H.B. No. 1295
1-1 AN ACT
1-2 relating to the regulation of certain securities.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsection N, Section 2, The Securities Act
1-5 (Article 581-2, Vernon's Texas Civil Statutes), is amended to read
1-6 as follows:
1-7 N. The Board and Commissioner are subject to Chapters 551,
1-8 2001, and 2002, Government Code <the open meetings law, Chapter
1-9 271, Acts of the 60th Legislature, Regular Session, 1967, as
1-10 amended (Article 6252-17, Vernon's Texas Civil Statutes), and the
1-11 Administrative Procedure and Texas Register Act, as amended
1-12 (Article 6252-13a, Vernon's Texas Civil Statutes)>.
1-13 SECTION 2. The Securities Act (Article 581-1 et seq.,
1-14 Vernon's Texas Civil Statutes) is amended by adding Section 3-1 to
1-15 read as follows:
1-16 Sec. 3-1. NONEXCLUSIVITY OF MEANS OF ENFORCEMENT. The
1-17 Commissioner may utilize any or all penalties, sanctions, remedies,
1-18 or relief as the Commissioner deems necessary.
1-19 SECTION 3. Subsection A, Section 4, The Securities Act
1-20 (Article 581-4, Vernon's Texas Civil Statutes), is amended to read
1-21 as follows:
1-22 A. The term "security" or "securities" shall include
1-23 any limited partner interest in a limited partnership, share,
1-24 stock, treasury stock, stock certificate under a voting trust
2-1 agreement, collateral trust certificate, equipment trust
2-2 certificate, preorganization certificate or receipt, subscription
2-3 or reorganization certificate, note, bond, debenture, mortgage
2-4 certificate or other evidence of indebtedness, any form of
2-5 commercial paper, certificate in or under a profit sharing or
2-6 participation agreement, certificate or any instrument representing
2-7 any interest in or under an oil, gas or mining lease, fee or title,
2-8 or any certificate or instrument representing or secured by an
2-9 interest in any or all of the capital, property, assets, profits or
2-10 earnings of any company, investment contract, or any other
2-11 instrument commonly known as a security, whether similar to those
2-12 herein referred to or not. Provided, however, that this definition
2-13 shall not apply to any insurance policy, endowment policy, annuity
2-14 contract, optional annuity contract, or any contract or agreement
2-15 in relation to and in consequence of any such policy or contract,
2-16 issued by an insurance company subject to the supervision or
2-17 control of the Texas Department <State Board> of Insurance when the
2-18 form of such policy or contract has been duly filed with the
2-19 Department <Board> as now or hereafter required by law.
2-20 SECTION 4. Section 5, The Securities Act (Article 581-5,
2-21 Vernon's Texas Civil Statutes), is amended to read as follows:
2-22 Sec. 5. Exempt Transactions. Except as hereinafter in this
2-23 Act specifically provided, the provisions of this Act shall not
2-24 apply to the sale of any security when made in any of the following
2-25 transactions and under any of the following conditions, and the
2-26 company or person engaged therein shall not be deemed a dealer
2-27 within the meaning of this Act; that is to say, the provisions of
3-1 this Act shall not apply to any sale, offer for sale, solicitation,
3-2 subscription, dealing in or delivery of any security under any of
3-3 the following transactions or conditions:
3-4 A. At any judicial, executor's, administrator's,
3-5 guardian's or conservator's sale, or any sale by a receiver or
3-6 trustee in insolvency or bankruptcy.
3-7 B. The sale by or for the account of a pledge holder
3-8 or mortgagee, selling or offering for sale or delivery in the
3-9 ordinary course of business to liquidate a bona fide debt, of a
3-10 security pledged in good faith as security for such debt.
3-11 C. (1) Sales of securities made by or in behalf of a
3-12 vendor, whether by dealer or other agent, in the ordinary course of
3-13 bona fide personal investment of the personal holdings of such
3-14 vendor, or change in such investment, if such vendor is not engaged
3-15 in the business of selling securities and the sale or sales are
3-16 isolated transactions not made in the course of repeated and
3-17 successive transactions of a like character; provided, that in no
3-18 event shall such sales or offerings be exempt from the provisions
3-19 of this Act when made or intended by the vendor or his agent, for
3-20 the benefit, either directly or indirectly, of any company or
3-21 corporation except the individual vendor (other than a usual
3-22 commission to said agent), and provided further, that any person
3-23 acting as agent for said vendor shall be registered pursuant to
3-24 this Act;
3-25 (2) Sales by or on behalf of any insurance
3-26 company subject to the supervision or control of the Texas
3-27 Department <State Board> of Insurance of any security owned by such
4-1 company as a legal and bona fide investment, provided that in no
4-2 event shall any such sale or offering be exempt from the provisions
4-3 of this Act when made or intended, either directly or indirectly,
4-4 for the benefit of any other company as that term is defined in
4-5 this Act.
4-6 D. The distribution by a corporation of securities
4-7 direct to its stockholders as a stock dividend or other
4-8 distribution paid out of earnings or surplus.
4-9 E. Any offer and any transaction pursuant to any offer
4-10 by the issuer of its securities to its existing security holders
4-11 (including persons who at the time of the transaction are holders
4-12 of convertible securities or nontransferable warrants) if no
4-13 commission or other remuneration (other than a stand-by commission)
4-14 is paid or given directly or indirectly for soliciting any security
4-15 holder in this State.
4-16 F. The issue in good faith of securities by a company
4-17 to its security holders, or creditors, in the process of a bona
4-18 fide reorganization of the company made in good faith, or the issue
4-19 in good faith of securities by a company, organized solely for the
4-20 purpose of taking over the assets and continuing the business of a
4-21 predecessor company, to the security holders or creditors of such
4-22 predecessor company, provided that in either such case such
4-23 securities are issued in exchange for the securities of such
4-24 holders or claims of such creditors, or both, and in either such
4-25 case security holders or creditors do not pay or give or promise
4-26 and are not obligated to pay or give any consideration for the
4-27 securities so issued other than the securities of or claims against
5-1 said company or its predecessor then held or owned by them.
5-2 G. The issue or sale of securities (a) by one
5-3 corporation to another corporation or the security holders thereof
5-4 pursuant to a vote by one or more classes of such security holders,
5-5 as required by the certificate of incorporation or the applicable
5-6 corporation statute, in connection with a merger, consolidation or
5-7 sale of corporate assets, or (b) by one corporation to its own
5-8 stockholders in connection with the change of par value stock to no
5-9 par value stock or vice versa, or the exchange of outstanding
5-10 shares for the same or a greater or smaller number of shares;
5-11 provided that in any such case such security holders do not pay or
5-12 give or promise and are not obligated to pay or give any
5-13 consideration for the securities so issued or sold other than the
5-14 securities of the corporation then held by them.
5-15 H. The sale of any security to any bank, trust
5-16 company, building and loan association, insurance company, surety
5-17 or guaranty company, savings institution, investment company as
5-18 defined in the Investment Company Act of 1940, small business
5-19 investment company as defined in the Small Business Investment Act
5-20 of 1958, as amended, or to any registered dealer actually engaged
5-21 in buying and selling securities.
5-22 I. Provided such sale is made without any public
5-23 solicitation or advertisements:
5-24 (a) the sale of any security by the issuer
5-25 thereof so long as the total number of security holders of the
5-26 issuer thereof does not exceed thirty-five (35) persons after
5-27 taking such sale into account;
6-1 (b) the sale or distribution by an employer or
6-2 its participating subsidiary, if any, of a security under a thrift,
6-3 savings, stock purchase, retirement, pension, profit-sharing,
6-4 option, bonus, appreciation right, incentive, or similar employee
6-5 benefit plan for employees or directors of the employer or its
6-6 subsidiary; or
6-7 (c) the sale by an issuer of its securities
6-8 during the period of twelve (12) months ending with the date of the
6-9 sale in question to not more than fifteen (15) persons (excluding,
6-10 in determining such fifteen (15) persons, purchasers of securities
6-11 in transactions exempt under other provisions of this Section 5,
6-12 purchasers of securities exempt under Section 6 hereof and
6-13 purchasers of securities which are part of an offering registered
6-14 under Section 7 hereof), provided such persons purchased such
6-15 securities for their own account and not for distribution.
