require the securities to be rated in a rating category of “AA” or its equivalent or better.

Existing law provides that an eligible security for the investment of surplus state funds includes commercial paper of “prime” quality, as defined by a nationally recognized statistical rating organization that rates these securities, that also meets certain conditions. Under existing law, those conditions include, among other things, that the paper not exceed 270 days maturity and, at the request of the Pooled Money Investment Board, is secured by the issuer by depositing with the Treasurer certain authorized securities of a market value at least 10% in excess of the amount of the state’s investment (authorized securities condition).

This bill would instead require that the paper be of “prime” quality of the highest ranking or of the highest letter and number rating, as defined by a statistical rating organization, and not exceed 397 days maturity. The bill would also remove the authorized securities condition. The bill would also make nonsubstantive changes.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.