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.