6-16 <The commissioner may by order revoke or suspend the
6-17 exemption under clause (c) of this Subsection I with respect to any
6-18 security if he has reasonable cause to believe that the plan of
6-19 business of the issuer of such security, the security, or the sale
6-20 thereof would tend to work a fraud or deceit upon the purchaser or
6-21 purchasers thereof, such order to be subject to review in the
6-22 manner provided by Section 24 of this Act. The revocation or
6-23 suspension of this exemption shall be inapplicable to the issuer
6-24 until such issuer shall have received actual notice from the
6-25 commissioner of such revocation or suspension.>
6-26 J. Wherein the securities disposed of consist
6-27 exclusively of notes or bonds secured by mortgage or vendor's lien
7-1 upon real estate or tangible personal property, and the entire
7-2 mortgage is sold or transferred with all of the notes or bonds
7-3 secured thereby in a single transaction.
7-4 K. Any security or membership issued by a corporation
7-5 or association, organized exclusively for religious, educational,
7-6 benevolent, fraternal, charitable, or reformatory purposes and not
7-7 for pecuniary profit, and no part of the net earnings of which
7-8 inures to the benefit of any stockholder, shareholder, or
7-9 individual members, and where no commission or remuneration is paid
7-10 or given or is to be paid or given in connection with the
7-11 disposition thereof.
7-12 L. The sale by the issuer itself, or by a registered
7-13 dealer, of any security issued or guaranteed by any bank organized
7-14 and subject to regulation under the laws of the United States or
7-15 under the laws of any State or territory of the United States, or
7-16 any insular possession thereof, or by any savings and loan
7-17 association organized and subject to regulation under the laws of
7-18 this State, or the sale by the issuer itself of any security issued
7-19 by any federal savings and loan association.
7-20 M. The sale by the issuer itself, or by a registered
7-21 dealer, of any security either issued or guaranteed by the United
7-22 States or by any territory or insular possession thereof, or by the
7-23 District of Columbia, or by any state of the United States, or
7-24 political subdivision thereof (including but not limited to any
7-25 county, city, municipal corporation, district, or authority), or by
7-26 any public or governmental agency or instrumentality of any of the
7-27 foregoing.
8-1 N. The sale and issuance of any securities issued by
8-2 any farmers' cooperative marketing association organized under
8-3 Chapter 52, Agriculture Code, or the predecessor of that law
8-4 (Article 5737 et seq., Revised Statutes); the sale and issuance of
8-5 any securities issued by any mutual loan corporation <corporations>
8-6 organized under Chapter 54, Agriculture Code, or the predecessor of
8-7 that law (Article 2500 et seq., Revised Statutes); the sale and
8-8 issuance of any equity securities issued by any cooperative
8-9 association organized under the Cooperative Association Act, as
8-10 amended (Article 1396-50.01, Vernon's Texas Civil Statutes); and
8-11 the sale of any securities issued by any farmers' cooperative
8-12 society organized under Chapter 51, Agriculture Code, or the
8-13 predecessor of that law (Article 2514 et seq., Revised Statutes).
8-14 Provided, however, this exemption shall not be applicable to agents
8-15 and salesmen of any farmers' cooperative marketing association,
8-16 mutual loan corporation, cooperative association, or farmers'
8-17 cooperative society when the sale of such securities is made to
8-18 non-members, or when the sale of such securities is made to members
8-19 or non-members and a commission is paid or contracted to be paid to
8-20 the said agents or salesmen.
8-21 O. The sale by a registered dealer of outstanding
8-22 securities provided that:
8-23 (1) Such securities form no part of an unsold
8-24 allotment to or subscription by such dealer as a participant in the
8-25 distribution of such securities by the issuer thereof; and
8-26 (2) Securities of the same class, of the same
8-27 issuer, are outstanding in the hands of the public; and
9-1 (3) Such securities are offered for sale, in
9-2 good faith, at prices reasonably related to the current market
9-3 price of such securities at the time of such sale; and
9-4 (4) No part of the proceeds of such sale are
9-5 paid directly or indirectly to the issuer of such securities; and
9-6 (5) Such sale is not directly or indirectly for
9-7 the purposes of providing or furthering any scheme to violate or
9-8 evade any provision of this Act; and
9-9 (6) The right to sell or resell such securities
9-10 has not been enjoined by any court of competent jurisdiction in
9-11 this State by proceedings instituted by an officer or agency of
9-12 this State charged with enforcement of this Act; and
9-13 (7) The right to sell such securities has not
9-14 been revoked or suspended by the commissioner under any of the
9-15 provisions of this Act, or, if so, revocation or suspension is not
9-16 in force and effect; and
9-17 (8) At the time of such sale, the issuer of such
9-18 securities shall be a going concern actually engaged in business
9-19 and shall then be neither in an organization stage nor in
9-20 receivership or bankruptcy; and
9-21 (9) Such securities or other securities of the
9-22 issuer of the same class have been registered by qualification,
9-23 notification or coordination under Section 7 of this Act; or at the
9-24 time of such sale at least the following information about the
9-25 issuer shall appear in a recognized securities manual or in a
9-26 statement, in form and extent acceptable to the commissioner, filed
9-27 with the commissioner by the issuer or by a registered dealer:
10-1 (a) A statement of the issuer's principal
10-2 business;
10-3 (b) A balance sheet as of a date within
10-4 eighteen (18) months of the date of such sale; and
10-5 (c) Profit and loss statements and a
10-6 record of the dividends paid, if any, for a period of not less than
10-7 three (3) years prior to the date of such balance sheet or for the
10-8 period of existence of the issuer, if such period of existence is
10-9 less than three (3) years.
10-10 The term "recognized securities manual" means a nationally
10-11 distributed manual of securities that is approved for use hereunder
10-12 by the Board.
10-13 The Commissioner <commissioner> may issue a stop order or by
10-14 order prohibit, revoke or suspend the exemption under this
10-15 Subsection O with respect to any security if the Commissioner <he>
10-16 has reasonable cause to believe that the plan of business of the
10-17 issuer of such security, the security, or the sale thereof would
10-18 tend to work a fraud or deceit upon any purchaser or purchasers
10-19 thereof, such order to be subject to review in the manner provided
10-20 by Section 24 of this Act. Notice of any court injunction enjoining
10-21 the sale, or resale, of any such security, or of an order revoking
10-22 or suspending the exemption under this subdivision with respect to
10-23 any security, shall be delivered or shall be mailed by certified or
10-24 registered mail with return receipt requested, to any dealers
10-25 believed to be selling, or offering for sale, securities of the
10-26 type referred to in the notice; and the prohibitions of (6) and (7)
10-27 above of this Subsection O shall be inapplicable to any dealer
11-1 until the dealer <he> has received actual notice from the
11-2 commissioner of such revocation or suspension.
11-3 The Board may for cause shown revoke or suspend the
11-4 recognition hereunder of any manuals previously approved under this
11-5 Subsection but no such action may be taken unless upon notice and
11-6 opportunity for hearing before the Board or a hearings officer as
11-7 now or hereafter required by law <appointed by the Board>. A
11-8 judgment sustaining the Board in the action complained of shall not
11-9 bar after one year an application by the plaintiff for approval of
11-10 its manual or manuals hereunder, nor shall a judgment in favor of
11-11 the plaintiff prevent the Board from thereafter revoking such
11-12 recognition for any proper cause which may thereafter accrue or be
11-13 discovered.
11-14 P. The execution by a dealer of an unsolicited order
11-15 for the purchase of securities, where the initial offering of such
11-16 securities has been completed and provided that the dealer acts
11-17 solely as an agent for the purchaser, has no direct or indirect
11-18 interest in the sale or distribution of the security ordered, and
11-19 receives no commission, profit, or other compensation from any
11-20 source other than the purchaser.
