By Grusendorf H.B. No. 2408 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the licensing of certain persons who represent or 1-3 advise others in business brokerage matters; providing a criminal 1-4 penalty. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 Art. . LICENSING OF BUSINESS BROKERS 1-7 Sec. 1. This Act shall be known and may be cited as "The 1-8 Business Brokers License Act". 1-9 (1) "Commission" means the Texas Commission of 1-10 Licensing and Regulation. 1-11 (2) "Commissioner" means the commissioner of licensing 1-12 and regulation. 1-13 (3) "Council" means the Business Brokers Advisory 1-14 Council. 1-15 (4) "Department" means the Texas Department of 1-16 Licensing and Regulation. 1-17 (5) "Person" means an individual, partnership, 1-18 corporation, or association. 1-19 (6) "Business Broker" means a person who performs or 1-20 supervises others in the performance of business brokerage. 1-21 (7) "Business brokerage services" means: receiving a 1-22 fee or commission when functioning as an intermediary through a 1-23 fiduciary relationship to a buying entity or a selling entity and 2-1 is involved in any of the aspects that relate to the selling of any 2-2 business, business enterprise, business assets, or securities of a 2-3 business to accomplish the sale of a business, or anyone who 2-4 receives a fee for the evaluation of a business or business 2-5 enterprise, whether that business enterprise is active, inactive or 2-6 proposed. 2-7 Sec. 2. REGISTRATION REQUIRED: EXEMPTIONS. 2-8 (a) An individual may not perform business brokerage 2-9 services for compensation unless the individual is a licensed 2-10 business broker. 2-11 (b) A business broker may not perform business brokerage 2-12 services for compensation unless the individual is employed by or 2-13 associated with and acting for a licensed business broker. 2-14 (c) A person may not represent that an individual is a 2-15 business broker, agent, advisor, or representative unless the 2-16 individual is licensed under this act. 2-17 (d) The licensing requirement imposed under Subsection (a) 2-18 of this section does not apply to: 2-19 (1) an individual acting under a general power of 2-20 attorney, unless the individual represents that the individual is a 2-21 business broker, agent, advisor, or representative; 2-22 (2) an individual licensed to practice law in this 2-23 state; 2-24 (3) an employee of a business owner or of an 2-25 affiliated or subsidiary company of a business owner, if the 3-1 employee performs business brokerage services for the property 3-2 owner or for a partnership, joint venture, or corporation in which 3-3 the property owner owns an interest; 3-4 (4) a public employee or officer who provides 3-5 assistance to a business owner in the course of the employee's or 3-6 officer's duties; or 3-7 (5) a certified public accountant under the Public 3-8 Accountancy Act of 1979 (Article 41a-1), Vernon's Texas Civil 3-9 Statutes). 3-10 (e) An individual who is not required to be registered under 3-11 this article may register under this article if the individual 3-12 meets the registration requirements imposed by Sections 3, 4, and 5 3-13 of this article. An individual exempt from registration under this 3-14 article who elects to be registered under this article is subject 3-15 to the provisions of this article. 3-16 (f) The requirements imposed by Subsection (b) of this 3-17 section and Subsections (b) and (c) of Section 3 of this article do 3-18 not apply to an individual who applies for licensure under this 3-19 article before September 1, 1993. 3-20 (g) A licensed business broker is exempt from licensing with 3-21 the Texas Real Estate Commission if real estate or an interest in 3-22 real property is incidental to or accompanies the sale of the 3-23 business, or acquiring either a license or exemption from obtaining 3-24 a license from the State Securities Commission if the sale of a 3-25 business is in the form of a stock sale. All evaluations or 4-1 appraisals of a business are exempt from licensing under the Texas 4-2 Appraisers Licensing and Certification Board, if such evaluation or 4-3 appraisal is accomplished by a licensed business broker. 4-4 Sec. 3. ELIGIBILITY. 4-5 (a) To be eligible to register under this article, an 4-6 individual must: 4-7 (1) be at least 18 years of age; 4-8 (2) hold a high school diploma or an equivalent 4-9 credential; 4-10 (3) pay the fees required by the commission; 4-11 (4) establish a place of business in this state or 4-12 designate an agent for service of legal process who is a resident 4-13 of this state; and 4-14 (5) meet any additional qualifications required by 4-15 this article or by the commissioner in the exercise of the 4-16 commissioner's authority under this article or under Article 9100, 4-17 Revised Statutes. 