Surety Bond in Derivative Lawsuits §17501 (California)

The California Corporations Code section 17501 pertains to surety bonds required from certain officers or employees of corporations involved in the sale of securities, or more simply a requirement for financial assurance in derivative actions. The statute addresses offers or sales of securities by brokers, dealers, salespersons, or agents who are employed by corporations registered under the Corporate Securities Law of 1968.

Under section 17501, the California Commissioner of Business Oversight has the authority to require a surety bond from officers or employees of a registered corporation when there is reasonable cause to believe that the interests of the public or the corporation's security holders require one. The purpose of the indemnity bond is to provide protection against any potential wrongdoing, fraud, or misconduct by officers or employees involved with the sale of securities. The surety bond penalty, its terms and the named parties are determined by the Commissioner based on the circumstances and the extent of the potential risks involved. Requirements and provisions related to surety bonds under California law are subject to change and may be further clarified by subsequent court rulings.

Underwriting of surety bonds for derivative actions and other miscellaneous court bonds are best accomplished by a surety bond expert with knowledge of this class of judicial bond obligation and the specific pleading style required by the Commissioner and courts. A surety bond must follow the specific statutory requirements. California surety bond leader, Surety One, Inc. specializes in judicial bonds for all district, superior, family, supreme and appellate courts. Surety bond submissions are reviewed and responded to within one hour of receipt. We are the most agile court bond underwriter in the United States. Call (800) 373-2804, email us at Underwriting@SuretyOne.com or click here if you would like to chat live with an underwriter about your California judicial bond need.

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