11-21 Q. The sales of interests <interest> in and under oil,
11-22 gas or mining leases, fees or titles, or contracts relating
11-23 thereto, where (1) the total number of sales by any one owner of
11-24 interests, whether whole, fractional, segregated or undivided in
11-25 any single oil, gas or mineral lease, fee or title, or contract
11-26 relating thereto, shall not exceed thirty-five (35) within a period
11-27 of twelve (12) consecutive months and (2) no use is made of
12-1 advertisement or public solicitation; provided, however, if such
12-2 sale or sales are made by an agent for such owner or owners, such
12-3 agent shall be licensed pursuant to this Act. No oil, gas or
12-4 mineral unitization or pooling agreement shall be deemed a sale
12-5 under this Act.
12-6 R. The sale by the issuer itself, or by a subsidiary
12-7 of such issuer, of any securities which would be exempt if sold by
12-8 a registered dealer under Section 6 (other than Section 6E
12-9 <Subsection 6-E>) of this Act.
12-10 S. The sale by or through a registered dealer of any
12-11 option if at the time of the sale of the option:
12-12 (1) the performance of the terms of the option
12-13 is guaranteed by any broker-dealer registered under the federal
12-14 Securities Exchange Act of 1934, as amended, which guaranty and
12-15 broker-dealer are in compliance with such requirements or
12-16 regulations as may be approved or adopted by the board;
12-17 (2) the option is not sold by or for the benefit
12-18 of the issuer of the security which may be purchased or sold upon
12-19 exercise of the option;
12-20 (3) the security which may be purchased or sold
12-21 upon exercise of the option is either (a) exempted under Subsection
12-22 F of Section 6 of this Act or (b) quoted on the National
12-23 Association of Securities Dealers Automated Quotation system and
12-24 meets the requirements of Paragraphs (1), (6), (7), and (8) of
12-25 Subsection O of Section 5 of this Act; and
12-26 (4) such sale is not directly or indirectly for
12-27 the purposes of providing or furthering any scheme to violate or
13-1 evade any provisions of this Act.
13-2 For purposes of this subsection the term "option" shall mean
13-3 and include any put, call, straddle, or other option or privilege
13-4 of buying or selling a specified number of securities at a
13-5 specified price from or to another person, without being bound to
13-6 do so, on or prior to a specified date, but such term shall not
13-7 include any option or privilege which by its terms may terminate
13-8 prior to such specified date upon the occurrence of a specified
13-9 event.
13-10 T. Such other transactions or conditions as the board
13-11 by rule, regulation, or order may define or prescribe,
13-12 conditionally or unconditionally.
13-13 SECTION 5. Subsections A, B, and C, Section 7, The
13-14 Securities Act (Article 581-7, Vernon's Texas Civil Statutes), are
13-15 amended to read as follows:
13-16 A. Qualification of Securities.
13-17 (1) No dealer, agent or salesman shall sell or offer
13-18 for sale any securities issued after September 6, 1955, except
13-19 those which shall have been registered by Notification under
13-20 subsection <subdivision> B or by Coordination under subsection
13-21 <subdivision> C of this Section 7 and except those which come
13-22 within the classes enumerated in Section 5 or Section 6 of this
13-23 Act, until the issuer of such securities or a dealer registered
13-24 under the provisions of this Act shall have been granted a permit
13-25 by the Commissioner; and no such permit shall be granted by the
13-26 Commissioner until the issuer of such securities or a dealer
13-27 registered under the provisions of this Act shall have filed with
14-1 the Commissioner a sworn statement verified under the oath of an
14-2 executive officer or partner of the issuer, or of such registered
14-3 dealer, and attested by the secretary or partner thereof, setting
14-4 forth the following information:
14-5 a. The names, residences and post office
14-6 addresses of the officers and directors of the company;
14-7 b. The location of its principal office and of
14-8 all branch offices in this State, if any;
14-9 c. A copy of its articles of incorporation or
14-10 partnership or association, as the case may be, and of any
14-11 amendments thereto, if any; if a corporation, a copy of all minutes
14-12 of any proceedings of its directors, stockholders or members
14-13 relating to or affecting the issue of said security; if a
14-14 corporation, a copy of its bylaws and of any amendments thereto; if
14-15 a trustee, a copy of all instruments by which the trust is created
14-16 and in which it is accepted, acknowledged or declared;
14-17 d. A statement showing the amount of capital
14-18 stock, if any, and if no capital stock, the amount of capital of
14-19 the issuer that is contemplated to be employed; the number of
14-20 shares into which such stock is divided, or if not divided into
14-21 shares of stock, what division is to be made or is contemplated;
14-22 the par value of each share, or if no par stock, the price at which
14-23 such security is proposed to be sold; the promotional fees or
14-24 commissions to be paid for the sale of same, including any and all
14-25 compensations of every nature that are in any way to be allowed the
14-26 promoters or allowed for the sale of same; and how such
14-27 compensation is to be paid, whether in cash, securities, service or
15-1 otherwise, or partly of either or both; also, the amount of cash to
15-2 be paid, or securities to be issued, given, transferred or sold to
15-3 promoters for promotion or organization services and expenses, and
15-4 the amount of promotion or organization services and expenses which
15-5 will be assumed or in any way paid by the issuer;
15-6 e. Copies of certificates of the stock and all
15-7 other securities to be sold, or offered for sale, together with
15-8 application blanks therefor; a copy of any contract it proposes to
15-9 make concerning such security; a copy of any prospectus or
15-10 advertisement or other description of security prepared by or for
15-11 it for distribution or publication;
15-12 f. 1. A detailed statement prepared in
15-13 accordance with generally accepted auditing standards and
15-14 procedures and generally accepted accounting principles, showing
15-15 all the assets and all the liabilities of the issuer, said
15-16 statement to reflect the financial condition of the issuer on a day
15-17 not more than ninety (90) days prior to the date such statement is
15-18 filed. Such statement shall list all assets in detail and shall
15-19 show how the value of such assets was determined, that is, whether
15-20 the value set forth in said statement represents the actual cost in
15-21 money of such assets, or whether such value represents their
15-22 present market value, or some other value than the actual cost in
15-23 money, and shall show the present actual value of said assets;
15-24 also, whether the value set forth in the statement is greater or
15-25 less than the actual cost value in money and greater or less than
15-26 the present market value of such assets. If any of the assets
15-27 consist of real estate, then said statement shall show the amount
16-1 for which said real estate is rendered for State and county taxes,
16-2 or assessed for taxes. If any such assets listed shall consist of
16-3 anything other than cash and real estate, same shall be set out in
16-4 detail so as to give the Commissioner the fullest possible
16-5 information concerning same, and the Commissioner shall have the
16-6 power to require the filing of such additional information as the
16-7 Commissioner <he> may deem necessary to determine whether or not
16-8 the true value of said assets are reflected in the statement filed.
16-9 Should any of the assets listed in said statement be subject to any
16-10 repurchase agreement, or any other agreement of like character, by
16-11 the terms of which the absolute ownership of, or title to said
16-12 assets is qualified or limited in any way, then the terms and
16-13 conditions of said agreement by which the absolute ownership of, or
16-14 title to said assets is qualified or limited, as well as the amount
16-15 and character of the assets subject thereto shall be fully stated.
16-16 Said statement shall list all current liabilities, that is, all
16-17 liabilities which will mature and become due within one year from
16-18 the date of such application, and shall list separately from such
16-19 current liabilities, all other liabilities, contingent or
16-20 otherwise, showing the amount of those which are secured by
16-21 mortgage or otherwise, the assets of the issuer which are subject
16-22 to such mortgage, and the dates of maturity of any such mortgage
16-23 indebtedness. Such application shall also include a detailed
16-24 income <profit and loss> statement, prepared in accordance with
16-25 generally accepted auditing standards and procedures and generally
16-26 accepted accounting principles, which shall cover the last three
16-27 (3) years' operations of the issuer, if such issuer has been in
17-1 operation for three (3) years, but if not, said income <profit and
17-2 loss> statement shall cover the time that said issuer has been
17-3 operating. If said issuer has not been operating, but is taking
17-4 over a concern of any kind which has been previously operating, an
17-5 income <then a financial and profit and loss> statement showing the
17-6 operations of the concern thus taken over for a period of the last
17-7 three (3) years next preceding the taking over of said concern
17-8 shall be included in said statement; said income <profit and loss>
17-9 statement shall clearly reflect the amount of net income <profit>
17-10 or net loss incurred during each of the years shown.
