1-1 By: Clemons (Senate Sponsor - Montford) H.B. No. 1295
1-2 (In the Senate - Received from the House April 21, 1995;
1-3 April 24, 1995, read first time and referred to Committee on
1-4 Economic Development; May 12, 1995, reported favorably by the
1-5 following vote: Yeas 10, Nays 0; May 12, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the regulation of certain securities.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Subsection N, Section 2, The Securities Act
1-11 (Article 581-2, Vernon's Texas Civil Statutes), is amended to read
1-12 as follows:
1-13 N. The Board and Commissioner are subject to Chapters 551,
1-14 2001, and 2002, Government Code <the open meetings law, Chapter
1-15 271, Acts of the 60th Legislature, Regular Session, 1967, as
1-16 amended (Article 6252-17, Vernon's Texas Civil Statutes), and the
1-17 Administrative Procedure and Texas Register Act, as amended
1-18 (Article 6252-13a, Vernon's Texas Civil Statutes)>.
1-19 SECTION 2. The Securities Act (Article 581-1 et seq.,
1-20 Vernon's Texas Civil Statutes) is amended by adding Section 3-1 to
1-21 read as follows:
1-22 Sec. 3-1. NONEXCLUSIVITY OF MEANS OF ENFORCEMENT. The
1-23 Commissioner may utilize any or all penalties, sanctions, remedies,
1-24 or relief as the Commissioner deems necessary.
1-25 SECTION 3. Subsection A, Section 4, The Securities Act
1-26 (Article 581-4, Vernon's Texas Civil Statutes), is amended to read
1-27 as follows:
1-28 A. The term "security" or "securities" shall include
1-29 any limited partner interest in a limited partnership, share,
1-30 stock, treasury stock, stock certificate under a voting trust
1-31 agreement, collateral trust certificate, equipment trust
1-32 certificate, preorganization certificate or receipt, subscription
1-33 or reorganization certificate, note, bond, debenture, mortgage
1-34 certificate or other evidence of indebtedness, any form of
1-35 commercial paper, certificate in or under a profit sharing or
1-36 participation agreement, certificate or any instrument representing
1-37 any interest in or under an oil, gas or mining lease, fee or title,
1-38 or any certificate or instrument representing or secured by an
1-39 interest in any or all of the capital, property, assets, profits or
1-40 earnings of any company, investment contract, or any other
1-41 instrument commonly known as a security, whether similar to those
1-42 herein referred to or not. Provided, however, that this definition
1-43 shall not apply to any insurance policy, endowment policy, annuity
1-44 contract, optional annuity contract, or any contract or agreement
1-45 in relation to and in consequence of any such policy or contract,
1-46 issued by an insurance company subject to the supervision or
1-47 control of the Texas Department <State Board> of Insurance when the
1-48 form of such policy or contract has been duly filed with the
1-49 Department <Board> as now or hereafter required by law.
1-50 SECTION 4. Section 5, The Securities Act (Article 581-5,
1-51 Vernon's Texas Civil Statutes), is amended to read as follows:
1-52 Sec. 5. Exempt Transactions. Except as hereinafter in this
1-53 Act specifically provided, the provisions of this Act shall not
1-54 apply to the sale of any security when made in any of the following
1-55 transactions and under any of the following conditions, and the
1-56 company or person engaged therein shall not be deemed a dealer
1-57 within the meaning of this Act; that is to say, the provisions of
1-58 this Act shall not apply to any sale, offer for sale, solicitation,
1-59 subscription, dealing in or delivery of any security under any of
1-60 the following transactions or conditions:
1-61 A. At any judicial, executor's, administrator's,
1-62 guardian's or conservator's sale, or any sale by a receiver or
1-63 trustee in insolvency or bankruptcy.
1-64 B. The sale by or for the account of a pledge holder
1-65 or mortgagee, selling or offering for sale or delivery in the
1-66 ordinary course of business to liquidate a bona fide debt, of a
1-67 security pledged in good faith as security for such debt.
