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Enforcement Division — FAQ's: Top 10 Consumer Questions

  1. WHAT IS THE FUNCTION OF THE ENFORCEMENT DIVISION OF THE DEPARTMENT OF CORPORATIONS?

    The Enforcement Division acts as the investigative and litigation branch of the Department in any investigations or enforcement actions brought by the Department under one of the business regulatory statutes administered by the Department. The Enforcement Division also defends the State of California, the Department and its employees in any lawsuits brought against them.

  2. WHAT KINDS OF ACTIONS CAN THE DEPARTMENT BRING?

    The Enforcement Division can issue orders to stop unlicensed activity or to stop violations of the law by licensees or permittees of the Department. The Department can seek injunctions in those cases in which the violations are more serious and there is a need for court orders to stop ongoing violations of the law, appoint a receiver, order an accounting or restitution, or take other appropriate action. The Department can also refer the most serious fraud and theft violations to the District Attorney for prosecution and provide assistance as needed.

  3. WILL THE ENFORCEMENT DIVISION BE ABLE TO GET AN INVESTOR HIS OR HER MONEY BACK?

    The Enforcement Division's function is to investigate and bring actions to stop violations of the laws under the Department's jurisdiction. The Division does not act like a court of law and does not represent victims in getting their money back. Sometimes, the Division's actions result in the return of investor funds, and in other cases the Division may cooperate with private counsel for investors, but investors should primarily look to their own counsel or to a class action to get their money back.

  4. CAN YOU TELL THE PUBLIC IF YOU HAVE RECEIVED ANY COMPLAINTS AGAINST A PARTICULAR COMPANY OR THE INDIVIDUALS INVOLVED?

    If the Department has taken a public enforcement action or is aware of an enforcement action brought by another state or federal agency or a self-regulatory organization like the Financial Industry Regulatory Authority that can be disclosed to any member of the public. The Division's investigations are confidential, however, and investigative information, including whether complaints have been received and the nature of those complaints is not public information.

  5. WHAT TYPE OF INFORMATION IS AVAILABLE FROM THE DEPARTMENT'S FILES?

    The Department's public files include applications filed for any qualification, registration, order, permit, certificate, license or other authority, financial statements, reports, advertising and correspondence between the applicant and the Department directly relating thereto. Also included as public files are notices of hearings, accusations and statements of issues, proposed decisions of hearing officers and decisions of the Commissioner, releases, newsletters and interpretive opinions. Members of the public may call at 1-866-ASK CORP (1-866-275-2677) and request to check the Department's files on any company or individual. The Department's investigative files are considered confidential and will not be disclosed.

  6. WILL THE DEPARTMENT ASSIST A MEMBER OF THE PUBLIC IN DECIDING IF HE OR SHE SHOULD MAKE A PARTICULAR INVESTMENT?

    The Department cannot provide a member of the public with any legal or investment advice. The Department will be able to disclose what type of public information is available relating to the investment opportunity. A prospective investor should make sure that he or she reviews the information available at the Department and discusses the investment opportunity with a licensed professional.

  7. HOW DOES AN INVESTOR FIND OUT INFORMATION ABOUT A SECURITIES BROKER-DEALER OR AN AGENT?

    The Department of Corporations maintains a separate broker-dealer unit in the Securities Regulation Division. Members of the public can contact them and request the licensing status on a broker-dealer and can be provided with the Central Registration Depository (CRD) information on the broker-dealer or agent, including their work history and any disciplinary history. The CRD information may also be obtained from the Financial Industry Regulatory Authority, which also provides members of the public with the licensing and disciplinary information that is available.

  8. WHAT OTHER RESOURCES ARE AVAILABLE TO POTENTIAL INVESTORS TO ASSIST THEM IN DECIDING WHETHER THEY SHOULD INVEST?

    In addition to the Department of Corporations, they may wish to contact the California Department of Real Estate for real estate investments, the California Attorney General's Office or general corporate information, the California Secretary of State for information on officers and directors and whether the company is in good standing and the District Attorney to see if the companies or individuals have had actions brought against them.

    Also, they may check to see if any lawsuits have been filed against the persons they are thinking of doing business with. On the Federal level, they may contact the Securities and Exchange Commission, the Federal Trade Commission, the Commodity Futures Trading Commission, the National Futures Association and the Financial Industry Regulatory Authority, Inc.

    Also, their licensed financial or legal representative should be able to assist them in tracking down information. Potential investors should attempt to verify material representations made by the promoter in the offering materials and get the answers to the questions they may have. Investors should remember that investing some time and money at the beginning in determining if the investment is legitimate and suitable for them could save them the pain and suffering of losing the entire investment later on.

  9. IF AN INVESTOR THINKS THAT HIS OR HER MONEY IS AT RISK IN A BAD INVESTMENT, WHAT SHOULD HE OR SHE DO?

    The best protection is to be very cautious about any investment before making it, since it is much more difficult to get money back than not to invest in the first place. There are several cautionary rules that investors should follow. One, if it's to good to be true, it probably is. Second, if an investor cannot understand an investment or cannot afford to lose the money he or she is investing, don't iinvest. Third, if he or she is being solicited over the phone, hang up immediately.

    After an investment is made, the investor can contact the various state and federal agencies that might have information about the company to see if there are any public records or actions that relate to that investment. An investor can discuss the matter with a licensed financial or legal adviser. An investor may want to demand access to the books and records of the company and try and determine if his or her investment is at risk. If an investor is denied access, a complaint can be filed with the California Attorney General's Office. An investor should not be taken in by pleas that more money is needed to protect the existing investment unless the legitimacy of the request has been verified.

  10. WHAT SHOULD AN INVESTOR DO IF THE CORPORATION HE OR SHE INVESTED IN IS FAILING TO COMPLY WITH THE CALIFORNIA CORPORATIONS CODE REQUIREMENTS OF SHAREHOLDERS' MEETINGS AND CONSENTS, VOTING RIGHTS, RIGHTS OF INSPECTION OF SHAREHOLDERS' NAMES AND ADDRESSES AND OF ACCOUNTING BOOKS AND RECORDS OR IF A LIMITED PARTNERSHIP FAILS TO COMPLY WITH A PARTNER'S RIGHT TO INSPECT AND COPY THE PARTNERSHIP BOOKS, TO HAVE TRUE AND FULL INFORMATION AND AN ACCOUNTING OF THE PARTNERSHIP AFFAIRS OR TO AFFORD OTHER RIGHTS GIVEN TO PARTNERS IN THE CERTIFICATE OF LIMITED PARTNERSHIP?

    An investor should seek private counsel and/or file a complaint with the California Attorney General's Office, as these matters are not subject to the jurisdiction of the Department of Corporations.