17-11 2. The financial statements required in
17-12 subparagraph (1) of this paragraph for a small business issuer, as
17-13 defined by Board rule, may be reviewed by an independent certified
17-14 public accountant in accordance with the Statements on Standards
17-15 for Accounting and Review Services promulgated by the American
17-16 Institute of Certified Public Accountants in lieu of being audited
17-17 and certified, provided that the small business issuer otherwise
17-18 meets all of the requirements that the Board by rule, regulation,
17-19 or order may prescribe, conditionally or unconditionally.
17-20 B. Registration by Notification.
17-21 (1) Securities may be registered by notification under
17-22 this subsection B if they are issued by an issuer which has been in
17-23 continuous operation for not less than three (3) years and which
17-24 has shown, during the period of not less than three (3) years next
17-25 prior to the date of registration under this section, average
17-26 annual net earnings after deducting all prior charges including
17-27 income taxes except charges upon securities to be retired out of
18-1 the proceeds of sale, as follows:
18-2 a. In the case of interest-bearing securities,
18-3 not less than one and one-half times the annual interest charges on
18-4 such securities and on all other outstanding interest-bearing
18-5 securities of equal rank;
18-6 b. In the case of securities having a specified
18-7 dividend rate, not less than one and one-half times the annual
18-8 dividend requirements on such securities and on all outstanding
18-9 securities of equal rank;
18-10 c. In the case of securities wherein no dividend
18-11 rate is specified, not less than five percent <per cent> (5%) on
18-12 all outstanding securities of equal rank, together with the amount
18-13 of such securities then offered for sale, based upon the maximum
18-14 price at which such securities are to be offered for sale. The
18-15 ownership by an issuer of more than fifty percent <per cent> (50%)
18-16 of the outstanding voting stock of a corporation shall be construed
18-17 as the proportionate ownership of such corporation and shall permit
18-18 the inclusion of the earnings of such corporation applicable to the
18-19 payment of dividends upon the stock so owned in the earnings of the
18-20 issuer of the securities being registered by notification.
18-21 (2) Securities entitled to registration by
18-22 notification shall be registered by the filing with the
18-23 Commissioner by the issuer or by a registered dealer of a
18-24 registration statement as required by paragraph a of this
18-25 subdivision <subsection (a)>, and completion of the procedures
18-26 outlined in paragraph b of this subdivision <subsection b hereof>:
18-27 a. A registration statement in a form prescribed
19-1 by the Commissioner signed by the applicant filing such statement
19-2 and containing the following information:
19-3 1. Name and business address of main
19-4 office of issuer and address of issuer's principal office, if any,
19-5 in this state;
19-6 2. Title of securities being registered
19-7 and total amount of securities to be offered;
19-8 3. Price at which securities are to be
19-9 offered for sale to the public, amount of securities to be offered
19-10 in this state, and amount of registration fee, computed as
19-11 hereinafter provided;
19-12 4. A brief statement of the facts which
19-13 show that the securities are entitled to be registered by
19-14 notification;
19-15 5. Name and business address of the
19-16 applicant filing the statement;
19-17 6. Financial statements to include a
19-18 certified income <profit and loss> statement, a certified balance
19-19 sheet, and a certified statement of stockholders' equity
19-20 <statements of surplus>, each to be for a period of not less than
19-21 three (3) years prior to the date of registration. These financial
19-22 statements shall reflect the financial condition of the issuer as
19-23 of a date not more than ninety (90) days prior to the date of such
19-24 filing with the Commissioner;
19-25 7. A copy of the prospectus, if any,
19-26 describing such securities;
19-27 8. Filing of a consent to service of
20-1 process conforming to the requirements of Section 8 of this Act, if
20-2 the issuer is registering the securities and is not a resident of
20-3 this state or is not incorporated under the laws of this state.
20-4 b. Such filing with the Commissioner shall
20-5 constitute the registration of securities by notification and such
20-6 registration shall become effective five (5) days after receipt of
20-7 the registration statement and all accompanying papers by the
20-8 Commissioner; provided that the Commissioner may in his discretion
20-9 waive or reduce the five (5) days waiting period in any case where
20-10 he finds no injury to the public will result therefrom. Upon such
20-11 registration by notification, securities may be sold in this state
20-12 by registered dealers and registered salesmen. Upon the receipt of
20-13 a registration statement, prospectus, if any, payment of the filing
20-14 fee and registration fee, and, if required, a consent to service of
20-15 process, the Commissioner shall record the registration by
20-16 notification of the securities described. Such registration shall
20-17 be effective for a period of one (1) year and may be renewed for
20-18 additional periods of one (1) year, if the securities are entitled
20-19 to registration under this subsection at the time of renewal, by a
20-20 new filing under this section together with the payment of the
20-21 renewal fee of Ten Dollars ($10.00).
20-22 c. If at any time, before or after registration
20-23 of securities under this section, in the opinion of the
20-24 Commissioner the information in a registration statement filed with
20-25 him is insufficient to establish the fact that the securities
20-26 described therein are, or were, entitled to registration by
20-27 notification under this section, or that the registration
21-1 information contains, or contained, false, misleading or fraudulent
21-2 facts, he may order the applicant who filed such statement to cease
21-3 and desist from selling, or offering for sale, such securities
21-4 registered, or proposed to be registered, under provisions of this
21-5 section, until there is filed with the Commissioner such further
21-6 information as may in his judgment be necessary to establish the
21-7 fact that such securities are, or were, entitled to registration
21-8 under this section. The provisions of Section 24 of this Act as
21-9 to hearing shall be applicable to an order issued hereunder.
21-10 C. Registration by Coordination.
21-11 (1) Any security for which a registration statement
21-12 has been filed under the federal <Federal> Securities Act of 1933,
21-13 as amended, in connection with the same offering, may be registered
21-14 by coordination. A registration statement under this section shall
21-15 be filed with the Commissioner by the issuer or any registered
21-16 dealer, <and> shall contain the following information, and shall be
21-17 accompanied by the following documents:
21-18 a. One copy <Three copies> of the prospectus
21-19 filed under the <Federal> Securities Act of 1933 together with all
21-20 amendments thereto;
21-21 b. The amount of securities to be offered in
21-22 this state;
21-23 c. The states in which a registration statement
21-24 or similar document in connection with the offering has been or is
21-25 expected to be filed;
21-26 d. Any adverse order, judgment or decree
21-27 previously entered in connection with the offering by any court or
22-1 the Securities and Exchange Commission;
22-2 e. A copy of the articles of incorporation and
22-3 by-laws (or their substantial equivalents) currently in effect, a
22-4 copy of any agreements with or among underwriters, a copy of any
22-5 indenture or other instrument governing the issuance of the
22-6 security to be registered, and a specimen or copy of the security;
22-7 f. If the Commissioner requests any other
22-8 information, or copies of any other documents, filed under the
22-9 Federal Securities Act of 1933;
22-10 g. An undertaking to forward promptly all
22-11 amendments to the federal registration statement, other than an
22-12 amendment which merely delays the effective date; and
22-13 h. If the registration statement is filed by the
22-14 issuer, or by a dealer who will offer such securities for sale as
22-15 the agent of the issuer, and the issuer is not a resident of this
22-16 state or is not incorporated under the laws of this state, a
22-17 consent to service of process conforming to the requirements of
22-18 Section 8.