1-68 C. (1) Sales of securities made by or in behalf of a
2-1 vendor, whether by dealer or other agent, in the ordinary course of
2-2 bona fide personal investment of the personal holdings of such
2-3 vendor, or change in such investment, if such vendor is not engaged
2-4 in the business of selling securities and the sale or sales are
2-5 isolated transactions not made in the course of repeated and
2-6 successive transactions of a like character; provided, that in no
2-7 event shall such sales or offerings be exempt from the provisions
2-8 of this Act when made or intended by the vendor or his agent, for
2-9 the benefit, either directly or indirectly, of any company or
2-10 corporation except the individual vendor (other than a usual
2-11 commission to said agent), and provided further, that any person
2-12 acting as agent for said vendor shall be registered pursuant to
2-13 this Act;
2-14 (2) Sales by or on behalf of any insurance
2-15 company subject to the supervision or control of the Texas
2-16 Department <State Board> of Insurance of any security owned by such
2-17 company as a legal and bona fide investment, provided that in no
2-18 event shall any such sale or offering be exempt from the provisions
2-19 of this Act when made or intended, either directly or indirectly,
2-20 for the benefit of any other company as that term is defined in
2-21 this Act.
2-22 D. The distribution by a corporation of securities
2-23 direct to its stockholders as a stock dividend or other
2-24 distribution paid out of earnings or surplus.
2-25 E. Any offer and any transaction pursuant to any offer
2-26 by the issuer of its securities to its existing security holders
2-27 (including persons who at the time of the transaction are holders
2-28 of convertible securities or nontransferable warrants) if no
2-29 commission or other remuneration (other than a stand-by commission)
2-30 is paid or given directly or indirectly for soliciting any security
2-31 holder in this State.
2-32 F. The issue in good faith of securities by a company
2-33 to its security holders, or creditors, in the process of a bona
2-34 fide reorganization of the company made in good faith, or the issue
2-35 in good faith of securities by a company, organized solely for the
2-36 purpose of taking over the assets and continuing the business of a
2-37 predecessor company, to the security holders or creditors of such
2-38 predecessor company, provided that in either such case such
2-39 securities are issued in exchange for the securities of such
2-40 holders or claims of such creditors, or both, and in either such
2-41 case security holders or creditors do not pay or give or promise
2-42 and are not obligated to pay or give any consideration for the
2-43 securities so issued other than the securities of or claims against
2-44 said company or its predecessor then held or owned by them.
2-45 G. The issue or sale of securities (a) by one
2-46 corporation to another corporation or the security holders thereof
2-47 pursuant to a vote by one or more classes of such security holders,
2-48 as required by the certificate of incorporation or the applicable
2-49 corporation statute, in connection with a merger, consolidation or
2-50 sale of corporate assets, or (b) by one corporation to its own
2-51 stockholders in connection with the change of par value stock to no
2-52 par value stock or vice versa, or the exchange of outstanding
2-53 shares for the same or a greater or smaller number of shares;
2-54 provided that in any such case such security holders do not pay or
2-55 give or promise and are not obligated to pay or give any
2-56 consideration for the securities so issued or sold other than the
2-57 securities of the corporation then held by them.
2-58 H. The sale of any security to any bank, trust
2-59 company, building and loan association, insurance company, surety
2-60 or guaranty company, savings institution, investment company as
2-61 defined in the Investment Company Act of 1940, small business
2-62 investment company as defined in the Small Business Investment Act
2-63 of 1958, as amended, or to any registered dealer actually engaged
2-64 in buying and selling securities.
2-65 I. Provided such sale is made without any public
2-66 solicitation or advertisements:
2-67 (a) the sale of any security by the issuer
2-68 thereof so long as the total number of security holders of the
2-69 issuer thereof does not exceed thirty-five (35) persons after
2-70 taking such sale into account;
3-1 (b) the sale or distribution by an employer or
3-2 its participating subsidiary, if any, of a security under a thrift,
3-3 savings, stock purchase, retirement, pension, profit-sharing,
3-4 option, bonus, appreciation right, incentive, or similar employee
3-5 benefit plan for employees or directors of the employer or its
3-6 subsidiary; or
3-7 (c) the sale by an issuer of its securities
3-8 during the period of twelve (12) months ending with the date of the
3-9 sale in question to not more than fifteen (15) persons (excluding,
3-10 in determining such fifteen (15) persons, purchasers of securities
3-11 in transactions exempt under other provisions of this Section 5,
3-12 purchasers of securities exempt under Section 6 hereof and
3-13 purchasers of securities which are part of an offering registered
3-14 under Section 7 hereof), provided such persons purchased such
3-15 securities for their own account and not for distribution.
