California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 4 - Insurer Securities Permits › Article 9 - Miscellaneous Requirements › Section 2609.07 - Expense Ratio

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
A permit will not issue where the Commissioner
					 finds:
A. In the case of an
				  application by a domestic insurer, as "insurer" is defined in Section
				  826 of the
				  Insurance Code, for an organizational permit, that all expenses of every kind
				  (including but not limited to expenses of incorporation, promotion, stock
				  selling, legal and filing fees, commissions, costs of printing, engraving and
				  postage) from incorporation to and including the obtaining of a certificate of
				  authority chargeable currently or in the future to applicant for matters
				  occurring prior to the issuance of a certificate of authority will exceed 10%
				  of the total amount actually to be paid for applicant's securities. Assumption
				  of any of such expenses by a person other than the applicant is not deemed to
				  avoid the ban of the statute. (Secs.
				  839.5,
				  715 and
				  843). Obligations attempted to be
				  incurred by the promoters for applicant, or incurred by the Directors on
				  applicant's behalf for durable goods, equipment or facilities having a
				  permanent usable value to an operating insurer, prior to issuance of a
				  certificate of authority and without the Commissioner's prior authorization and
				  disclosure in the prospectus, are regarded with disfavor.
B. In the case of a domestic insurer's
				  application for other than an organizational permit, that all expenses of the
				  stock sale (including but not limited to promotion, stock sales commission,
				  printing, engraving, postage, legal, accounting, auditing and governmental
				  filing fees) will exceed 10% of the amount actually to be paid for applicant's
				  securities. Assumption of any of such expenses by a person other than the
				  applicant is not deemed to avoid the ban of the statute. (Secs.
				  839.5,
				  843)
C. In the case of a foreign applicant, that
				  the expenses described in A. or B. above, as appropriate, are such as to make
				  applicant's plan of business unfair, unjust, or inequitable, or are such in the
				  Commissioner's opinion that the sale of applicant's securities under the
				  circumstances will work a fraud upon the purchasers thereof or upon other
				  stockholders of applicant. Applications revealing such an expense ratio in
				  excess of 10% are regarded with disfavor and will normally be disapproved on
				  the grounds that to do otherwise would be to allow such foreign applicants to
				  do business in California under terms and conditions more favorable than are
				  domestic applicants. Assumption of any of such expenses by a person other than
				  the applicant is not deemed to avoid application of any lawful rule in this
				  respect. (Section
				  843 and California Constitution,
				  Article XII, Section
				  15).
D. Each application for a securities permit
				  and each authorized issue shall be judged independently insofar as expense
				  ratio is concerned. There shall be no carryover from one issue to another of an
				  unused allowance or of an overage; and there shall be no averaging of expenses
				  between or among transactions authorized by successive permits.