By Grusendorf H.B. No. 2408
Substitute the following for H.B. No. 2408:
By Carter C.S.H.B. No. 2408
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of persons who represent or advise
1-3 others in the buying or selling of a business; providing a criminal
1-4 penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Title 132A, Revised Statutes, is amended by
1-7 adding Article 9103 to read as follows:
1-8 Art. 9103. REGULATION OF BUSINESS BROKERS
1-9 Sec. 1. DEFINITIONS. In this article:
1-10 (1) "Business broker" means a person who performs
1-11 business brokerage services.
1-12 (2) "Business brokerage services" means services
1-13 rendered while functioning as an intermediary through a fiduciary
1-14 relationship to a person buying or selling a business, including
1-15 any aspect relating to the buying or selling of any business,
1-16 business assets, or securities of a business, subject to Section
1-17 12, The Securities Act (Article 581-12, Vernon's Texas Civil
1-18 Statutes), to accomplish the sale of the business, whether or not
1-19 the business is active, inactive, or proposed.
1-20 (3) "Commission" means the Texas Commission of
1-21 Licensing and Regulation.
1-22 (4) "Commissioner" means the commissioner of licensing
1-23 and regulation.
2-1 (5) "Council" means the Business Brokers Advisory
2-2 Council.
2-3 (6) "Department" means the Texas Department of
2-4 Licensing and Regulation.
2-5 (7) "Person" includes a corporation, organization,
2-6 government or governmental subdivision or agency, business trust,
2-7 estate, trust, partnership, association, and any other legal
2-8 entity.
2-9 Sec. 2. REGISTRATION REQUIRED; REPRESENTATIONS. (a) A
2-10 person may not perform business brokerage services for compensation
2-11 unless the person is an individual licensed as a business broker
2-12 under this article.
2-13 (b) A person may not represent that the person is a business
2-14 broker or authorized to perform business brokerage services for
2-15 compensation unless the person is licensed under this article.
2-16 Sec. 3. EXEMPTIONS. This article does not apply to:
2-17 (1) an individual acting under a general power of
2-18 attorney unless the individual represents that the individual is a
2-19 business broker;
2-20 (2) an individual licensed to practice law in this
2-21 state;
2-22 (3) an individual who merely introduces parties to a
2-23 business opportunity transaction but is not involved in the
2-24 negotiation of the sale or purchase of the business or its assets
2-25 or securities;
3-1 (4) an employee of a business owner or of an
3-2 affiliated or subsidiary company of a business owner if the
3-3 employee performs business brokerage services solely for the
3-4 benefit of the business owner or for a partnership, joint venture,
3-5 or corporation in which the business owner owns an interest and
3-6 that functions as a buyer or seller; or
3-7 (5) a public employee or officer who provides
3-8 assistance to a business owner in the course of the public
3-9 employee's or officer's duties.
3-10 Sec. 4. VOLUNTARY LICENSING. An individual who is exempt
3-11 from licensing under Section 3 of this article may apply for and
3-12 obtain a license under this article if the individual meets the
3-13 requirements imposed by Sections 5 and 6(a) of this article. An
3-14 individual exempt from licensing under this article who elects to
3-15 be licensed under this article is subject to this article.
3-16 Sec. 5. ELIGIBILITY FOR LICENSE. To be eligible to obtain a
3-17 license as a business broker under this article, a person must:
3-18 (1) be an individual at least 18 years of age;
3-19 (2) hold a high school diploma or an equivalent
3-20 credential;
3-21 (3) pay the fees required by the commission;
3-22 (4) establish a place of business in this state or
3-23 designate an agent for service of legal process who is a resident
3-24 of this state;
3-25 (5) complete at least 15 classroom hours of
4-1 educational courses approved by the commissioner, at least four
4-2 hours of which must include instruction on law and legal issues in
4-3 this state related to business brokerage services; and
4-4 (6) meet any additional qualifications required by
4-5 this article or by the commissioner in the exercise of the
4-6 commissioner's authority under this article or under Article 9100,
4-7 Revised Statutes.
