Recently, I've been writing about Section 25501.5 of the California Corporations Code, which was added to the Corporate Securities Law of 1968 by AB 2167 (Correa). That wasn't the only statutory change effected by AB 2167, however. AB 2167 also amended California Code of Civil Procedure § 1029.8 and that amendment should be of particular interest to unregistered broker-dealers and investment advisers in California.
Section 1029.8 provides that a person who causes injury or damage to another person as a result of providing goods or performing services for which a license is required by specified statutes "shall be liable to the injured person for treble the amount of damages assessed in a civil action in any court having proper jurisdiction". (Note the use of the word "shall" in the statute.) The statute further provides that the court "may, in its discretion, award all costs and attorney's fees to the injured person if that person prevails in the action". AB 2167 added references to the broker-dealer and investment adviser registration provisions of the Corporate Securities Law of 1968, thereby subjecting unlicensed broker-dealers and investment advisers to liability for treble damages and attorneys' fees.
There are several ameliorative provision in the statute. First, the amount of the treble additional damages may not exceed $10,000. CCP § 1029.8(c). Second, the statute makes it clear that it must not be construed to confer an additional cause of action (but it also may not be construed to affect or limit any other remedy, including,but not limited to, a claim for exemplary damages). CCP § 1029.8(b). Third, the statute provides some relief for inadvertent and lapsed licensees. CCP § 1029.8(d). Fourth, the statute includes an exception for actions against an unlicensed person for unfair trade practices (under the Business & Professions Code) by a a person who holds a license that is required, or closely related to the license that is required, to engage in the unlicensed person's activities. CCP § 1029.8(e).
