California Code of Regulations
Title 10 - Investment
Chapter 3 - Commissioner of Financial Protection and Innovation
Subchapter 2.3 - Capital Access Companies
Article 12 - Custody
Section 280.700 - Custody of Securities or Other Similar Investment-Contract

Universal Citation: 10 CA Code of Regs 280.700

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) No capital access company shall place or maintain any of its securities or similar investments in custody with any person outside the State of California.

(b) No capital access company shall place or maintain any of its securities or similar investments in the custody of any person, except pursuant to a written contract which shall have been approved, by a majority of the board of directors of such capital access company.

(c) The contract shall require that the securities and investments be maintained in accordance with the following:

(1) The securities and similar investments held in such custody shall at all times be individually segregated from the securities and investments of any other person and marked in such manner as to clearly identify them as the property of such capital access company both upon physical inspection thereof and upon examination of the books of the custodian;

(2) The custodian shall have no power or authority to assign, hypothecate, pledge or otherwise to dispose of any such securities and investments, except pursuant to the direction of capital access company and only for the account of such capital access company;

(3) Such securities and investments shall be subject to no lien or charge of any kind in favor of the custodian or any persons claiming through the custodian.

(4) Such securities and investments shall be verified by actual examination at the end of each annual fiscal period by an independent public accountant retained by the capital access company, and shall be examined by an accountant at least one time during each year on an unannounced basis. This unannounced examination must be conducted independent to the annual certified audit. A certificate of such accountant, stating that an examination of such securities has been made, and describing the nature and extent of the examination, shall be filed with the Commissioner within 45 days after each examination. If the accountant notes any material deficiencies during the examination, such deficiencies must immediately be reported to the Commissioner.

(5) Such securities and investments shall, at all times, be subject to inspection by the Commissioner through the Commissioner's employees or agents.

(d) A copy of any contract executed or ratified pursuant to subsection (b) of this section shall be transmitted to the Commissioner promptly after execution or ratification unless it has been previously transmitted.

(e) Any contract executed or ratified pursuant to subsection (b) of this section shall be ratified by the board of directors of the capital access company at least annually thereafter.

1. New article 12 (section 280.700) and section filed 6-24-99; operative 7-1-99 pursuant to Government Code section 11343.4(d) (Register 99, No. 26)

Note: Authority cited: Sections 28500 and 28951, Corporations Code. Reference: Section 28500, Corporations Code.

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