4-8 Sec. 6. APPLICATION FOR AND ISSUANCE OF LICENSE; TERM. (a)
4-9 An applicant for licensure must file an application with the
4-10 department on a printed form prescribed by the commissioner. The
4-11 application must be accompanied by a nonrefundable application fee
4-12 and a license fee that shall be refunded if the commissioner does
4-13 not approve the application.
4-14 (b) The commissioner shall approve or deny an initial
4-15 application not later than the 31st day after the date on which the
4-16 department receives the application.
4-17 (c) The commissioner shall issue to each applicant who
4-18 qualifies for licensing under this article the appropriate license.
4-19 Except as otherwise provided by the commission, a license is valid
4-20 for two years from the date of issuance.
4-21 Sec. 7. RENEWAL OF LICENSE. (a) On the timely receipt of
4-22 the required renewal fee, the commissioner shall issue to an
4-23 eligible licensed business broker a certificate of renewal of
4-24 license that is valid for two years after the date of issuance.
4-25 (b) The commissioner by rule shall require that a licensee
5-1 seeking renewal of a license complete during the two years
5-2 preceding the date of renewal a minimum of 15 classroom hours of
5-3 continuing education courses, recognized by the commissioner, as a
5-4 prerequisite to the renewal. The rules must require that at least
5-5 four of the 15 hours required include instruction on law and legal
5-6 issues in this state related to business brokerage services.
5-7 (c) If an individual's license has expired, the individual
5-8 may renew the license not later than the 30th day after the date of
5-9 expiration by paying the unpaid renewal fee plus a late license
5-10 renewal fee. An individual may not renew an expired license later
5-11 than the 30th day after the date of expiration but may obtain a new
5-12 license by complying with the requirements for an original license.
5-13 Sec. 8. WAIVER OF REQUIREMENTS FOR APPLICANT LICENSED OUT OF
5-14 STATE. The commissioner may waive any licensing requirement for an
5-15 applicant who holds a valid registration certificate or license
5-16 issued by another state that has requirements that were, on the
5-17 date of the registration or licensing, substantially equal to the
5-18 licensing requirements of this state. An applicant for licensing
5-19 under this section shall apply in the same manner as any other
5-20 applicant and shall furnish the department with documents and other
5-21 evidence substantiating the applicant's qualifications as required
5-22 by the department.
5-23 Sec. 9. GENERAL POWERS AND DUTIES OF COMMISSIONER. (a) The
5-24 commissioner by rule shall adopt and shall enforce standards of
5-25 practice, conduct, and ethics for licensees.
6-1 (b) The commissioner by rule shall recognize appropriate
6-2 continuing education programs for licensees under this article.
6-3 The commissioner may recognize a private provider of an educational
6-4 program or course if the provider:
6-5 (1) applies with the department on a printed form
6-6 prescribed by the commissioner;
6-7 (2) pays a nonrefundable application fee established
6-8 by the commission; and
6-9 (3) pays an educational provider's fee established by
6-10 the commission that shall be refunded if the commissioner does not
6-11 recognize the provider's educational program or course offering.
6-12 (c) The commissioner by rule may adopt and authorize the use
6-13 of standard forms for the use of licensed business brokers to
6-14 facilitate the buying and selling of businesses and reduce
6-15 controversies while providing safeguards adequate to protect the
6-16 interests of the principals to a transaction.
6-17 (d) In the best interests of the public the commissioner by
6-18 rule may require a business broker to use contract forms adopted by
6-19 the commissioner. The commissioner may not prohibit a business
6-20 broker from using a contract form binding the sale, exchange,
6-21 option, lease, or rental of an interest in property that has been
6-22 prepared by the property owner or prepared by an attorney and
6-23 required by the property owner.
6-24 Sec. 10. UNAUTHORIZED PRACTICE OF LAW. (a) The
6-25 commissioner shall suspend or revoke a license granted under this
7-1 article on proof that the licensee, if not licensed and authorized
7-2 to practice law in this state, for a consideration, reward, or
7-3 pecuniary benefit, present or anticipated, direct or indirect, or
7-4 in connection with or as a part of the licensee's employment,
7-5 agency, or fiduciary relationship as a licensee:
7-6 (1) drew a deed, note, deed of trust, will, or other
7-7 written instrument that may transfer or otherwise affect the title
7-8 to or an interest in property, except as provided by Subsection (b)
7-9 of this section; or
7-10 (2) advised or counseled a person as to the validity
7-11 or legal sufficiency of an instrument or as to the validity of
7-12 title to property.
