Last week, the California Attorney General filed this 89 count criminal complaint against three individuals.  The complaint alleges that these individuals offered and sold securities without qualification under the Corporate Securities Law of 1968.  An interesting aspect of this cases is that it involved the alleged offer and sale of securities in the form of loans. 

According to the Attorney General's press release, this prosecution resulted from a referral by the Department of Corporations.  The Commissioner of Corporations has only civil enforcement authority.  However, Corporations Code Section 25533 expressly authorizes the Commissioner to make referrals to the Attorney General or District Attorney.  The same statute authorizes the Commissioner and his or her counsel, deputies or assistants to assist at trial.  Also, the Commissioner is required to send a copy of any desist and refrain order issued under the CSL to the Attorney General and the local District Attorney.  Cal. Corp. Code § 25533.5. 

Although it remains to be seen whether these defendants will be convicted, the Attorney General's complaint is a useful reminder of several points.  First, violations of the CSL can and do result in criminal prosecutions.  Second, criminal prosecutions may result from civil investigations by the Department of Corporations.  Finally, loans and notes may constitute a "security" under the CSL.