4-18 (b) To be eligible to license as a business broker under 4-19 this article, an applicant must complete at least 15 classroom 4-20 hours of educational courses approved by the commissioner, of which 4-21 at least four hours must include instruction on laws and legal 4-22 issues in this state related to business brokerage services. 4-23 Sec. 5. LICENSE REGISTRATION PROCEDURE; RENEWAL. 4-24 (a) An applicant for licensure must file an application with 4-25 the department on a printed form prescribed by the commissioner. 5-1 The application must be accompanied by a non-refundable application 5-2 fee and a license fee, which shall be refunded if the department 5-3 does not approve the application. 5-4 (b) The commissioner shall act on an initial application not 5-5 later than the 31st day after the date on which the department 5-6 receives the application. 5-7 (c) The commissioner may waive any licensing requirement for 5-8 an applicant who holds a valid registration certificate or license 5-9 issued by another state that has requirements that were, on the 5-10 date of the registration or licensing, substantially equal to those 5-11 of this state. An applicant for registration under this subsection 5-12 shall apply in the same manner as any other applicant and shall 5-13 furnish the department with documents and other evidence 5-14 substantiating the applicant's qualifications as required by the 5-15 department. 5-16 (d) The commissioner shall issue to each applicant that 5-17 qualifies for licensing under this article the appropriate 5-18 certificate of licensing. Except as otherwise provided by the 5-19 commission, a license is valid for two years from the date of 5-20 issuance. 5-21 (e) On the timely receipt of the required renewal fee, the 5-22 commissioner shall issue to an eligible licensed business broker 5-23 certificate of renewal of license that is valid for two years after 5-24 the date of issuance. 5-25 (f) The commissioner by rule shall require that each 6-1 registrant complete during each registration period a minimum of 20 6-2 classroom hours of continuing education courses recognized by the 6-3 commissioner as a prerequisite to renewal of registration. The 6-4 rules must require that at least six of the 20 hours required 6-5 include instruction on laws and legal issues in this state related 6-6 to business brokerage services. 6-7 (g) If an individual's registration has been expired for 6-8 less than 30 days after the date of expiration, the individual may 6-9 renew the registration by paying the unpaid renewal fees plus a 6-10 late license renewal fee. If the individual's license has been 6-11 expired for one year or more, the individual may not renew the 6-12 license. The individual may obtain a new certificate of license by 6-13 complying with the requirements for an original application. 6-14 Sec. 6. GENERAL POWERS AND DUTIES OF COMMISSIONER. 6-15 (a) The commissioner by rule shall establish standards of 6-16 practice, conduct, and ethics for registrants. 6-17 (b) The commissioner by rule shall recognize appropriate 6-18 continuing education programs for registrants under this article. 6-19 (c) The commissioner may recognize any educational program 6-20 or course that is related to business brokerage services and that 6-21 is offered or sponsored by any public or recognized private 6-22 provider, including: 6-23 (1) the Texas Association of Business Brokers; 6-24 (2) the State Bar of Texas; 6-25 (3) the Texas Real Estate Commission; 7-1 (4) any institution of higher education that meets 7-2 program and accreditation standards comparable to public 7-3 institutions of higher education as determined by the Texas Higher 7-4 Education Coordinating Board; or 7-5 (5) a nonprofit voluntary trade association, 7-6 institute, or organization whose membership is primarily composed 7-7 of persons who represent practitioners of business brokerage and 7-8 that: 7-9 (A) has written requirements of experience an 7-10 examination as a prerequisite for an individual's membership or for 7-11 granting professional designation to its members; and 7-12 (B) subscribes to a code of professional conduct 7-13 or ethics; and, 7-14 (C) is approved in writing by the commissioner. 7-15 (c) The commissioner may recognize a private provider of an 7-16 educational program or course if the provider: 7-17 (1) applies with the department on a printed form 7-18 prescribed by the commissioner; 7-19 (2) pays a non-refundable application fee established 7-20 by the commission; and 7-21 (3) pays an educational provider's fee established by 7-22 the commission, which shall be refunded if the commissioner does 7-23 not recognize the provider's educational program or course 7-24 offering. 