22-19 (2) Upon receipt of a registration statement under
22-20 this section the Commissioner shall examine such registration
22-21 statement and he may enter an order denying registration of the
22-22 securities described therein if he finds that the registrant has
22-23 not proven the proposed plan of business of the issuer to be fair,
22-24 just and equitable, and also that any consideration paid, or to be
22-25 paid, for such securities by promoters is fair, just and equitable
22-26 when such consideration for such securities is less than the
22-27 proposed offering price to the public, and that the securities
23-1 which it proposes to issue and the methods to be used by it in
23-2 issuing and disposing of the same will be such as will not work a
23-3 fraud upon the purchaser thereof. If the Commissioner enters an
23-4 order denying the registration of securities under this section, he
23-5 shall notify the registrant immediately. The provisions of Section
23-6 24 of this Act as to hearing shall be applicable to an order issued
23-7 hereunder. A registration statement under this section
23-8 automatically becomes effective at the moment the federal
23-9 registration statement becomes effective if all the following
23-10 conditions are satisfied:
23-11 a. No order has been entered by the Commissioner
23-12 denying registration of the securities;
23-13 b. The registration statement has been on file
23-14 with the Commissioner for at least ten (10) days; and
23-15 c. A statement of the maximum and minimum
23-16 proposed offering prices and the maximum underwriting discounts and
23-17 commissions has been on file for two full business days or such
23-18 shorter period as the Commissioner expressly permits and the
23-19 offering is made within those limitations. The registrant shall
23-20 promptly notify the Commissioner by telephone or telegram of the
23-21 date and time when the federal registration statement became
23-22 effective and the content of the price amendment, if any, and shall
23-23 promptly file a post-effective amendment containing the information
23-24 and documents in the price amendment. "Price amendment" means the
23-25 final federal amendment which includes a statement of the offering
23-26 price, underwriting and selling discounts or commissions, amount of
23-27 proceeds, conversion rates, call prices, and other matters
24-1 dependent upon the offering price.
24-2 Upon failure to receive the required notification and
24-3 post-effective amendment with respect to the price amendment, the
24-4 Commissioner may enter a stop order, without notice or hearing,
24-5 retroactively denying effectiveness to the registration statement
24-6 or suspending its effectiveness until compliance with this
24-7 subsection, if he promptly notifies the registrant by telephone or
24-8 telegram (and promptly confirms by letter or telegram when he
24-9 notifies by telephone) of the issuance of the order. If the
24-10 registrant proves compliance with the requirements of this
24-11 subsection as to notice and post-effective amendment, the stop
24-12 order is void as of the time of its entry. The Commissioner may
24-13 waive either or both of the conditions specified in clauses b and
24-14 c. If the federal registration statement becomes effective before
24-15 all these conditions are satisfied and they are not waived, the
24-16 registration statement automatically becomes effective as soon as
24-17 all the conditions are satisfied. If the registrant advises the
24-18 Commissioner of the date when the federal registration statement is
24-19 expected to become effective the Commissioner shall promptly advise
24-20 the registrant by telephone or telegram, at the registrant's
24-21 expense, whether all the conditions are satisfied and whether he
24-22 then contemplates the issuance of an order denying registration;
24-23 but this advice by the Commissioner does not preclude the issuance
24-24 of such an order at any time.
24-25 (3) Registration of securities under this subsection
24-26 shall be effective for the following periods:
24-27 a. The initial registration of securities of an
25-1 open-end investment company, as defined in the Investment Company
25-2 Act of 1940, shall be effective until two (2) months after the end
25-3 of the issuer's fiscal year. After the initial registration, the
25-4 issuer or its agent may renew the registration by submitting the
25-5 appropriate registration forms and renewal fees within two (2)
25-6 months after the end of the issuer's fiscal year.
25-7 b. The registration of securities of a unit
25-8 investment trust, as defined in the Investment Company Act of 1940,
25-9 shall be effective until one (1) year from the date of
25-10 effectiveness granted by the federal Securities and Exchange
25-11 Commission.
25-12 c. Any other registration of securities shall be
25-13 effective for a period of one (1) year from the date the
25-14 registration is declared effective by the Commissioner.
25-15 (4) Registrations of securities under subdivision (3)
25-16 <and> may be renewed for additional periods of one (1) year<,> if
25-17 the appropriate registration forms and <a> renewal fees are
25-18 received prior to the expiration date. The <fee of Ten Dollars
25-19 ($10.00) is paid, and if the securities are entitled to
25-20 registration at the time of renewal by the> same standards of
25-21 fairness, justice and equity as prescribed by this subsection for
25-22 original approval will apply to the renewal of all registrations.
25-23 SECTION 6. Section 8, The Securities Act (Article 581-8,
25-24 Vernon's Texas Civil Statutes), is amended to read as follows:
25-25 Sec. 8. Consent to Service <and Certificate of Good
25-26 Standing>. Unless the Board by rule otherwise specifies, any <If
25-27 the application for a permit to sell securities be filed by an
26-1 issuer, or by a dealer who will offer such securities for sale as
26-2 the agent of the issuer, and the issuer is organized under the laws
26-3 of any other state, territory, or government, or domiciled in any
26-4 other state than Texas, such application shall also contain a
26-5 certificate executed by the proper officer of such state, territory
26-6 or government dated not more than thirty (30) days prior to the
26-7 date of filing of the application showing that such issuer is
26-8 authorized to transact business in such state, territory or
26-9 government, and is not delinquent in any taxes or assessments
26-10 required to be paid to such state, territory or government. Such>
26-11 application filed by an issuer, or by a dealer who will offer such
26-12 securities for sale as the agent of the issuer, and the issuer is
26-13 organized under the laws of any other state, territory, or
26-14 government, or domiciled in any other state than Texas, shall
26-15 <also> contain a written instrument <duly executed by an executive
26-16 officer of such issuer, under proper resolution of its board of
26-17 directors, and authenticated and attested by the seal of said
26-18 issuer,> appointing the Commissioner the issuer's <irrevocably its>
26-19 true and lawful attorney upon whom all process may be served in any
26-20 action or proceedings against such issuer arising out of any
26-21 transaction subject to this Act <may be served> with the same
26-22 effect as if such issuer were organized or created under the laws
26-23 of this state and had been lawfully served with process therein.
26-24 Such instrument shall be duly executed by an authorized agent of
26-25 the issuer under proper resolution or authority. Whenever the
26-26 Commissioner shall have been served with any process as is herein
26-27 provided, it <It> shall be the duty of the Commissioner<, whenever
27-1 he shall have been served with any process as is herein provided,>
27-2 to forward same by United States mail to the last known address
27-3 <home office> of such issuer.
27-4 SECTION 7. Section 12, The Securities Act (Article 581-12,
27-5 Vernon's Texas Civil Statutes), is amended to read as follows:
27-6 Sec. 12. Registration of Persons Selling. A. Except as
27-7 provided in Section 5 of this Act, no person, firm, corporation or
27-8 dealer shall, directly or through agents or salesmen, offer for
27-9 sale, sell or make a sale of any securities in this state without
27-10 first being registered as in this Act provided. No salesman or
27-11 agent shall, in behalf of any dealer, sell, offer for sale, or make
27-12 sale of any securities within the state unless registered as a
27-13 salesman or agent of a registered dealer under the provisions of
27-14 this Act.
27-15 B. The Board may adopt rules and regulations exempting
27-16 certain classes of persons from the dealer and agent registration
27-17 requirements, or providing conditional exemptions from
27-18 registration, if the Board determines that such rules and
27-19 regulations are consistent with the purposes of this Act.
27-20 SECTION 8. Subsection K, Section 13, The Securities Act
27-21 (Article 581-13, Vernon's Texas Civil Statutes), is amended to read
27-22 as follows:
27-23 K. The Commissioner <Board> may accept some or all of the
27-24 examinations administered by the National Association of Securities
27-25 Dealers to fulfill the examination requirements of Subsection D
27-26 <waive any registration requirement for an applicant with a valid
27-27 registration from another state having registration requirements
28-1 substantially equivalent to those of this state>.