7-13 (b) Notwithstanding other law, the completion of a contract
7-14 form that binds the sale, exchange, option, lease, or rental of any
7-15 interest in property by a licensed business broker incident to the
7-16 performance of business brokerage services does not constitute the
7-17 unauthorized or illegal practice of law in this state if the form:
7-18 (1) is a standard form adopted for use by the
7-19 commissioner for the particular kind of transaction involved;
7-20 (2) was prepared by an attorney-at-law licensed by
7-21 this state and approved by the attorney for the particular kind of
7-22 transaction involved; or
7-23 (3) was prepared by the property owner or prepared by
7-24 an attorney and required by the property owner.
7-25 Sec. 11. DISCIPLINARY ACTION. The commissioner may deny,
8-1 suspend, or revoke a license, impose administrative sanctions and
8-2 penalties, or seek injunctive relief and civil penalties against a
8-3 licensee as provided by Sections 17 and 18, Article 9100, Revised
8-4 Statutes, if the licensee:
8-5 (1) violates this article or a rule applicable to the
8-6 licensee adopted under this article;
8-7 (2) is grossly incompetent in the performance of
8-8 business brokerage services;
8-9 (3) commits dishonest or fraudulent acts while
8-10 performing business brokerage services;
8-11 (4) violates the standards of ethics adopted under
8-12 this article; or
8-13 (5) while performing business brokerage services, is
8-14 guilty of:
8-15 (A) making a material misrepresentation or
8-16 failing to disclose to a potential purchaser any latent defect or
8-17 any false representation known to the licensee;
8-18 (B) making a false promise of a character likely
8-19 to influence, persuade, or induce any person to enter into a
8-20 contract or agreement when the licensee could not or did not intend
8-21 to keep the promise;
8-22 (C) pursuing a continued and flagrant course of
8-23 misrepresentation or making false promises through advertising or
8-24 otherwise;
8-25 (D) failing to make clear, to all parties to a
9-1 transaction, which party the licensee is acting for or receiving
9-2 compensation from more than one party except with the full
9-3 knowledge and consent of all parties;
9-4 (E) failing within a reasonable time to properly
9-5 account for or remit money coming into the licensee's possession
9-6 that belongs to others or commingling money belonging to others
9-7 with the licensee's own funds;
9-8 (F) paying a commission or fees to or dividing a
9-9 commission or fees with a person who is:
9-10 (i) not licensed under this article and
9-11 not exempt from licensing under this article; or
9-12 (ii) not licensed to sell businesses and
9-13 not exempt from licensing in another jurisdiction for compensation
9-14 for services as a business broker;
9-15 (G) failing to specify in a listing contract a
9-16 definite termination date that is not subject to prior notice;
9-17 (H) accepting, receiving, or charging an
9-18 undisclosed commission, rebate, or direct profit on expenditures
9-19 made for a principal;
9-20 (I) soliciting, selling, or offering for sale a
9-21 business under a scheme or program that constitutes a lottery or
9-22 deceptive practice;
9-23 (J) acting in the dual capacity of business
9-24 broker and undisclosed principal in a transaction;
9-25 (K) guaranteeing, authorizing, or permitting a
10-1 person to guarantee that future profits will result from a resale
10-2 of a business;
10-3 (L) placing a sign on property offering it for
10-4 sale without the written consent of the owner or the owner's
10-5 authorized agent;
10-6 (M) inducing or attempting to induce a party to
10-7 a contract of sale to break the contract for the purpose of
10-8 substituting a new contract;
10-9 (N) negotiating or attempting to negotiate the
10-10 sale or exchange of a business with an owner, knowing that the
10-11 owner had a written outstanding contract granting exclusive agency
10-12 in connection with the business to another business broker;
10-13 (O) offering a business for sale without the
10-14 knowledge and consent of the owner or the owner's authorized agent
10-15 or on terms other than those authorized by the owner or the owner's
10-16 authorized agent;
10-17 (P) publishing or causing to be published an
10-18 advertisement, including advertising by newspaper, radio,
10-19 television, or display, that is misleading or likely to deceive the
10-20 public, that in any manner tends to create a misleading impression,
