Senate BillIntroducedFinancial
SB 972: California Financing Law: commercial loans: investment advisers.
What SB 972 does, verified May 18, 2026
This bill allows an investment adviser registered with the US Securities and Exchange Commission to apply for a finance lender license to act on its own behalf and on behalf of client accounts, but only for commercial loans. The licence holder must maintain a surety bond, undergo background checks, meet minimum net worth and commercial loan threshold requirements, and file information with the commissioner under oath. The licence covers any affiliate of the investment adviser that is also registered with the SEC. The bill also exempts investment advisers from usury laws, allowing them to charge higher interest rates on commercial loans.
Bill journey
1IntroducedCurrent
2In CommitteePending
3First Chamber FloorPending
4Second ChamberPending
5GovernorPending
6ChapteredPending
Last action: May 14 hearing: Held in committee and under submission. (2026-05-14)Alert me
Author and sponsors
Full contact details, staff, and committees with Connect, $16/moUnlockRecent actions11 total · showing 5
| May. 14, 2026 | May 14 hearing: Held in committee and under submission. |
| May. 08, 2026 | Set for hearing May 14. |
| Apr. 20, 2026 | April 20 hearing: Placed on APPR. suspense file. |
| Apr. 10, 2026 | Set for hearing April 20. |
| Apr. 08, 2026 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 12. Noes 0. Page 3757.) (April 7). Re-referred to Com. on APPR. |
Latest bill textIntroduced version, February 4, 2026 · 2,623 words
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Senate Bill
No. 972
| Introduced by Senator Grayson |
February 04, 2026 |
An act to amend Section 22002 of, and to add Section 22100.3 to, the Financial Code, relating to financial institutions.
LEGISLATIVE COUNSEL'S DIGEST
SB 972, as introduced, Grayson. California Financing Law: commercial loans: investment advisers.
Existing law, the California Financing Law, generally regulates the business of finance lenders and brokers and prohibits any person from engaging in those businesses without obtaining a license from the Commissioner of Financial Protection and Innovation. Existing law also imposes various requirements on licensees who offer or sell commercial loans, as defined.
This bill would authorize an investment adviser that is registered with the United States Securities and Exchange Commission, known as an “SEC-registered investment adviser,” to apply for and obtain a finance lender license to act on its own behalf and on behalf of any client account if all lending activity conducted pursuant to the license is limited to commercial loans, in accordance with certain requirements. The bill would provide that a license obtained by an SEC-registered investment adviser to act as a finance lender covers any affiliate of the SEC-registered investment adviser that is also an SEC-registered investment adviser. The bill would require the SEC-registered investment adviser to maintain and file with the commissioner an appendix to its license application and renewals, listing each client account, as defined. Under the bill, as a condition of licensure, the SEC-registered investment adviser would be required to obtain and maintain a surety bond, complete background checks, meet minimum net worth and commercial loan threshold requirements, and file specified information with the commissioner under oath, subject to penalty of perjury. The bill also would authorize the commissioner to adopt rules and regulations as necessary to implement and administer these provisions. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program.
The California Constitution prohibits usury, which is the loan or forbearance of any money, goods, or things at a rate of interest in excess of specified rates, but exempts certain transactions and lenders from these provisions, and allows the Legislature to exempt additional classes of persons by statute. Existing law, the California Financing Law, establishes a class of exempt persons pursuant to the constitutional provision on usury that includes personal property brokers and specified lenders.
This bill would provide that the class of exempt persons under the California Financing Law includes each person within the meaning of client account, as defined, to which the above-described provision on investment advisors applies.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The people of the State of California do enact as follows:
SECTION 1.
Section 22002 of the Financial Code is amended to read:22002.
To accomplish its underlying purposes and policies, this division creates a class of exempt persons pursuant to Section 1 of Article XV of the California Constitution. The class of exempt persons includes each person within the meaning of a client account, as defined in paragraph (2) of subdivision (c) of Section 22100.3, to which Section 22100.3 applies.It is the intent of the Legislature to preserve existing exemptions under Section 1 of Article XV of the California Constitution and statutory law for (a) personal property brokers formerly regulated by the Personal Property Brokers Law; (b) lenders formerly regulated by the Consumer Finance Lenders Law; and (c) lenders formerly regulated by the Commercial Finance Lenders Law; and no finding that any provision of this division is invalid with respect to a particular lender or class of lenders shall affect the enforceability of this division with respect to any of the foregoing classifications of lenders, which shall in all events continue to be exempted by this division.