28-2 SECTION 9. Subsections A and D, Section 14, The Securities
28-3 Act (Article 581-14, Vernon's Texas Civil Statutes), are amended to
28-4 read as follows:
28-5 A. The Commissioner may deny, revoke, or suspend a
28-6 registration, place on probation a dealer, agent, or salesman whose
28-7 registration has been suspended, or reprimand a person registered
28-8 under this Act if the person:
28-9 (1) has been convicted of any <a> felony<, or of any
28-10 misdemeanor of which fraud is an essential element>;
28-11 (2) has been convicted of any misdemeanor which
28-12 directly relates to the person's securities-related duties and
28-13 responsibilities;
28-14 (3) has engaged in any inequitable practice in the
28-15 sale of securities or in any fraudulent business practice;
28-16 (4) <(3)> is <in the case of> a dealer who<,> is
28-17 insolvent;
28-18 (5) <(4)> is <in the case of> a dealer who<,> is
28-19 selling or has sold securities in this state through a salesman
28-20 other than a registered salesman, or, is <in the case of> a
28-21 salesman<,> who is selling or has sold securities in this state for
28-22 a dealer, issuer or controlling person with knowledge that such
28-23 dealer, issuer or controlling person has not complied with the
28-24 provisions of this Act;
28-25 (6) <(5)> has violated any of the provisions of this
28-26 Act or a rule of the Board;
28-27 (7) <(6)> has made any material misrepresentation to
29-1 the Commissioner or Board in connection with any information deemed
29-2 necessary by the Commissioner or Board to determine a dealer's
29-3 financial responsibility or a dealer's or salesman's business
29-4 repute or qualifications, or has refused to furnish any such
29-5 information requested by the Commissioner or Board; <or>
29-6 (8) <(7)> became registered as a dealer or salesman
29-7 after August 23, 1963, and has not complied with a condition
29-8 imposed by the Commissioner under Section 13-D;
29-9 (9) is the subject of any of the following orders that
29-10 are currently effective and were issued within the last five years:
29-11 (a) an order by the securities agency or
29-12 administrator of another state, by the financial regulatory
29-13 authority of a foreign country, or by the Securities and Exchange
29-14 Commission, entered after notice and opportunity for hearing,
29-15 denying, suspending, or revoking the person's license as a dealer,
29-16 agent, salesman, or investment adviser, or the substantial
29-17 equivalent of those terms;
29-18 (b) a suspension or expulsion from membership in
29-19 or association with a member of a self-regulatory organization;
29-20 (c) a United States Postal Service fraud order;
29-21 (d) an order by the securities agency or
29-22 administrator of another state, the financial regulatory authority
29-23 of a foreign country, the Securities and Exchange Commission, or by
29-24 the Commodity Futures Trading Commission, finding, after notice and
29-25 opportunity for hearing, that the person engaged in acts involving
29-26 fraud, deceit, false statements or omissions, or wrongful taking of
29-27 property;
30-1 (e) an order by the Commodity Futures Trading
30-2 Commission denying, suspending, or revoking registration under the
30-3 Commodity Exchange Act;
30-4 (10) is subject to any order, judgment, or decree
30-5 entered by any court of competent jurisdiction which permanently
30-6 restrains or enjoins such person from engaging in or continuing any
30-7 conduct, action, or practice in connection with any aspect of the
30-8 purchase or sale of securities; or
30-9 (11) has violated any provision of any order issued by
30-10 the Commissioner or has violated any provision of any undertaking
30-11 or agreement with the Commissioner<. Provided, however, that this
30-12 subdivision shall not apply to any person or company registered as
30-13 a dealer or salesman on August 23, 1963>.
30-14 D. If the Commissioner proposes to suspend or revoke a
30-15 person's registration, the person is entitled to a hearing before
30-16 the Commissioner or a hearings officer as now or hereafter required
30-17 by law. Proceedings for the suspension or revocation of a
30-18 registration are governed by Chapter 2001, Government Code <the
30-19 Administrative Procedure and Texas Register Act, as amended
30-20 (Article 6252-13a, Vernon's Texas Civil Statutes)>.
30-21 SECTION 10. Section 16, The Securities Act (Article 581-16,
30-22 Vernon's Texas Civil Statutes), is amended to read as follows:
30-23 Sec. 16. Consent to Suit in this State<,> by Certain Dealers
30-24 <Who Are Foreign Companies or Non-residents>. Every company
30-25 organized under the laws of any other state or of any foreign
30-26 country, or having its principal office therein, and every
30-27 non-resident individual, shall file with its or his application for
31-1 registration as a dealer an irrevocable <a> written consent<,
31-2 irrevocable,> that actions growing out of any transaction subject
31-3 to this Act may be commenced against the applicant <it or him,> in
31-4 the proper court of any county of this state in which the cause of
31-5 action may arise, or in which the plaintiff may reside, by a
31-6 service of process upon the Commissioner as the applicant's <its or
31-7 his> agent. The consent shall stipulate<, and stipulating> and
31-8 agree <agreeing> that such service of process shall be taken and
31-9 held in all courts to be as valid and binding as if due service had
31-10 been made upon the person or company itself according to the laws
31-11 of this or any other state or foreign country. Such <, and such>
31-12 instrument shall be authorized by the seal of such corporation, or
31-13 by the signature of all the members of such co-partnership, or by
31-14 the signature of the president and secretary of the association, if
31-15 it is a corporation or association, and shall be accompanied by a
31-16 duly certified copy of the resolutions of the board of directors,
31-17 trustees, or managers of the corporation authorizing the said
31-18 secretary and president to execute the same.
31-19 SECTION 11. Subsection C, Section 19, The Securities Act
31-20 (Article 581-19, Vernon's Texas Civil Statutes), is amended to read
31-21 as follows:
31-22 C. Renewal of Registration. (1) A person may renew an
31-23 unexpired registration by filing a renewal application in the form
31-24 prescribed by the Commissioner and paying to the Board, before the
31-25 expiration date of the registration, the required renewal fee.
31-26 (2) If a person's registration has been expired for
31-27 <not longer than> ninety (90) days or less, the person may renew
32-1 the registration by filing a renewal application with the
32-2 Commissioner and paying to the Board the required renewal fee and a
32-3 fee that is equal to one-half of the original application fee for
32-4 the registration.
32-5 (3) If a person's registration has been expired for
32-6 longer than ninety (90) days but less than two years, the person
32-7 may renew the registration by filing a renewal application with the
32-8 Commissioner and paying to the Board all unpaid renewal fees and a
32-9 fee that is equal to the original application fee for the
32-10 registration.
32-11 (4) If a person's registration has been expired for
32-12 two years or more <longer>, the person may not renew the
32-13 registration. The person may obtain a new registration by
32-14 submitting to reexamination and complying with the requirements and
32-15 procedures for obtaining an original registration. The person must
32-16 pay to the Board a fee that is equal to the original application
32-17 fee.
32-18 (5) At least thirty (30) days before the expiration of
32-19 a person's registration, the Commissioner shall send to the person
32-20 at the person's last known address according to the records of the
32-21 Board a written notice <shall be notified in writing> of the
32-22 impending <registration> expiration of the registration.
32-23 (6) A person who sells securities or renders
32-24 investment advisory services after the person's registration has
32-25 expired and before it is renewed is subject to the sanctions
32-26 provided by this Act for selling securities or rendering investment
32-27 advice without being registered.
33-1 SECTION 12. Section 23, The Securities Act (Article 581-23,
33-2 Vernon's Texas Civil Statutes), is amended to read as follows:
33-3 Sec. 23. Cease and Desist <Cease-Desist> Orders; Cease
33-4 Publication Orders; List of Securities Offered. Anything in this
33-5 Act to the contrary notwithstanding,
33-6 A. If it appears to the commissioner at any time that
33-7 the sale or proposed sale or method of sale of any securities,
33-8 whether exempt or not, would not be in compliance with this Act or
33-9 would tend to work a fraud on any purchaser thereof or would not be
33-10 fair, just or equitable to any purchaser thereof, the commissioner
33-11 may hold a hearing on a date determined by the commissioner within
33-12 30 days after the date of receipt of actual notice by, or notice by
33-13 registered or certified mail to the person's last known address is
33-14 given to, the issuer, the registrant, the person on whose behalf
33-15 such securities are being or are to be offered, or any person
33-16 acting as a dealer in violation of this Act. If the commissioner
33-17 shall determine at such hearing that such sale would not be in
33-18 compliance with the Act or would tend to work a fraud on any
33-19 purchaser thereof or would not be fair, just or equitable to any
33-20 purchaser thereof, the commissioner may issue a written cease and
33-21 desist order, prohibiting or suspending the sale of such securities
33-22 or denying or revoking the registration of such securities or
33-23 prohibiting an unregistered person from acting as a dealer. No
33-24 dealer, agent or salesman shall thereafter knowingly sell or offer
33-25 for sale any security named in such cease and desist order.
