The California Corporate Securities Law of 1968 currently exempts from qualification any security of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association.  Cal. Corp. Code § 25100(j).  There are two significant exceptions to this exemption.  First, the exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.  Second, the exemption does not extend to evidences of indebtedness, whether interest bearing or not.

Assemblymember Cheryl Brown has introduced a bill, AB 2751, that would eliminate the second exception.  The Commissioner of Business Oversight has adopted a number of standards with respect to an application of a church for a permit to sell debt securities in a limited offering pursuant to Section 25113 of the Corporations Code.  10 CCR §§ 260.140.72 - 72.6.  An offering of church debt securities to the general public are subject to the standards generally applicable to public offerings of debt securities.  These standards would become moot if AB 2751 is enacted.

The bill has not yet been referred to a policy committee and it remains to be seen who will support or oppose the change.