MOORLACH UPDATE — SB 496 and SB 598 — March 6, 2019

My new bill, SB 496, was a recommendation from the Financial Planning Association of Orange County. The bill recommends the adoption of policies to prevent elder abuse when curious financial transaction requests are received. The legislation is modeled after that recommended by the North American Securities Administration Association (NASAA).

We have been in contact with numerous parties including representatives of financial institutions, the securities industry, and broker dealers. Financial experts have expressed their excitement for the legislation and are eager to help make changes that are essential to protecting our most vulnerable from financial exploitation (see

The National Law Review introduces SB 496 in the first piece below. The concern? What supersedes, Federal or state law?

Watching Alzheimer’s and dementia concerns growing in our state, providing safeguards to prevent financial abuse for those in the beginning stages of this difficult life journey is critical. And I’m happy to work with financial professionals who appreciate their fiduciary roles to protect their aging clientele.

The second piece is from The Bond Buyer and introduces my bill, SB 598, that would provide more transparency for critical accounting documents. Currently, Comprehensive Annual Financial Reports (CAFRs) are provided in a PDF format. This is fine if you have the time to scour the entire document. Why not upload it in a language that allows for faster analysis and comparisons with other CAFRs? Let’s move into the 21st century (see

The concern? Inconvenience. But, once again, the publicly traded industry is years ahead of government. It is time to have the municipalities you fund with your tax dollars to provide a simple data dive opportunity.

California Ponders Mandating That Brokers And Investment Advisers Report Financial Elder Abuse

The California Elder Abuse and Dependent Adult Civil Protection Act mandates reporting of suspected financial abuse of an elder or dependent adult. Cal. Welf. & Inst. Code § 15630.1. Under the act, a “mandated reporter of suspected financial abuse of an elder or dependent adult” means all officers and employees of financial institutions [as defined]”.

Senator John M. W. Moorlach recently introduced a bill, SB 496, that would expand the list of mandated reporters to include broker-dealers (as defined in Corp. Code § 25004) and investment advisers (as defined in Corp. Code § 25009). The bill would also allow a mandated reporter to delay temporarily a requested disbursement from an account of an elder or dependent adult or an account to which an elder or dependent adult is a beneficiary provided specified conditions are satisfied.

By imposing state specific requirements on broker-dealers, the bill may run afoul of Section 15(i)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) which states:

“No law, rule, regulation, or order, or other administrative action of any State or political subdivision thereof shall establish capital, custody, margin, financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements for brokers, dealers, municipal securities dealers, government securities brokers, or government securities dealers that differ from, or are in addition to, the requirements in those areas established under this title [the Exchange Act].”

The issue of federal preemption has become red hot as states move to impose fiduciary obligations on broker-dealers. See Is Nevada’s Broker-Dealer Fiduciary Standard Constitutional?

Bill would require California issuers to use XBRL

Keeley Webster

A California bill would require its governments and agencies to provide financial documents to the State Controller’s Office in a more readily searchable format than the PDF.

State Sen. John Moorlach, R-Costa Mesa, sponsored Senate Bill 598, the Open Financial Statement Act, with the aim of making state and local government financial data more accessible.

The bill would require that the state, counties, cities, school districts, special districts and pension funds submit financial statements in Extensible Business Reporting Language.

The machine-readable computer language, known as XBRL, would standardize issuers’ financial documents making it easier to compare data and add transparency, said Marc Joffe, a senior policy analyst with the Reason Foundation, a libertarian think tank.

The concept, contemplated on the federal level, has received mixed reviews from municipal market participants, some of whom say the changeover would be onerous and costly.

“It is disappointing to me that people in the bond markets not only don’t consider it a priority, but that some are actually opposed,” Joffe said.

The only way to compare data in the less interactive PDFs is to manually type information into a speadsheet. XBRL would enable researchers to easily populate a page with information to make comparisons for statistical analysis.

“I would like to see the data become available at a lower price, so that more people can access it, rather than relying on a small number of experts,” Joffe said.

Currently, research firms pay people to manually enter the data from comprehensive annual financial reports to create data sets and then charge people for the information, he said.

The Securities and Exchange Commission has required private companies to use XBRL for filings on the EDGAR system for about 10 years, but it doesn’t have the authority to require the municipal market to use the 15-year-old technology.

Since he was elected to the state Senate in 2015, Moorlach has been producing reports on the state’s 944 school districts and 482 cities using financial information culled from comprehensive annual reports to rank them based on fiscal soundness.

“It goes back to the basic management principle: if you can’t measure it, you can’t manage it,” Moorlach said.

He pointed to three school districts in the state that are struggling financially: Los Angeles Unified School District, Sacramento City Unified School District and Oakland Unified School District. If financial information were easier to analyze and more readily available, problems could be solved before they get to the point that the state’s Fiscal Crisis & Management Assistance Team has to be called in, he said.

Florida approved similar legislation last year, but it doesn’t include the state and public pension funds in the mix, Joffe said.

“In California, you have this really crazy system where the city has to send in the CAFR and enter financial data for the controller’s office,” Joffe said. “The data isn’t necessarily the same, so it makes it hard to compare.”

Controller Betty Yee includes the unaudited data in her “By the Numbers” report.

“The two sets of reports overlap and the need to prepare both creates extra work for local government finance teams,” Joffe said.


This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.