33-26 B. If it appears to the Commissioner at any time that
33-27 an <No person shall make an offer within this State after a cease
34-1 publication order has been issued by the commissioner stating that,
34-2 in the commissioner's opinion, the> offer contains any statement
34-3 that is materially false or misleading or is otherwise likely to
34-4 deceive the public, the Commissioner may issue a cease publication
34-5 order. No person shall make an offer prohibited by such cease
34-6 publication order <a reader thereof>.
34-7 C. The commissioner may, in the exercise of reasonable
34-8 discretion hereunder, at any time, require a dealer to file with
34-9 the commissioner a list of securities which he has offered for sale
34-10 or has advertised for sale within this State during the preceding
34-11 six months, or which he is at the time offering for sale or
34-12 advertising, or any portion thereof.
34-13 SECTION 13. The Securities Act (Article 581-1 et seq.,
34-14 Vernon's Texas Civil Statutes) is amended by adding Section 23-1 to
34-15 read as follows:
34-16 Sec. 23-1. ASSESSMENT OF ADMINISTRATIVE FINES. A. After
34-17 giving notice and opportunity for a hearing, the Commissioner may
34-18 issue an order which assesses an administrative fine against any
34-19 person or company found to have violated any provision of this Act,
34-20 Board rule, or Board order.
34-21 B. Any administrative fine assessed under this Section must
34-22 be in an amount that does not exceed $10,000 for a single violation
34-23 or $100,000 for multiple violations in a single proceeding or a
34-24 series of related proceedings.
34-25 C. For purposes of determining the amount of an
34-26 administrative fine assessed under this Section, the Commissioner
34-27 shall consider factors set out in guidelines established by the
35-1 Board.
35-2 D. For purposes of private civil litigation, the payment of
35-3 a fine assessed in an agreed order under this Act shall not
35-4 constitute an admission of any misconduct described in the agreed
35-5 order.
35-6 E. Any proceeding for the assessment of an administrative
35-7 fine must be commenced within five years after the violation
35-8 occurs.
35-9 SECTION 14. Section 24, The Securities Act (Article 581-24,
35-10 Vernon's Texas Civil Statutes), is amended to read as follows:
35-11 Sec. 24. Hearings upon Exception to Actions of Commissioner.
35-12 A. If any person or company should take exception to the action of
35-13 the Commissioner under Sections 15 or 18, in failing or refusing to
35-14 register and issue certificate for a dealer or salesman, under
35-15 Section 23 in issuing an order against the sale of securities or
35-16 the use of materials therein, or in any other particular where this
35-17 Act specifies no other procedure, the complaining party may request
35-18 a hearing before the Commissioner or before a hearings officer as
35-19 now or hereafter required by law.
35-20 B. On complaint by a person aggrieved by a denial of a
35-21 permit for the sale of securities under Section 10 of this article
35-22 or a failure or refusal to register securities under Section 7 of
35-23 this article, the Board or a hearings officer as now or hereafter
35-24 required by law <appointed by the Board> shall conduct a hearing.
35-25 C. Hearings under this Section are subject to the
35-26 requirements of Chapter 2001, Government Code.
35-27 SECTION 15. Section 28, The Securities Act (Article 581-28,
36-1 Vernon's Texas Civil Statutes), is amended to read as follows:
36-2 Sec. 28. Investigations, Investigatory Materials, and
36-3 Registration Related Materials <Subpoenas or Other Process in
36-4 Investigations by Commissioner>. A. Subpoenas or Other Process in
36-5 Investigations by Commissioner. The Commissioner may require, by
36-6 subpoena or summons issued by the Commissioner, the attendance and
36-7 testimony of witnesses and the production of any books, accounts,
36-8 records, papers and correspondence or other records relating to any
36-9 matter which the Commissioner has authority by this Act to consider
36-10 or investigate. For<, and for> this purpose the Commissioner may
36-11 sign subpoenas, administer oaths and affirmations, examine
36-12 witnesses and receive evidence; provided, however, that all
36-13 information of every kind and nature contained therein shall be
36-14 treated as confidential by the Commissioner and shall not be
36-15 disclosed to the public except under order of court. However,
36-16 except for good cause the order may not extend to a record or
36-17 communication received from other law enforcement or regulatory
36-18 agencies or to the internal notes, memoranda, reports, or
36-19 communications made in connection with a matter that the
36-20 Commissioner has the authority by this Act to consider or
36-21 investigate. Nothing in this section shall be interpreted to
36-22 prohibit or limit the publication of rulings or decisions of the
36-23 Commissioner nor shall this limitation apply to hearings provided
36-24 for in Sections 24 and 25 of this Act. In case of disobedience of
36-25 any subpoena, or of the contumacy of any witness appearing before
36-26 the Commissioner, the Commissioner may invoke the aid of the
36-27 District Court within whose jurisdiction any witness may be found,
37-1 and such court may thereupon issue an order requiring the person
37-2 subpoenaed to obey the subpoena or give evidence, or produce books,
37-3 accounts, records, papers, and correspondence touching the matter
37-4 in question. Any failure to obey such order of the court may be
37-5 punished by such court as contempt thereof.
37-6 In the course of an investigation looking to the enforcement
37-7 of this Act, or in connection with the application of a person or
37-8 company for registration or to qualify securities, the Commissioner
37-9 or Deputy Commissioner shall have free access to all records <of
37-10 the State Board of Insurance, including company examination reports
37-11 to the Board and reports of special investigations made by
37-12 personnel of the Board, as well as records> and reports of and to
37-13 any <other> department or agency of the state government. In the
37-14 event, however, that the Commissioner or Deputy Commissioner should
37-15 give out any information which the law makes confidential, the
37-16 affected corporation, firm or person shall have a right of action
37-17 on the official bond of the Commissioner or Deputy for the
37-18 corporation's, firm's, or person's <his> injuries, in a suit
37-19 brought in the name of the state at the relation of the injured
37-20 party.
37-21 The Commissioner may in any investigation cause the
37-22 deposition of witnesses residing within or without the state to be
37-23 taken in the manner prescribed for depositions in civil actions
37-24 under the laws of Texas.
37-25 Each witness required to attend before the Commissioner shall
37-26 receive a fee, for each day's attendance, in an amount set by Board
37-27 rule. All disbursements made in the payment of such fees shall be
38-1 made in accordance with Board rule and shall be included in, and
38-2 paid in the same manner as is provided for, the payment of other
38-3 expenses incident to the administration and enforcement of this Act
38-4 <as hereinafter provided>.
38-5 The sheriff's or constable's fee for serving the subpoena
38-6 shall be the same as those paid the sheriff or constable for
38-7 similar services. The fees, expenses and costs incurred at or in
38-8 connection with any hearing may be imposed by the Commissioner upon
38-9 any party to the record, or may be divided between any and all
38-10 parties to the record in such proportions as the Commissioner may
38-11 determine.
38-12 Any subpoena, summons, or other process issued by the
38-13 Commissioner may be served, at the Commissioner's discretion, by
38-14 the Commissioner, the Commissioner's <his> authorized agent, a
38-15 sheriff, or a constable.
38-16 The Commissioner may, at the Commissioner's <his> discretion,
38-17 disclose any confidential information in the Commissioner's <his>
38-18 possession to any governmental authority approved by Board rule;
38-19 <or> to any quasi-governmental authority charged with overseeing
38-20 securities activities which is approved by Board rule; or to any
38-21 receiver appointed under Section 25-1 of this Act. The disclosure
38-22 does not violate any other provision of this Act or Chapter 552,
38-23 Government Code <any provision of Chapter 424, Acts of the 63rd
38-24 Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's
38-25 Texas Civil Statutes)>.
38-26 B. Confidentiality of Certain Registration-Related and Other
38-27 Materials. To the extent not already provided for by this Act,
39-1 any intraagency or interagency notes, memoranda, reports, or other
39-2 communications consisting of advice, analyses, opinions, or
39-3 recommendations shall be treated as confidential by the
39-4 Commissioner and shall not be disclosed to the public, except under
39-5 order of court, for good cause shown. The Commissioner may, at the
39-6 Commissioner's discretion, disclose any confidential information in
39-7 the Commissioner's possession to any governmental authority
39-8 approved by Board rule; to any quasi-governmental authority charged
39-9 with overseeing securities activities which is approved by Board
39-10 rule; or to any receiver appointed under Section 25-1 of this Act.