10-21 or that fails to identify the person causing the advertisement to
10-22 be published as a licensed business broker;
10-23 (Q) having knowingly withheld from or inserted
10-24 in a statement of account or invoice a statement that made the
10-25 account or invoice inaccurate in a material way;
11-1 (R) publishing or circulating an unjustified or
11-2 unwarranted threat of legal proceedings or other action;
11-3 (S) establishing an association, by employment
11-4 or otherwise, with an unlicensed person who is expected or required
11-5 to act as a business broker or aiding or abetting or conspiring
11-6 with a person to circumvent the requirements of this article;
11-7 (T) failing or refusing on demand to furnish
11-8 copies of a document pertaining to a transaction dealing with
11-9 business brokerage to a person whose signature is affixed to the
11-10 document;
11-11 (U) conduct that constitutes dishonest dealings,
11-12 bad faith, or untrustworthiness; or
11-13 (V) discriminating against an owner or potential
11-14 owner on the basis of race, color, religion, sex, national origin,
11-15 or ancestry, including directing a prospective business buyer
11-16 interested in equivalent businesses to a different business area
11-17 according to the race, color, religion, sex, national origin, or
11-18 ancestry of the potential owner.
11-19 Sec. 12. CRIMINAL PENALTY. (a) A person commits an offense
11-20 if the person performs or offers to perform business brokerage
11-21 services for compensation and the person is not licensed under this
11-22 article.
11-23 (b) A person commits an offense if the person represents
11-24 that the person is a business broker, agent, counselor, advisor, or
11-25 representative, knowing that the person is required to be licensed
12-1 under this article and is not licensed.
12-2 (c) An offense under this section is a Class B misdemeanor.
12-3 Sec. 13. FUNDS RECEIVED BY DEPARTMENT. (a) The department
12-4 shall receive and account for all fees collected or money derived
12-5 under this article.
12-6 (b) The department shall deposit all money received under
12-7 this article to the credit of the general revenue fund in the state
12-8 treasury not later than the third working day after the date the
12-9 money is received.
12-10 Sec. 14. BUSINESS BROKER-LAWYER COMMITTEE. (a) The
12-11 Business Broker-Lawyer Committee is established. The committee is
12-12 composed of six members, three of whom are appointed by the
12-13 commission and three who are members of the State Bar of Texas
12-14 appointed by the president of the State Bar of Texas. The members
12-15 of the committee hold office for staggered terms of six years, with
12-16 the terms of one commission appointee and one State Bar appointee
12-17 expiring February 1 of each odd-numbered year. Each member holds
12-18 office until the member's successor is appointed. A vacancy for
12-19 any cause shall be filled for the expired term by the agency making
12-20 the original appointment. Appointments to the committee shall be
12-21 made without regard to race, creed, sex, religion, or national
12-22 origin.
12-23 (b) The Business Broker-Lawyer Committee shall advise the
12-24 commissioner in the adoption of rules on contract forms under
12-25 Section 9(d) of this article.
13-1 Sec. 15. BUSINESS BROKERS ADVISORY COUNCIL--ORGANIZATION AND
13-2 ADMINISTRATION. (a) The Business Brokers Advisory Council is
13-3 composed of six members appointed by the commission, two of whom
13-4 are public members and four of whom are business broker members.
13-5 To be eligible for appointment as a business broker member, the
13-6 member must:
13-7 (1) be licensed under this article to engage in
13-8 business brokerage services;
13-9 (2) subscribe to a code of professional conduct or
13-10 ethics;
13-11 (3) be a resident of this state for the five years
13-12 preceding the date of the appointment; and
13-13 (4) have performed business brokerage services as the
13-14 individual's primary occupation continuously for the five years
13-15 preceding the date of the appointment.
13-16 (b) An individual is not eligible for appointment as a
13-17 member of the council if the individual is required to register
13-18 with the secretary of state under Chapter 305, Government Code.
13-19 (c) Before March 1 of each year, the members of the council
13-20 shall elect one member to serve as presiding officer of the council
13-21 until the last day of February of the following year.