3-16 <The commissioner may by order revoke or suspend the
3-17 exemption under clause (c) of this Subsection I with respect to any
3-18 security if he has reasonable cause to believe that the plan of
3-19 business of the issuer of such security, the security, or the sale
3-20 thereof would tend to work a fraud or deceit upon the purchaser or
3-21 purchasers thereof, such order to be subject to review in the
3-22 manner provided by Section 24 of this Act. The revocation or
3-23 suspension of this exemption shall be inapplicable to the issuer
3-24 until such issuer shall have received actual notice from the
3-25 commissioner of such revocation or suspension.>
3-26 J. Wherein the securities disposed of consist
3-27 exclusively of notes or bonds secured by mortgage or vendor's lien
3-28 upon real estate or tangible personal property, and the entire
3-29 mortgage is sold or transferred with all of the notes or bonds
3-30 secured thereby in a single transaction.
3-31 K. Any security or membership issued by a corporation
3-32 or association, organized exclusively for religious, educational,
3-33 benevolent, fraternal, charitable, or reformatory purposes and not
3-34 for pecuniary profit, and no part of the net earnings of which
3-35 inures to the benefit of any stockholder, shareholder, or
3-36 individual members, and where no commission or remuneration is paid
3-37 or given or is to be paid or given in connection with the
3-38 disposition thereof.
3-39 L. The sale by the issuer itself, or by a registered
3-40 dealer, of any security issued or guaranteed by any bank organized
3-41 and subject to regulation under the laws of the United States or
3-42 under the laws of any State or territory of the United States, or
3-43 any insular possession thereof, or by any savings and loan
3-44 association organized and subject to regulation under the laws of
3-45 this State, or the sale by the issuer itself of any security issued
3-46 by any federal savings and loan association.
3-47 M. The sale by the issuer itself, or by a registered
3-48 dealer, of any security either issued or guaranteed by the United
3-49 States or by any territory or insular possession thereof, or by the
3-50 District of Columbia, or by any state of the United States, or
3-51 political subdivision thereof (including but not limited to any
3-52 county, city, municipal corporation, district, or authority), or by
3-53 any public or governmental agency or instrumentality of any of the
3-54 foregoing.
3-55 N. The sale and issuance of any securities issued by
3-56 any farmers' cooperative marketing association organized under
3-57 Chapter 52, Agriculture Code, or the predecessor of that law
3-58 (Article 5737 et seq., Revised Statutes); the sale and issuance of
3-59 any securities issued by any mutual loan corporation <corporations>
3-60 organized under Chapter 54, Agriculture Code, or the predecessor of
3-61 that law (Article 2500 et seq., Revised Statutes); the sale and
3-62 issuance of any equity securities issued by any cooperative
3-63 association organized under the Cooperative Association Act, as
3-64 amended (Article 1396-50.01, Vernon's Texas Civil Statutes); and
3-65 the sale of any securities issued by any farmers' cooperative
3-66 society organized under Chapter 51, Agriculture Code, or the
3-67 predecessor of that law (Article 2514 et seq., Revised Statutes).
3-68 Provided, however, this exemption shall not be applicable to agents
3-69 and salesmen of any farmers' cooperative marketing association,
3-70 mutual loan corporation, cooperative association, or farmers'
4-1 cooperative society when the sale of such securities is made to
4-2 non-members, or when the sale of such securities is made to members
4-3 or non-members and a commission is paid or contracted to be paid to
4-4 the said agents or salesmen.