SEC. 2.
Section 22100.3 is added to the Financial Code, to read:22100.3.
(a) (1) An investment adviser that is registered with the United States Securities and Exchange Commission, known as an “SEC-registered investment adviser,” may apply for and obtain a finance lender license under this section and Section 22100 to act on its own behalf and on behalf of any client account if all lending activity conducted pursuant to the license is limited to commercial loans, as described in this section.(2) Any reference in this section to an “SEC-registered investment adviser” shall also include a “relying adviser,” “affiliate,” or “affiliated adviser,” as the context requires.
(b) A license obtained by an SEC-registered investment adviser to act as a finance lender shall cover any affiliate of the SEC-registered investment adviser that is also an SEC-registered investment adviser, including any “relying advisers,” “affiliates,” or “affiliated advisers,” as those terms are defined by the Securities and Exchange Commission for purposes of investment adviser registration and reporting forms, with those affiliated advisers listed on an appendix, as modified pursuant to paragraph (1) of subdivision (c), and labeled as such with the SEC-registered investment adviser’s application for a finance lender license.
(c) (1) The SEC-registered investment adviser shall maintain and file with the commissioner an appendix to its license application and renewals, listing each client account, as defined in paragraph (2). The appendix shall include, for each affiliated adviser and each client account, the legal name and the jurisdiction of formation. The SEC-registered investment adviser shall update the appendix as necessary to reflect any changes in the list of affiliated advisers and the list of client accounts, which shall include any additions or removals from the list, engaging in, or that may engage in, as determined by the SEC-registered investment adviser, commercial lending activity in the State of California.
(2) For purposes of this section, “client account” means any account, fund, pooled investment vehicle, special purpose vehicle, subsidiary, or similar vehicle or person sponsored, advised, managed, subadvised, or submanaged by the SEC-registered investment adviser or by any affiliated adviser registered investment adviser or any affiliated adviser that may engage in commercial lending activity in this state.
(d) A license issued to an SEC-registered investment adviser by the commissioner pursuant to this section shall authorize the adviser and its affiliated advisers to engage in commercial lending activities in this state through any of their respective client accounts listed on the appendix at the time of those commercial lending activities, without the need for a separate license for each affiliated adviser client account. The SEC-registered investment adviser shall be deemed the sole licensee for all activities conducted through its listed client accounts, except as otherwise provided in this section.
(e) (1) For purposes of the background investigation and fingerprinting requirements set forth in this article, only those individuals, even if not affiliated with the adviser, who both (A) directly control the advisory activities of the SEC-registered investment adviser or any of its affiliated advisers and (B) hold direct responsibility for making an investment decision to engage in any particular commercial lending transaction in this state shall be required to submit fingerprint images and related information to the Department of Justice.
(2) For the avoidance of doubt, and for the purposes of paragraph (1), both of the following conditions apply:
(A) Fingerprint images shall be submitted to the Department of Justice solely on a one-time basis per individual at the time of the initial application or in any amendment adding the person.
(B) A presumption of control shall not apply to any SEC-registered investment adviser with respect to any affiliated adviser or client account.
(3) The term “control,” as used in this section, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person. “Control” shall not be construed to mean, or deemed to refer to, “control” as defined by the Securities and Exchange Commission in the Glossary of Terms contained in the Uniform Application for Investment Adviser Registration and Report by Exempt Reporting Advisers (Form ADV) in the rules promulgated pursuant to the Investment Advisers Act of 1940.
(f) (1) The SEC-registered investment adviser shall obtain and maintain a surety bond in accordance with this subdivision.
(2) The surety bond shall be in an amount of not less than twenty-five thousand dollars ($25,000) per client account listed on the appendix, in the aggregate.
(3) The bond may be obtained either for each client account individually or by the relevant SEC-registered investment adviser on behalf of some or all of its client accounts, provided that the total bond amount is at least twenty-five thousand dollars ($25,000) multiplied by the number of client accounts listed on the appendix.
(4) The bond shall be payable to the commissioner and issued by an insurer authorized to do business in this state, and shall be used for the recovery of expenses, fines, and fees levied by the commissioner or for losses or damages incurred by borrowers or consumers as the result of noncompliance with the requirements of this section, provided, however, that the bond shall only be utilized if the SEC-registered investment adviser and relevant client accounts do not directly cover the expenses, fines, and fees.
