(a)A corporation is liable for a civil penalty in an amount not exceeding one million dollars ($1,000,000) if the corporation does both of the following:
(1)Has actual knowledge that an officer, director, manager, or agent of the corporation does any of the following:
(A)Makes, publishes, or posts, or has made, published, or posted, either generally or privately to the shareholders or other persons, either of the following:
(i)An oral, written, or electronically transmitted report, exhibit, notice, or statement of its affairs or pecuniary condition that includes a material statement or omission that is false and intended to give the
shares of stock in the corporation a materially greater or a materially less apparent market value than they really possess.
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(a)
A corporation is liable for a civil penalty in an amount not exceeding one million dollars ($1,000,000) if the corporation does both of the following:
(1)
Has actual knowledge that an officer, director, manager, or agent of the corporation does any of the following:
(A)
Makes, publishes, or posts, or has made, published, or posted, either generally or privately to the shareholders or other persons, either of the following:
(i)
An oral, written, or electronically transmitted report, exhibit, notice, or statement of its affairs or pecuniary condition that includes a material statement or omission that is false and intended to give the
shares of stock in the corporation a materially greater or a materially less apparent market value than they really possess.
(ii)
An oral, written, or electronically transmitted report, prospectus, account, or statement of operations, values, business, profits, or expenditures, that includes a material false statement or omission intended to give the shares of stock in the corporation a materially greater or a materially less apparent market value than they really possess.
(B)
Refuses, or has refused to make, any book entry or post any notice required by law in the manner required by law.
(C)
Misstates or conceals, or has misstated or concealed, from a regulatory body a material fact in order to deceive a regulatory body to avoid a statutory or regulatory duty, or to avoid a statutory or regulatory limit or
prohibition.
(2)
Within 30 days after actual knowledge is acquired of the actions described in paragraph (1), the corporation knowingly fails to do both of the following:
(A)
Notify the Attorney General or appropriate government agency in writing, unless the corporation has actual knowledge that the Attorney General or appropriate government agency has been notified.
(B)
Notify its shareholders in writing, unless the corporation has actual knowledge that the shareholders have been notified.
(b)
The requirement for notification under this section does not apply if the action taken or about to be taken by the corporation, or by an officer, director, manager, or agent of the corporation under paragraph (1) of subdivision (a), is abated within the time
prescribed for reporting, unless the appropriate government agency requires disclosure by regulation.
(c)
If the action reported to the Attorney General pursuant to this section implicates the government authority of an agency other than the Attorney General, the Attorney General shall promptly forward the written notice to that agency.
(d)
If the Attorney General was not notified pursuant to subparagraph (A) of paragraph (2) of subdivision (a), but the corporation reasonably and in good faith believed that it had complied with the notification requirements of this section by notifying a government agency listed in paragraph (5) of subdivision (e), no penalties shall apply.
(e)
For purposes of this section:
(1)
“Manager” means a person having both of
the following:
(A)
Management authority over a business entity.
(B)
Significant responsibility for an aspect of a business that includes actual authority for the financial operations or financial transactions of the business.
(2)
“Agent” means a person or entity authorized by the corporation to make representations to the public about the corporation’s financial condition and who is acting within the scope of the agency when the representations are made.
(3)
“Shareholder” means a person or entity that is a shareholder of the corporation at the time the disclosure is required pursuant to subparagraph (B) of paragraph (2) of subdivision (a).
(4)
“Notify its shareholders” means to give
sufficient description of an action taken or about to be taken that would constitute acts or omissions as described in paragraph (1) of subdivision (a). A notice or report filed by a corporation with the United States Securities and Exchange Commission that relates to the facts and circumstances giving rise to an obligation under paragraph (1) of subdivision (a) shall satisfy all notice requirements arising under paragraph (2) of subdivision (a), but is not the exclusive means of satisfying the notice requirements, if the Attorney General or appropriate agency is informed in writing that the filing has been made together with a copy of the filing or an electronic link where it is available online without charge.
(5)
“Appropriate government agency” means an agency on the following list that has regulatory authority with respect to the financial operations of a corporation:
(A)
Department of Financial Protection and Innovation.
(B)
Department of Insurance.
(C)
Department of Managed Health Care.
(D)
United States Securities and Exchange Commission.
(6)
“Actual knowledge of the corporation” means the knowledge an officer or director of a corporation actually possesses or does not consciously avoid possessing, based on an evaluation of information provided pursuant to the corporation’s disclosure controls and procedures.
(7)
“Refuse to make a book entry” means the intentional decision not to record an accounting transaction when all of the following conditions are satisfied:
(A)
The
independent auditors required recordation of an accounting transaction during the course of an audit.
(B)
The corporation’s audit committee has not approved the independent auditor’s recommendation.
(C)
The decision is made for the primary purpose of rendering the financial statements materially false or misleading.
(8)
“Refuse to post any notice required by law” means an intentional decision not to post a notice required by law when all of the following conditions exist:
(A)
The decision not to post the notice has not been approved by the corporation’s audit committee.
(B)
The decision is intended to give the shares of stock in the corporation a materially greater or a materially less
apparent market value than they really possess.
(9)
“Misstate or conceal material facts from a regulatory body” means an intentional decision not to disclose material facts when all of the following conditions exist:
(A)
The decision not to disclose material facts has not been approved by the corporation’s audit committee.
(B)
The decision is intended to give the shares of stock in the corporation a materially greater or a materially less apparent market value than they really possess.
(10)
“Material false statement or omission” means an untrue statement of material fact or an omission to state a material fact necessary in order to make the statements made under the circumstances under which they were made not misleading.
(11)
“Officer” means any person as set forth in Rule 16a-1 promulgated under the Securities Exchange Act of 1934 or any successor regulation thereto, except an officer of a subsidiary corporation who is not also an officer of the parent corporation.
(f)
This section only applies to corporations that are issuers, as defined in Section 2 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. Sec. 7201 et seq.).
(g)
An action to enforce this section may only be brought by the Attorney General or a district attorney or city attorney in the name of the people of the state.