4-5 O. The sale by a registered dealer of outstanding
4-6 securities provided that:
4-7 (1) Such securities form no part of an unsold
4-8 allotment to or subscription by such dealer as a participant in the
4-9 distribution of such securities by the issuer thereof; and
4-10 (2) Securities of the same class, of the same
4-11 issuer, are outstanding in the hands of the public; and
4-12 (3) Such securities are offered for sale, in
4-13 good faith, at prices reasonably related to the current market
4-14 price of such securities at the time of such sale; and
4-15 (4) No part of the proceeds of such sale are
4-16 paid directly or indirectly to the issuer of such securities; and
4-17 (5) Such sale is not directly or indirectly for
4-18 the purposes of providing or furthering any scheme to violate or
4-19 evade any provision of this Act; and
4-20 (6) The right to sell or resell such securities
4-21 has not been enjoined by any court of competent jurisdiction in
4-22 this State by proceedings instituted by an officer or agency of
4-23 this State charged with enforcement of this Act; and
4-24 (7) The right to sell such securities has not
4-25 been revoked or suspended by the commissioner under any of the
4-26 provisions of this Act, or, if so, revocation or suspension is not
4-27 in force and effect; and
4-28 (8) At the time of such sale, the issuer of such
4-29 securities shall be a going concern actually engaged in business
4-30 and shall then be neither in an organization stage nor in
4-31 receivership or bankruptcy; and
4-32 (9) Such securities or other securities of the
4-33 issuer of the same class have been registered by qualification,
4-34 notification or coordination under Section 7 of this Act; or at the
4-35 time of such sale at least the following information about the
4-36 issuer shall appear in a recognized securities manual or in a
4-37 statement, in form and extent acceptable to the commissioner, filed
4-38 with the commissioner by the issuer or by a registered dealer:
4-39 (a) A statement of the issuer's principal
4-40 business;
4-41 (b) A balance sheet as of a date within
4-42 eighteen (18) months of the date of such sale; and
4-43 (c) Profit and loss statements and a
4-44 record of the dividends paid, if any, for a period of not less than
4-45 three (3) years prior to the date of such balance sheet or for the
4-46 period of existence of the issuer, if such period of existence is
4-47 less than three (3) years.
4-48 The term "recognized securities manual" means a nationally
4-49 distributed manual of securities that is approved for use hereunder
4-50 by the Board.
4-51 The Commissioner <commissioner> may issue a stop order or by
4-52 order prohibit, revoke or suspend the exemption under this
4-53 Subsection O with respect to any security if the Commissioner <he>
4-54 has reasonable cause to believe that the plan of business of the
4-55 issuer of such security, the security, or the sale thereof would
4-56 tend to work a fraud or deceit upon any purchaser or purchasers
4-57 thereof, such order to be subject to review in the manner provided
4-58 by Section 24 of this Act. Notice of any court injunction enjoining
4-59 the sale, or resale, of any such security, or of an order revoking
4-60 or suspending the exemption under this subdivision with respect to
4-61 any security, shall be delivered or shall be mailed by certified or
4-62 registered mail with return receipt requested, to any dealers
4-63 believed to be selling, or offering for sale, securities of the
4-64 type referred to in the notice; and the prohibitions of (6) and (7)
4-65 above of this Subsection O shall be inapplicable to any dealer
4-66 until the dealer <he> has received actual notice from the
4-67 commissioner of such revocation or suspension.
4-68 The Board may for cause shown revoke or suspend the
4-69 recognition hereunder of any manuals previously approved under this
4-70 Subsection but no such action may be taken unless upon notice and
5-1 opportunity for hearing before the Board or a hearings officer as
5-2 now or hereafter required by law <appointed by the Board>. A
5-3 judgment sustaining the Board in the action complained of shall not
5-4 bar after one year an application by the plaintiff for approval of
5-5 its manual or manuals hereunder, nor shall a judgment in favor of
5-6 the plaintiff prevent the Board from thereafter revoking such
5-7 recognition for any proper cause which may thereafter accrue or be
5-8 discovered.
