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Domicile And The CSL

The qualification requirement of the California Corporate Securities Law of 1968 applies to offers and sales of securities in this state.  Cal. Corp. Code § 25110.  An offer or sale is made "in this state" if any one or more of the following events occurs in California:

  • An offer to sell is made in California,
  • An offer to buy is accepted in this state, or
  • If both the seller and the purchaser are domiciled in this state, the security is delivered to the purchaser in this state.

Cal. Corp. Code § 25008.  The statute goes on to detail when an offer sell is made in California and when an offer to buy is accepted here.  None of these provisions refers to the residency or citizenship of the seller or purchaser.  The last, however, does refer to "domicile".  

The legislature has not defined "domicile" for purposes of the CSL.  The word is derived from the Latin word domus meaning "house".  It is often used as a synonym for "residence", a word derived from the Latin word sedere, meaning "to sit".  It is generally understood that one can have many residences but only one domicile.  

Applying the above, California's qualification requirement will not apply when a seller with a residence in California makes an offer to sell a security that is accepted by a buyer who also has a California residence, provided (i) the offer to sell is not made in California; (ii) the offer to buy is not accepted in California; and (iii) both seller and buyer are not domiciled in California.  However, if both the seller and buyer are domiciled in California, delivery of the security to the buyer in California would subject the transaction California's qualification requirement even though the offer to sell was made and the offer to buy was accepted outside of the state.

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