13-22 (d) Members of the council serve for staggered three-year
13-23 terms with the terms of two members expiring February 1 of each
13-24 year. In the event of a vacancy during a member's term, the
13-25 commission shall appoint to fill the unexpired part of the term a
14-1 replacement who meets the qualifications of the vacated office.
14-2 (e) A member of the council is not entitled to receive
14-3 compensation for serving as a member. A member is entitled to
14-4 reimbursement for reasonable expenses incurred in performing duties
14-5 as a member, subject to applicable limitations in the General
14-6 Appropriations Act.
14-7 (f) The council shall meet at least semiannually at the call
14-8 of the presiding officer or at the call of a majority of its
14-9 members. A decision of the council is not effective unless it
14-10 receives the affirmative vote of at least four members.
14-11 Sec. 16. BUSINESS BROKERS ADVISORY COUNCIL--POWERS. The
14-12 council shall advise the commission and the commissioner and make
14-13 recommendations on:
14-14 (1) the standards of practice, conduct, and ethics for
14-15 licensees to be adopted under this article;
14-16 (2) amounts for fees set under this article;
14-17 (3) contents for a license examination, if any, and
14-18 standards of acceptable performance;
14-19 (4) guidelines for approving continuing education
14-20 programs and educational courses for licensees that are offered,
14-21 sponsored, or accepted by any public or recognized private
14-22 provider, including:
14-23 (A) the Texas Association of Business Brokers;
14-24 (B) the State Bar of Texas;
14-25 (C) the Texas Real Estate Commission;
15-1 (D) the Texas Society of Certified Public
15-2 Accountants;
15-3 (E) any institution of higher education that
15-4 meets program and accreditation standards comparable to public
15-5 institutions of higher education as determined by the Texas Higher
15-6 Education Coordinating Board; and
15-7 (F) a nonprofit voluntary trade association,
15-8 institute, or organization whose membership is primarily composed
15-9 of persons who represent practitioners of business brokerage and
15-10 that:
15-11 (i) has written requirements of experience
15-12 and examination as a prerequisite for an individual's membership or
15-13 for granting professional designation to its members;
15-14 (ii) requires its members to subscribe to
15-15 a code of professional conduct or ethics; and
15-16 (iii) is approved in writing by the
15-17 commissioner; and
15-18 (5) educational requirements for initial and renewal
15-19 applicants.
15-20 SECTION 2. Section 12, The Securities Act (Article 581-12,
15-21 Vernon's Texas Civil Statutes), is amended to read as follows:
15-22 Sec. 12. Registration of Persons Selling. A. Except as
15-23 provided by Subsection B of this section and <in> Section 5 of this
15-24 Act, no person, firm, corporation or dealer shall, directly or
15-25 through agents or salesmen, offer for sale, sell or make a sale of
16-1 any securities in this state without first being registered as in
16-2 this Act provided. No salesman or agent shall, in behalf of any
16-3 dealer, sell, offer for sale, or make sale of any securities within
16-4 the state unless registered as a salesman or agent of a registered
16-5 dealer under the provisions of this Act.
16-6 B. Notwithstanding any other provision of this Act, a person
16-7 licensed under Article 9103, Revised Statutes, is not required to
16-8 register as a dealer, agent, or salesman to engage in business
16-9 brokerage services, as defined by that article, if the person acts
16-10 as a broker between and among principals for the sale in a single
16-11 transaction of a majority of the stock or equity securities of
16-12 privately held businesses incidental to a privately negotiated
16-13 purchase agreement under which the managerial control of the
16-14 business will devolve upon the purchaser or purchasers.