5-9 P. The execution by a dealer of an unsolicited order
5-10 for the purchase of securities, where the initial offering of such
5-11 securities has been completed and provided that the dealer acts
5-12 solely as an agent for the purchaser, has no direct or indirect
5-13 interest in the sale or distribution of the security ordered, and
5-14 receives no commission, profit, or other compensation from any
5-15 source other than the purchaser.
5-16 Q. The sales of interests <interest> in and under oil,
5-17 gas or mining leases, fees or titles, or contracts relating
5-18 thereto, where (1) the total number of sales by any one owner of
5-19 interests, whether whole, fractional, segregated or undivided in
5-20 any single oil, gas or mineral lease, fee or title, or contract
5-21 relating thereto, shall not exceed thirty-five (35) within a period
5-22 of twelve (12) consecutive months and (2) no use is made of
5-23 advertisement or public solicitation; provided, however, if such
5-24 sale or sales are made by an agent for such owner or owners, such
5-25 agent shall be licensed pursuant to this Act. No oil, gas or
5-26 mineral unitization or pooling agreement shall be deemed a sale
5-27 under this Act.
5-28 R. The sale by the issuer itself, or by a subsidiary
5-29 of such issuer, of any securities which would be exempt if sold by
5-30 a registered dealer under Section 6 (other than Section 6E
5-31 <Subsection 6-E>) of this Act.
5-32 S. The sale by or through a registered dealer of any
5-33 option if at the time of the sale of the option:
5-34 (1) the performance of the terms of the option
5-35 is guaranteed by any broker-dealer registered under the federal
5-36 Securities Exchange Act of 1934, as amended, which guaranty and
5-37 broker-dealer are in compliance with such requirements or
5-38 regulations as may be approved or adopted by the board;
5-39 (2) the option is not sold by or for the benefit
5-40 of the issuer of the security which may be purchased or sold upon
5-41 exercise of the option;
5-42 (3) the security which may be purchased or sold
5-43 upon exercise of the option is either (a) exempted under Subsection
5-44 F of Section 6 of this Act or (b) quoted on the National
5-45 Association of Securities Dealers Automated Quotation system and
5-46 meets the requirements of Paragraphs (1), (6), (7), and (8) of
5-47 Subsection O of Section 5 of this Act; and
5-48 (4) such sale is not directly or indirectly for
5-49 the purposes of providing or furthering any scheme to violate or
5-50 evade any provisions of this Act.
5-51 For purposes of this subsection the term "option" shall mean
5-52 and include any put, call, straddle, or other option or privilege
5-53 of buying or selling a specified number of securities at a
5-54 specified price from or to another person, without being bound to
5-55 do so, on or prior to a specified date, but such term shall not
5-56 include any option or privilege which by its terms may terminate
5-57 prior to such specified date upon the occurrence of a specified
5-58 event.
5-59 T. Such other transactions or conditions as the board
5-60 by rule, regulation, or order may define or prescribe,
5-61 conditionally or unconditionally.
5-62 SECTION 5. Subsections A, B, and C, Section 7, The
5-63 Securities Act (Article 581-7, Vernon's Texas Civil Statutes), are
5-64 amended to read as follows:
5-65 A. Qualification of Securities.
