Legal Question in Business Law in California

Probably. It would depend on a lot more information. Consult with an attorney that handles security issues.

Yes, it's "legal" if by that you mean not illegal....you won't be arrested, tried and jailed for it. Also, 95% of the time there would be no civil harm done so no basis upon which the employer could sue, nor in most cases would the employer even have a basis for objection. Now, secretly owning a controlling interest in one of your employer's distributors might be sufficiently unethical to get the employed officer fired, but that wouldn't be because it was "not legal," it would be because it wasn't wise.