(g) (1) The SEC-registered investment adviser shall be responsible for ensuring that all commercial lending activities conducted by or through one of its affiliated advisers or their respective listed client accounts comply with the requirements of this section and any regulations promulgated thereunder.
(2) The commissioner may hold the SEC-registered investment adviser accountable for any violations of this section arising from the lending activities of its or any of its affiliated advisers’ listed client accounts.
(3) Paragraph (2) shall not limit the availability of any indemnification provided for the benefit of the SEC-registered investment adviser or its affiliated advisers.
(h) Each client account listed on the appendix shall be subject to the minimum net worth requirement set forth in this section. For purposes of this section, the minimum net worth requirement shall be deemed satisfied with respect to a client account if, within 90 days of the filing of the appendix and, thereafter, at all times during the remaining term of the client account, either of the following conditions are satisfied:
(1) The client account maintains a net worth of at least twenty-five thousand dollars ($25,000).
(2) The client account has binding contractual capital commitments from one or more investors or affiliates to fund at least twenty-five thousand dollars ($25,000) in equity.
(i) The SEC-registered investment adviser shall provide to the commissioner, at the time of initial application and upon each renewal, a representation letter for each client account listed on the appendix. The representation letter shall certify, on behalf of each client account, that the client account either maintains the required minimum net worth or has binding contractual capital commitments to fund the required minimum equity amount as described above. The representation letter shall be executed by an authorized officer or representative of the SEC-registered investment adviser with knowledge of the financial condition and capital commitments of the client account.
(j) Except as specifically set forth in subdivisions (f) and (h), no further guarantee, surety, capital commitment, or net worth requirements, obligations, or conditions shall apply to any SEC-registered investment adviser, any affiliate adviser, or client account for purposes of compliance with this section.
(k) (1) Each licensee shall file an annual report with the commissioner on or before March 15. This report shall provide all relevant information that the commissioner reasonably requires regarding the commercial lending activities conducted by the licensee’s client account within the State of California during the preceding calendar year for each licensed place of business. The annual report shall generally be made available to the public for inspection, except that, upon request in the annual report, the balance sheet of a sole proprietor or any other nonpublicly traded person, defined as a person with securities owned by 35 or fewer individuals, may be withheld from public inspection. All reports shall be made under oath and in the form prescribed by the commissioner. In addition to the annual report, a licensee shall submit any other special reports that may be reasonably required by the commissioner.
(2) The licensee may submit, on behalf of their relevant affiliated advisers and their respective client accounts, a single aggregated summary of lending activity and California lending activity in satisfaction of the annual reporting requirement. For the sake of clarity, rather than submitting individual reports for each client account, the adviser may provide a consolidated report that encompasses the aggregated relevant activities of all relevant affiliated advisers and their respective client accounts. Any fees assessed in connection with the annual reporting requirement shall be based on the aggregated reporting, rather than being calculated on a per-client account basis, in order to streamline the reporting process.
(l) (1) The availability of reliance on the licensing process under this section shall be strictly limited to the activity of those client accounts of an SEC-registered investment adviser that are engaged in making commercial loans on a privately originated basis in a minimum aggregate amount exceeding five hundred thousand dollars ($500,000). This licensing process shall not be available to the activity of those client accounts to the extent the client account engages in any of the following activities:
(A) Mortgage loan origination.
(B) Consumer lending.
(C) Making a commercial finance offer or a commercial loan in an amount equal to or less than five hundred thousand dollars ($500,000) per specific commercial financing offer.
(2) Any client account of an SEC-registered investment adviser, to the extent the client account engages in mortgage loan origination, consumer loans, or makes a commercial finance offer or a commercial loan that is equal to or less than five hundred thousand dollars ($500,000), shall not be eligible to utilize the SEC-registered investment adviser licensing process set forth in this section for that specific commercial financing offer.
(m) The commissioner may adopt rules and regulations as necessary to implement and administer this section, including, but not limited to, requirements for applications, reporting, and the supervision of commercial lending activities conducted by SEC-registered investment advisers and their listed client accounts.
SEC. 3.
The Legislature finds and declares that Section 2 of this act, which adds Section 22100.3 to the Financial Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:This act balances the right of the public to access public records while also preserving the confidentiality of certain financial information.
SEC. 4.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.Text of SB 972 as introduced, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions