Section 2609.07 - Expense RatioA 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.Cal. Code Regs. Tit. 10, § 2609.07