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Another Foolish Inconsistency - This Time For Broker-Dealers

Yesterday's post chided Glass, Lewis & Co., LLC for its inconsistent positions on majority rule.  Today's post tackles a foolish inconsistency in the California Codes.  Section 25217(c) of the California Corporations Code provides:

A broker-dealer licensed under this chapter making loans to its customers which are subject to the provisions of Division 9 (commencing with Section 22000) of the Financial Code shall be licensed as a personal property broker under that division.

Now the initial problem with this provision is that Division 9 no longer provides for the licensing of personal property brokers.  The term "personal property broker" was at one time unique to California.  It described lenders who lent money on the security of chattel mortgages "or other contracts by which personal property is hypothecated as security for such loan and the use and possession thereof is not to be in the  lender".  In re Application of Stephan, 170 Cal. 48, 50, 148 P. 196, 196 (1915).  The term can still be found in California's constitution.  Cal. Const. Art. XV, § 1.

In 1994, the Legislature consolidated three of California's lending laws (the Personal Property Brokers Law, the Consumer Finance Lenders Law, and the Commercial Finance Lenders Law) into a unified law known as the "California Finance Lenders Law".  Cal. Fin. Code § 22000.  One might assume therefore that the reference to licensure as a personal property broker should now be understood to refer to licensure as a lender under the CFLL.  The CFLL, however, provides:

This division [i.e., the CFLL] does not apply to a broker-dealer acting pursuant to a certificate then in effect and issued pursuant to Section 25211 of the Corporations Code.

Sections 22050(d) and 25217(c) are contradictory – the former exempting broker-dealers from the CFLL and the latter requiring broker-dealers to be licensed under the CFLL.  When two statutes are in conflict, California courts generally give the more specific statute precedence over the more general statute.  Here, however, both statutes would seem to be equally specific.  California courts also apply a rule of statutory construction that later enacted statutes take precedence over earlier enacted statutes.  Under this rule, Section 22050(d) would take precedence because it was enacted in 1994, well after the enactment of Section 25217(c) in 1973.

 

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broker-dealer, Broker-Dealers, Cal. Const. Art. XV, Finance Lender, Finance Lenders, Finance Lenders Law, In re Stephan, personal property broker, Section 22050, Section 25217

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