39-11 The disclosure does not violate any other provision of this Act or
39-12 Chapter 552, Government Code.
39-13 SECTION 16. Section 29, The Securities Act (Article 581-29,
39-14 Vernon's Texas Civil Statutes), is amended to read as follows:
39-15 Sec. 29. Penal Provisions. Any person who shall:
39-16 A. Sell, offer for sale or delivery, solicit
39-17 subscriptions or orders for, dispose of, invite offers for, or who
39-18 shall deal in any other manner in any security or securities
39-19 without being a registered dealer or salesman or agent as in this
39-20 Act provided shall be deemed guilty of a felony, and upon
39-21 conviction thereof shall be sentenced to pay a fine of not more
39-22 than $5,000 or imprisonment in the penitentiary for not less than
39-23 two or more than 10 years, or by both such fine and imprisonment.
39-24 B. Sell, offer for sale or delivery, solicit
39-25 subscriptions to and orders for, dispose of, invite orders for, or
39-26 who shall deal in any other manner in any security or securities
39-27 issued after September 6, 1955, unless said security or securities
40-1 have been registered or granted a permit as provided in Section 7
40-2 of this Act, shall be deemed guilty of a felony, and upon
40-3 conviction thereof shall be sentenced to pay a fine of not more
40-4 than $5,000 or imprisonment in the penitentiary for not less than
40-5 two or more than 10 years, or by both such fine and imprisonment.
40-6 C. In connection with the sale, offering for sale or
40-7 delivery of, the purchase, offer to purchase, invitation of offers
40-8 to purchase, invitations of offers to sell, or dealing in any other
40-9 manner in any security or securities, whether or not the
40-10 transaction or security is exempt under Section 5 or 6 of this Act,
40-11 directly or indirectly:
40-12 (1) engage in any fraud or fraudulent practice;
40-13 (2) employ any device, scheme, or artifice to
40-14 defraud;
40-15 (3) knowingly make any untrue statement of a
40-16 material fact or omit to state a material fact necessary in order
40-17 to make the statements made, in the light of the circumstances
40-18 under which they are made, not misleading; or
40-19 (4) engage in any act, practice or course of
40-20 business which operates or will operate as a fraud or deceit upon
40-21 any person, is guilty of a felony and upon conviction shall be:
40-22 (a) imprisoned for not less than 2 or more
40-23 than 10 years and fined not more than $10,000, if the amount
40-24 involved in the offense is less than $10,000;
40-25 (b) imprisoned for not less than 2 or more
40-26 than 20 years and fined not more than $10,000, if the amount
40-27 involved in the offense is $10,000 or more but less than $100,000;
41-1 or
41-2 (c) imprisoned for life or for not less
41-3 than 5 or more than 99 years and fined not more than $10,000, if
41-4 the amount involved is $100,000 or more.
41-5 D. Sell or offer for sale any security or securities
41-6 named or listed in a notice in writing given him by the
41-7 commissioner under the authority of Section 23A of this Act shall
41-8 be deemed guilty of a felony, and upon conviction thereof shall be
41-9 sentenced to pay a fine of not more than $5,000 or imprisonment in
41-10 the penitentiary for not more than two years, or by both such fine
41-11 and imprisonment.
41-12 E. Knowingly make or cause to be made, in any document
41-13 filed with the commissioner or in any proceeding under this Act,
41-14 whether or not such document or proceeding relates to a transaction
41-15 or security exempt under the provisions of Sections 5 or 6 of this
41-16 Act, any statement which is, at the time and in the light of the
41-17 circumstances under which it is made, false or misleading in any
41-18 material respect shall be deemed guilty of a felony, and upon
41-19 conviction thereof shall be sentenced to pay a fine of not more
41-20 than $5,000 or imprisonment in the penitentiary for not less than
41-21 two or more than 10 years, or by both such fine and imprisonment.
41-22 F. Knowingly make any false statement or
41-23 representation concerning any registration made under the
41-24 provisions of this Act shall be deemed guilty of a felony, and upon
41-25 conviction thereof shall be sentenced to pay a fine of not more
41-26 than $5,000 or imprisonment in the penitentiary for not more than
41-27 two years, or by both such fine and imprisonment.
42-1 G. Make an offer of any security within this State <as
42-2 to any security> that is not in compliance with the requirements
42-3 governing offers set forth in Section 22 of this Act shall be
42-4 deemed guilty of a felony, and upon conviction thereof, shall be
42-5 sentenced to pay a fine of not more than $5,000 or imprisonment in
42-6 the penitentiary for not more than two years, or by both such fine
42-7 and imprisonment.
42-8 H. Knowingly make an offer of any security within this
42-9 State prohibited by a cease publication order issued by the
42-10 Commissioner under Section 23B of this Act shall be deemed guilty
42-11 of a felony, and upon conviction thereof, shall be sentenced to pay
42-12 a fine of not more than $5,000 or imprisonment in the penitentiary
42-13 for not more than two years, or by both such fine and imprisonment.
42-14 SECTION 17. Section 34, The Securities Act (Article 581-34,
42-15 Vernon's Texas Civil Statutes), is amended to read as follows:
42-16 Sec. 34. Actions for Commission; Allegations and Proof of
42-17 Compliance. No person or company shall bring or maintain any
42-18 action in the courts of this state for collection of a commission
42-19 or compensation for services rendered in the sale or purchase of
42-20 securities, as that term is <herein> defined in this Act, without
42-21 alleging and proving that such person or company was duly
42-22 registered <licensed> under the provisions of this Act (or duly
42-23 exempt from such registration pursuant to rules adopted under
42-24 Section 12B of this Act) <hereof> and the securities so sold were
42-25 duly registered under the provisions of this Act <hereof> at the
42-26 time the alleged cause of action arose; provided, however, that
42-27 this section <or provision of this Act> shall not apply <(1)> to
43-1 any company or person that rendered services in connection with any
43-2 transaction exempted by Section 5 of this Act or by any rule
43-3 promulgated by the Board pursuant to Subsection T of Section 5 of
43-4 this Act if the company or person was not required to be registered
43-5 by the terms of the exemption<, nor (2) to the sale or purchase of
43-6 any security exempted by Section 6 of this Act>.
43-7 SECTION 18. The Securities Act (Article 581-1 et seq.
43-8 Vernon's Texas Civil Statutes) is amended by adding Section 42 to
43-9 read as follows:
43-10 Sec. 42. REDUCED FEES. A. The Board by rule may adopt
43-11 reduced fees, under Sections 35 and 41 of this Act, for original
43-12 and renewal applications of dealers, agents, officers, or salesmen
43-13 who have assumed inactive status as defined by the Board.
43-14 B. The Board by rule may adopt reduced fees, under
43-15 Sections 35 and 41 of this Act, for persons required by this Act to
43-16 register in two or more of the following capacities:
43-17 (1) dealer;
43-18 (2) agent or salesman; or
43-19 (3) officer.
43-20 SECTION 19. (a) The change in law made by this Act applies
43-21 only to a violation of The Securities Act (Article 581-1 et seq.,
43-22 Vernon's Texas Civil Statutes), as amended, that occurs on or after
43-23 the effective date of this Act. A violation occurs before the
43-24 effective date of this Act if any element of the violation occurs
43-25 before the effective date.
43-26 (b) A violation that occurs before the effective date of
43-27 this Act is covered by the law in effect at the time the violation
44-1 occurred, and the former law is continued in effect for that
44-2 purpose.
44-3 SECTION 20. This Act takes effect September 1, 1995.
44-4 SECTION 21. The importance of this legislation and the
44-5 crowded condition of the calendars in both houses create an
44-6 emergency and an imperative public necessity that the
44-7 constitutional rule requiring bills to be read on three several
44-8 days in each house be suspended, and this rule is hereby suspended.