Return to Non-CALJIC Offenses – Contents
F 18.25 n1 Unlawful Sale of Securities: Required Mens Rea (Corp. Code 25401).
In People v. Keating REV GTD/DISD/DEPUB (93) 16 CA4th 280, 310-11 [19 CR2d 899] reprinted as modified for tracking pending review at 31 CA4th 1688, the court held that the Corp. Code sections which proscribe the unlawful sale or offering of a security are general intent crimes which do not require specific intent or joint operation of act and intent. However, the willfulness requirement of Corp. Code 25401 — although not a specific intent — requires a finding that the defendant knew or should have known the securities were fraudulent. (People v. Simon (95) 9 C4th 493, 507-23 [37 CR2d 278].)
F 18.25 n2 Unlawful Sale of Securities: Mens Rea Required For Corp. Code 25110.
See People v. Salas (2006) 37 C4th 967 [scienter is an affirmative defense requiring instruction and disproof by the prosecution if the defense is raised by the evidence].
F 18.25 n3 Unlawful Sale Of Securities: Tolling Of Statute Of Limitations Based On Lack Of Discovery.
PC 801 requires that the prosecution of a violation of CC 25110 must be commenced within three years after commission of the offense. There is no tolling or extension of the time limitation except as provided in PC 803 which provides that the limitation period does not commence until discovery of an offense “a material element of which is fraud or breach of a fiduciary obligation.” People v. Fine (97) 52 CA4th 1258 [61 CR2d 254] held that the tolling provisions of PC 803(c) apply to “any type” of violation of the corporate securities law made punishable under CC 25440. That section expressly includes CC 25110.
F 18.25 n4 Selling Unqualified Securities (Corp. C 25110 and 25540(a)): Knowledge Requirement.
See FORECITE F 18.25 n2.
Unlawful Sale Of Securities: Miscellaneous
Instructions Defining Sale, Offer, Issuer, And Issuer Transaction
Section 25110 makes it unlawful for any person to offer or sell a security in an issuer transaction without first having obtained a qualification of such security from the Commission of Corporations or the State of California, unless such security is exempted. In order to prove the commission of such crime, each of the following elements must be proved:
1. That a security was offered or sold in this state;
2. That such conduct was willful; and
3. That at the time the security was offered or sold, such offer or sale had not been qualified with the Commissioner of Corporations of the State of California.
“Sale” or “Sell” includes every contract of sale of, contract to sell, or disposition of, a security or interest in security for value.
“Sale” or “Sell” includes any exchange of securities and any change in the rights, preferences, privileges, or restrictions of or on outstanding securities.
“Offer” or “Offer to Sell” includes every attempt or offer to dispose of, or solicitation of any offer to buy, a security or an interest in a security for value.
An “Issuer” is any person or corporation who issues or proposes to issue any security.
An “Issuer Transaction” is a transaction done for the benefit of the issuer, and the consideration is paid directly to the issuer.
The fact that a person encourages a transaction that results in a sale does not necessarily make that person a seller.
Points and Authorities
The above instructions were held to have properly addressed the issues pertaining to Corp. Code 25110 in People v. Corey (95) 35 CA4th 717, 730-32 [41 CR2d 540]. Note however that Corey held that Corp. Code 25110 is a strict liability offense and, hence, if Corey is followed, no criminal intent is required. (Compare Corp. Code 25401; FORECITE F 18.25 n1.) Note also that Corey held that there is no need to instruct the jury on the definition of “agency” as contained in Corp. Code 25003 in Corp. Code (CD) 25110 cases.
CAVEAT: There may be issues related to this instruction not addressed by Corey.
This instruction was given in People v. Savedra (93) 15 CA4th 738, 743-44 [19 CR2d 115]. The defendant did not fault this instruction and the Court of Appeal expressed no disagreement with it. The Court of Appeal rejected the defendant’s argument that CJ 12.42 should be given in addition to the above instruction, noting that the first 4 factors of CJ 12.42 are not applicable to PC 4574(a) and the 5th factor is included in the last paragraph of the above instruction.
The definition of possession in the above instruction comes from CJ 1.24.
Failure to adequately instruct the jury upon matters relating to proof of any element of the charge and/or the prosecution’s burden of proof thereon violates the defendant’s state (Art. I, § 15 and § 16) and federal (6th and 14th Amendments) constitutional rights to trial by jury and due process. [See generally, FORECITE PG VII(C).]
In Savedra, the Court of Appeal agreed with the trial court’s conclusion that the term “likely” means having potential for use as a deadly weapon. (15 CA4th at 744; see also People v. Martinez (98) 67 CA4th 905 [79 CR2d 334] [court properly defined deadly weapon in terms of “reasonable potential” rather than “reasonable likelihood”].)