16-15 SECTION 3. Section 3, The Real Estate License Act (Article
16-16 6573a, Vernon's Texas Civil Statutes), is amended to read as
16-17 follows:
16-18 Sec. 3. The provisions of this Act shall not apply to any of
16-19 the following persons and transactions, and each and all of the
16-20 following persons and transactions are hereby exempted from the
16-21 provisions of this Act:
16-22 (1) an attorney at law licensed in this state or in
16-23 any other state;
16-24 (2) an attorney in fact under a duly executed power of
16-25 attorney authorizing the consummation of a real estate transaction;
17-1 (3) a public official in the conduct of his official
17-2 duties;
17-3 (4) a person calling the sale of real estate by
17-4 auction under the authority of a license issued by this state
17-5 provided the person does not perform any other act of a real estate
17-6 broker or salesman as defined by this Act;
17-7 (5) a person acting under a court order or under the
17-8 authority of a will or a written trust instrument;
17-9 (6) a salesperson employed by an owner in the sale of
17-10 structures and land on which said structures are situated, provided
17-11 such structures are erected by the owner in the due course of his
17-12 business;
17-13 (7) an on-site manager of an apartment complex;
17-14 (8) transactions involving the sale, lease, or
17-15 transfer of any mineral or mining interest in real property;
17-16 (9) an owner or his employees in renting or leasing
17-17 his own real estate whether improved or unimproved;
17-18 (10) transactions involving the sale, lease, or
17-19 transfer of cemetery lots; <or>
17-20 (11) transactions involving the renting, leasing, or
17-21 management of hotels or motels; or
17-22 (12) an individual licensed as a business broker under
17-23 Article 9103, Revised Statutes, and performing business brokerage
17-24 services as defined in that article for a transaction in which the
17-25 value of real estate or an interest in real estate is less than 50
18-1 percent of the value of the total purchase price of the business.
18-2 SECTION 4. Section 18(b), Texas Appraiser Licensing and
18-3 Certification Act (Article 6573a.2, Vernon's Texas Civil Statutes),
18-4 is amended to read as follows:
18-5 (b) This Act does not prohibit:
18-6 (1) a real estate broker or salesman licensed under
18-7 The Real Estate License Act (Article 6573a, Vernon's Texas Civil
18-8 Statutes) but not licensed or certified under this Act from
18-9 performing an appraisal in a nonfederally related transaction; <or>
18-10 (2) the requirement of a real estate broker's or
18-11 salesman's license for an appraisal in nonfederally related
18-12 transactions by a person not licensed or certified under this Act;
18-13 or
18-14 (3) a business broker licensed under Article 9103,
18-15 Revised Statutes, but not licensed or certified under this Act,
18-16 from performing an appraisal of a business in connection with the
18-17 sale or purchase of the business in a nonfederally related
18-18 transaction.
18-19 SECTION 5. (a) In appointing the initial members of the
18-20 Business Broker-Lawyer Committee, the Texas Commission of Licensing
18-21 and Regulation and the president of the State Bar of Texas shall
18-22 each appoint one person to a term expiring February 1, 1995; one to
18-23 a term expiring February 1, 1997; and one to a term expiring
18-24 February 1, 1999.
18-25 (b) In appointing the initial members of the Business
19-1 Brokers Advisory Council, the Texas Commission of Licensing and
19-2 Regulation shall appoint two persons to terms expiring February 1,
19-3 1994; two to terms expiring February 1, 1995; and two to terms
19-4 expiring February 1, 1996.
19-5 SECTION 6. (a) A person who actively practiced the
19-6 occupation of business broker in this state for a continuous period
19-7 of at least six months preceding the effective date of this Act is
19-8 entitled to obtain a license under Article 9103, Revised Statutes,
19-9 as added by this Act, without fulfilling the educational
19-10 requirements prescribed by Section 5 of that article if the person
19-11 possesses the other qualifications required by that article and if,
19-12 before March 1, 1994, the person:
19-13 (1) submits an application as required by that
19-14 article; and
19-15 (2) pays the required license fee.
19-16 (b) The commissioner of licensing and regulation by rule may
19-17 establish the elements of active practice of the occupation of
19-18 business broker for purposes of this section.
19-19 SECTION 7. This Act takes effect September 1, 1993, except
19-20 that Section 1 of this Act, to the extent it prohibits performing
19-21 business brokerage services for compensation without a license,
19-22 takes effect January 1, 1994.
19-23 SECTION 8. The importance of this legislation and the
19-24 crowded condition of the calendars in both houses create an
19-25 emergency and an imperative public necessity that the
20-1 constitutional rule requiring bills to be read on three several
20-2 days in each house be suspended, and this rule is hereby suspended.