(a) For purposes of this section, the following terms have the following meanings:
(1) “Carrying a security” means maintaining, reducing, or retiring indebtedness originally incurred to acquire a security.
(2) “Controlling person” has the same meaning specified in Section 1250.
(3) “Security” has the following meanings:
(A) When used with respect to a bank, “security” has the same meaning set forth in subdivision (c) of Section 1200.
(B) When used with respect to any other person, “security” has the same meaning set forth in Section 25019 of the Corporations Code.
(b) No bank shall acquire, hold, extend credit on the security of, or extend credit for the purpose of acquiring or carrying, any security of the bank or of any controlling person of the bank.
(c) (1) Any bank which acquires or holds securities in violation of this section shall be liable to the people of this state for twice the market, book, or face value of the securities, whichever is greatest.
(2) Any bank which extends credit in violation of this section shall be liable to the people of this state for twice the amount of the credit so extended.
(d) This section does not apply to any of the following transactions:
(1) Any acquisition or extension of credit by a bank which is necessary to reduce or prevent loss to the bank on debts previously contracted in good faith.
(2) Any redemption by a bank of any of its redeemable securities in accordance with applicable provisions of this division and of Division 1 (commencing with Section 100) of Title 1 of the Corporations Code.
(3) Any acquisition by a bank of any of its securities, other than an acquisition of the type described in paragraph (1) or (2), if the acquisition is approved in advance by the commissioner.
(e) The provisions of Section 329 shall not apply to this section.
(Amended by Stats. 2013, Ch. 334, Sec. 36. (SB 537) Effective January 1, 2014.)
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