Department of Corporations Investment Adviser Update


As many of you know, in late August of this year the California Department of Corporations (DOC) enacted Investment Adviser Certification Requirements for Mortgage Fund Managers irrespective of their licensing or offering permits. 

During the rulemaking process, CMA provided significant written comments and met directly with DOC Commissioner Jan Owen and her staff.  While the DOC accepted some of CMA’s suggestions, the final regulations still present significant hurdles for those CMA members who fund all or a portion of their mortgage lending operations through permitted mortgage funds.

Your CMA team met again in mid-October with the Commissioner and staff.  At that meeting we agreed to provide further information supporting CMA’s position that Mortgage Fund Managers should not be subject to these regulations. We also agreed to provide a chart comparing DRE and CFL existing licensing requirements in making or arranging to the requirements and restrictions applicable to certified investment advisors.

Since then, we have spent many hours with our special counsel, Brad Rogerson and Mark Lubin of Stein & Lubin LLP, to provide a comprehensive document to the DOC.  CMA Member Mitch Feinstein also provided significant input.

On Monday, November 5, 2012, CMA delivered those documents to the DOC.  Specifically, CMA has requested an Interpretive Opinion, requesting the DOC confirm our position that: (1) the management services provided by Mortgage Fund Managers to mortgage funds do not fall within the definition of “investment advisor” in California Corporations Code Section 25009; (2) DRE and CFL licensing provides adequate protection, in many instances well beyond the those of an Investment Advisor license and (3) for those reasons,  Mortgage Fund Managers should not be subject to certification requirements set forth in California Corporations Code Section 25230.

Thus far, the DOC has expressed interest in our position.  Though we cannot yet know the outcome of this request, we do know that this is a critically important matter for many of you, and we will provide further updates when they are available. 

We extend our thanks and appreciation to all who have contributed to this project, and to all CMA members for your ongoing commitment to your profession and to CMA.


Yours Truly,
John Graziano, President
Lexi Howard, Executive Director
California Mortgage Association