5-66 (1) No dealer, agent or salesman shall sell or offer
5-67 for sale any securities issued after September 6, 1955, except
5-68 those which shall have been registered by Notification under
5-69 subsection <subdivision> B or by Coordination under subsection
5-70 <subdivision> C of this Section 7 and except those which come
6-1 within the classes enumerated in Section 5 or Section 6 of this
6-2 Act, until the issuer of such securities or a dealer registered
6-3 under the provisions of this Act shall have been granted a permit
6-4 by the Commissioner; and no such permit shall be granted by the
6-5 Commissioner until the issuer of such securities or a dealer
6-6 registered under the provisions of this Act shall have filed with
6-7 the Commissioner a sworn statement verified under the oath of an
6-8 executive officer or partner of the issuer, or of such registered
6-9 dealer, and attested by the secretary or partner thereof, setting
6-10 forth the following information:
6-11 a. The names, residences and post office
6-12 addresses of the officers and directors of the company;
6-13 b. The location of its principal office and of
6-14 all branch offices in this State, if any;
6-15 c. A copy of its articles of incorporation or
6-16 partnership or association, as the case may be, and of any
6-17 amendments thereto, if any; if a corporation, a copy of all minutes
6-18 of any proceedings of its directors, stockholders or members
6-19 relating to or affecting the issue of said security; if a
6-20 corporation, a copy of its bylaws and of any amendments thereto; if
6-21 a trustee, a copy of all instruments by which the trust is created
6-22 and in which it is accepted, acknowledged or declared;
6-23 d. A statement showing the amount of capital
6-24 stock, if any, and if no capital stock, the amount of capital of
6-25 the issuer that is contemplated to be employed; the number of
6-26 shares into which such stock is divided, or if not divided into
6-27 shares of stock, what division is to be made or is contemplated;
6-28 the par value of each share, or if no par stock, the price at which
6-29 such security is proposed to be sold; the promotional fees or
6-30 commissions to be paid for the sale of same, including any and all
6-31 compensations of every nature that are in any way to be allowed the
6-32 promoters or allowed for the sale of same; and how such
6-33 compensation is to be paid, whether in cash, securities, service or
6-34 otherwise, or partly of either or both; also, the amount of cash to
6-35 be paid, or securities to be issued, given, transferred or sold to
6-36 promoters for promotion or organization services and expenses, and
6-37 the amount of promotion or organization services and expenses which
6-38 will be assumed or in any way paid by the issuer;
6-39 e. Copies of certificates of the stock and all
6-40 other securities to be sold, or offered for sale, together with
6-41 application blanks therefor; a copy of any contract it proposes to
6-42 make concerning such security; a copy of any prospectus or
6-43 advertisement or other description of security prepared by or for
6-44 it for distribution or publication;
6-45 f. 1. A detailed statement prepared in
6-46 accordance with generally accepted auditing standards and
6-47 procedures and generally accepted accounting principles, showing
6-48 all the assets and all the liabilities of the issuer, said
6-49 statement to reflect the financial condition of the issuer on a day
6-50 not more than ninety (90) days prior to the date such statement is
6-51 filed. Such statement shall list all assets in detail and shall
6-52 show how the value of such assets was determined, that is, whether
6-53 the value set forth in said statement represents the actual cost in
6-54 money of such assets, or whether such value represents their
6-55 present market value, or some other value than the actual cost in
6-56 money, and shall show the present actual value of said assets;
6-57 also, whether the value set forth in the statement is greater or
6-58 less than the actual cost value in money and greater or less than
6-59 the present market value of such assets. If any of the assets
6-60 consist of real estate, then said statement shall show the amount
6-61 for which said real estate is rendered for State and county taxes,
6-62 or assessed for taxes. If any such assets listed shall consist of
6-63 anything other than cash and real estate, same shall be set out in
6-64 detail so as to give the Commissioner the fullest possible
6-65 information concerning same, and the Commissioner shall have the
6-66 power to require the filing of such additional information as the
6-67 Commissioner <he> may deem necessary to determine whether or not
6-68 the true value of said assets are reflected in the statement filed.
6-69 Should any of the assets listed in said statement be subject to any
6-70 repurchase agreement, or any other agreement of like character, by
7-1 the terms of which the absolute ownership of, or title to said
7-2 assets is qualified or limited in any way, then the terms and
7-3 conditions of said agreement by which the absolute ownership of, or
7-4 title to said assets is qualified or limited, as well as the amount
7-5 and character of the assets subject thereto shall be fully stated.
