When a corporation distributes its own securities to its existing shareholders, there is no sale - correct?  Well, maybe not.
Corporations Code 25017(f) does exclude from the definition of "sale" any "stock dividend payable with respect to common stock of a corporation solely (except for cash or script paid for fractional shares) in shares of common stock, if the corporation has no other class of voting stock outstanding . . .".  This means that the following dividends are "sales" under the California Corporate Securities Law:

• A dividend of common stock when:
  • The corporation has another class of voting shares outstanding;
  • The dividend is made with respect to a class other than common stock;
  • The shareholder has the option of receiving cash in lieu of shares; and/or
  • The shareholder also receives some other property (e.g., another security) or cash (except for cash or script in lieu of fractional shares); or
• A dividend of a security other than common stock.

Note also that the exclusion is limited to corporations and does not include other entities.  When dealing with dividends, be sure to look at 10 CCR Sec. 260.017 which further defines "dividend" and when a stock dividend is payable "solely in shares of such common stock".  Notably, this rule excludes stock splits (as defined in 10 CCR Sec. 260.103.2) from the definition of a "dividend". 

The bottom line is that practitioners who are familiar with the approach of the Uniform Securities Act should not assume that California will afford the same treatment to dividends. (Older versions of the Uniform Securities Act exclude most dividends from the definition of sale while the 2002 version treats most dividends as exempt.)