7-25 (d) The Commissioner may authorize the use of standard forms 8-1 for the use of licensed business brokers to facilitate the buying 8-2 and selling of businesses. 8-3 Sec. 7. BUSINESS BROKERAGE REGISTRATION FUND. 8-4 (a) The department shall receive and account for all fees 8-5 collected or money derived under this article. 8-6 (b) The department shall deposit all money received under 8-7 this article in the state treasury not later than three working 8-8 days after the money is received. 8-9 Sec. 8. DISCIPLINARY ACTION. After a hearing the commissioner may 8-10 deny, suspend, or revoke a certificate of license and may impose 8-11 administrative sanctions and penalties and seek injunctive relief 8-12 and civil penalties against a registrant as provided by Article 8-13 9100, Revised Statutes, on the following grounds: 8-14 (1) a violation of this article or of a rule 8-15 applicable to the registrant adopted by the commissioner under this 8-16 article; 8-17 (2) gross incompetency in the performance of business 8-18 brokerage; 8-19 (3) dishonesty or fraud committed while performing 8-20 business brokerage or business evaluation services; 8-21 (4) violation of the standards of ethics adopted by 8-22 the commissioner; or 8-23 (5) the broker, while performing an act constituting 8-24 an act of business brokerage, as defined by this Act, has been 8-25 guilty of: (A) making a material misrepresentation, or failing to 9-1 disclose to a potential purchaser any latent defect or any false 9-2 representation known to the broker. 9-3 (B) making a false promise of a character likely 9-4 to influence, persuade, or induce any person to enter into a 9-5 contract or agreement when the licensee could not or did not intend 9-6 to keep such promise; 9-7 (C) pursuing a continued and flagrant course of 9-8 misrepresentation for making of false promises through agents 9-9 salesmen, advertising, or otherwise; 9-10 (D) failing to make clear, to all parties to a 9-11 transaction, which party he is acting for, or receiving 9-12 compensation from more than one party except with the full 9-13 knowledge and consent of all parties; 9-14 (E) failing within a reasonable time to properly 9-15 account for or remit money coming into his possession which belongs 9-16 to others, or commingling money belonging to others with his own 9-17 funds; 9-18 (F) paying a commission or fees to or dividing a 9-19 commission or fees with anyone not licensed as a business broker in 9-20 this state or in any other state for compensation for services as 9-21 business broker; 9-22 (G) failing to specify in a listing contract a 9-23 definite termination date which is not subject to prior notice; 9-24 (H) accepting, receiving, or charging an 9-25 undisclosed commission, rebate, or direct profit on expenditures 10-1 made for a principal; 10-2 (I) soliciting, selling, or offering for sale a 10-3 business under a scheme or program that constitutes a lottery or 10-4 deceptive practice; 10-5 (J) acting in the dual capacity of broker and 10-6 undisclosed principal in a transaction; 10-7 (K) guaranteeing, authorizing, or permitting a 10-8 person to guarantee that future profits will result from a resale 10-9 of a business; 10-10 (L) placing a sign on property offering it for 10-11 sale without the written consent of the owner or his authorized 10-12 agent; 10-13 (M) inducing or attempting to induce a party to 10-14 a contract of sale to break the contract for the purpose of 10-15 substituting in lieu thereof a new contract; 10-16 (N) negotiating or attempting to negotiate the 10-17 sale or exchange of a business with an owner, knowing that the 10-18 owner had a written outstanding contract, granting exclusive agency 10-19 in connection with the business to another business broker; 10-20 (O) offering a business for sale without the 10-21 knowledge and consent of the owner or his authorized agent, or on 10-22 terms other than those authorized by the owner or his authorized 10-23 agent; 10-24 (P) publishing, or causing to be published, an 10-25 advertisement including, but not limited to, advertising by 11-1 newspaper, radio, television, or display which is misleading, or 11-2 which is likely to deceive the public, or which in any manner tends 11-3 to create a misleading impression, or which fails to identify the 11-4 person causing the advertisement to be published as a licensed 11-5 business broker; 11-6 (Q) having knowingly withheld from or inserted 11-7 in a statement of account or invoice, a statement that made it 11-8 inaccurate in a material way; 11-9 (R) publishing or circulating an unjustified or 11-10 unwarranted threat of legal proceedings, or other action; 11-11 (S) establishing an association, by employment 11-12 or otherwise, with an unlicensed person who is expected or required 11-13 to act as a business broker licensee, or aiding or abetting or 11-14 conspiring with a person to circumvent the requirements of this 11-15 Act; 11-16 (T) failing or refusing on demand to furnish 11-17 copies of document pertaining to a transaction dealing with 11-18 business brokerage to a person whose signature is affixed to the 11-19 document; 11-20 (U) conduct which constitutes dishonest 11-21 dealings, bad faith, or untrustworthiness; 11-22 (V) acting negligently or incompetently in 11-23 performing an act for which a person is required to hold a business 11-24 brokers license; 11-25 (W) disregarding or violating a provision of 12-1 this Act; 12-2 (AA) discriminating against an owner, 12-3 potential purchaser, lessor, or potential lessee on the basis of 12-4 race, color, religion, sex, national origin, or ancestry, including 12-5 directing prospective business buyers interested in equivalent 12-6 businesses to different areas according to the race, color, 12-7 religion, sex, national origin, or ancestry of the potential owner 12-8 or lessee. 12-9 Sec. 9. CRIMINAL PENALTY. 12-10 (a) An individual commits an offense if the individual is 12-11 required to register under this article, is not registered under 12-12 this article, and performs or offers to perform business brokerage 12-13 services for compensation. 12-14 (b) A person commits an offense if the person represents 12-15 that an individual is a business broker, agent, counselor, advisor, 12-16 or representative, knowing that the individual is required to be 12-17 registered under this article and is not registered. 12-18 (c) An offense under this section is a Class B misdemeanor. 12-19 Sec. 10. BUSINESS BROKERS ADVISORY COUNCIL. 12-20 (a) The Business Brokers Advisory Council is created. The 12-21 council is composed of three members appointed by the commission. 12-22 The commission will select two members who are licensed business 12-23 brokers or exempt under this license act, and, additionally met the 12-24 criteria below. The third member will be a public member selected 12-25 by the commission. The licensed business broker or exempt members 13-1 must: 13-2 (1) subscribe to a code of professional conduct or 13-3 ethics, 13-4 (2) be a resident of this state for the five years 13-5 preceding the date of the appointment; and 13-6 (3) have performed or supervised the performance of 13-7 business brokerage services as the individual's primary occupation 13-8 continuously for the five years preceding the date of the 13-9 appointment or is exempt under Section 2. 13-10 (b) An individual is not eligible for appointment as a 13-11 member of the council if the individual is required to register 13-12 with the secretary of state under Chapter 305, Government Code. 13-13 (c) Before March 1 of each year, the members of the council 13-14 shall elect one member to serve as presiding officer of the council 13-15 until the last day of February of the following year. 13-16 (d) Members of the council serve for staggered three-year 13-17 terms with the term of one member expiring February 1 of each year. 13-18 In the event of a vacancy during a member's term, the commissioner 13-19 shall appoint to fill the unexpired part of the term a replacement 13-20 who meets the qualifications of the vacated office. 13-21 (e) The council shall: 13-22 (1) recommend to the commissioner standards of 13-23 practice, conduct, and ethics for registrants to be adopted under 13-24 this article; 13-25 (2) recommend to the commission amounts for the fees 14-1 it may set under this article; 14-2 (3) recommend to the commissioner contents for the 14-3 license examination and standards of acceptable performance; 14-4 (4) assist and advise the commissioner in recognizing 14-5 continuing education programs and educational courses for 14-6 registrants; and 14-7 (5) advise the commissioner in establishing 14-8 educational requirements for initial and renewal applicants. 14-9 (f) A member of the council is not entitled to receive 14-10 compensation for serving as a member. A member is entitled to 14-11 reimbursement for reasonable expenses incurred in performing duties 14-12 as a member, subject to applicable limitations in the General 14-13 Appropriations Act. 14-14 (g) The council shall meet at least semiannually at the call 14-15 of the presiding officer or at the call of a majority of its 14-16 members. A decision of the council is not effective unless it 14-17 receives the affirmative vote of at least two members. 14-18 SECTION 2. The importance of this legislation and the crowded 14-19 condition of the calendars in both houses create an emergency and 14-20 an imperative public necessity that the constitutional rule 14-21 requiring bills to be read on three several days in each house be 14-22 suspended, and this rule is hereby suspended.