7-6 Said statement shall list all current liabilities, that is, all
7-7 liabilities which will mature and become due within one year from
7-8 the date of such application, and shall list separately from such
7-9 current liabilities, all other liabilities, contingent or
7-10 otherwise, showing the amount of those which are secured by
7-11 mortgage or otherwise, the assets of the issuer which are subject
7-12 to such mortgage, and the dates of maturity of any such mortgage
7-13 indebtedness. Such application shall also include a detailed
7-14 income <profit and loss> statement, prepared in accordance with
7-15 generally accepted auditing standards and procedures and generally
7-16 accepted accounting principles, which shall cover the last three
7-17 (3) years' operations of the issuer, if such issuer has been in
7-18 operation for three (3) years, but if not, said income <profit and
7-19 loss> statement shall cover the time that said issuer has been
7-20 operating. If said issuer has not been operating, but is taking
7-21 over a concern of any kind which has been previously operating, an
7-22 income <then a financial and profit and loss> statement showing the
7-23 operations of the concern thus taken over for a period of the last
7-24 three (3) years next preceding the taking over of said concern
7-25 shall be included in said statement; said income <profit and loss>
7-26 statement shall clearly reflect the amount of net income <profit>
7-27 or net loss incurred during each of the years shown.
7-28 2. The financial statements required in
7-29 subparagraph (1) of this paragraph for a small business issuer, as
7-30 defined by Board rule, may be reviewed by an independent certified
7-31 public accountant in accordance with the Statements on Standards
7-32 for Accounting and Review Services promulgated by the American
7-33 Institute of Certified Public Accountants in lieu of being audited
7-34 and certified, provided that the small business issuer otherwise
7-35 meets all of the requirements that the Board by rule, regulation,
7-36 or order may prescribe, conditionally or unconditionally.
7-37 B. Registration by Notification.
7-38 (1) Securities may be registered by notification under
7-39 this subsection B if they are issued by an issuer which has been in
7-40 continuous operation for not less than three (3) years and which
7-41 has shown, during the period of not less than three (3) years next
7-42 prior to the date of registration under this section, average
7-43 annual net earnings after deducting all prior charges including
7-44 income taxes except charges upon securities to be retired out of
7-45 the proceeds of sale, as follows:
7-46 a. In the case of interest-bearing securities,
7-47 not less than one and one-half times the annual interest charges on
7-48 such securities and on all other outstanding interest-bearing
7-49 securities of equal rank;
7-50 b. In the case of securities having a specified
7-51 dividend rate, not less than one and one-half times the annual
7-52 dividend requirements on such securities and on all outstanding
7-53 securities of equal rank;
7-54 c. In the case of securities wherein no dividend
7-55 rate is specified, not less than five percent <per cent> (5%) on
7-56 all outstanding securities of equal rank, together with the amount
7-57 of such securities then offered for sale, based upon the maximum
7-58 price at which such securities are to be offered for sale. The
7-59 ownership by an issuer of more than fifty percent <per cent> (50%)
7-60 of the outstanding voting stock of a corporation shall be construed
7-61 as the proportionate ownership of such corporation and shall permit
7-62 the inclusion of the earnings of such corporation applicable to the
7-63 payment of dividends upon the stock so owned in the earnings of the
7-64 issuer of the securities being registered by notification.
7-65 (2) Securities entitled to registration by
7-66 notification shall be registered by the filing with the
7-67 Commissioner by the issuer or by a registered dealer of a
7-68 registration statement as required by paragraph a of this
7-69 subdivision <subsection (a)>, and completion of the procedures
7-70 outlined in paragraph b of this subdivision <subsection b hereof>:
8-1 a. A registration statement in a form prescribed
8-2 by the Commissioner signed by the applicant filing such statement
8-3 and containing the following information:
8-4 1. Name and business address of main
8-5 office of issuer and address of issuer's principal office, if any,
8-6 in this state;
8-7 2. Title of securities being registered
8-8 and total amount of securities to be offered;
8-9 3. Price at which securities are to be
8-10 offered for sale to the public, amount of securities to be offered
8-11 in this state, and amount of registration fee, computed as
8-12 hereinafter provided;
8-13 4. A brief statement of the facts which
8-14 show that the securities are entitled to be registered by
8-15 notification;
8-16 5. Name and business address of the
8-17 applicant filing the statement;
8-18 6. Financial statements to include a
8-19 certified income <profit and loss> statement, a certified balance
8-20 sheet, and a certified statement of stockholders' equity
8-21 <statements of surplus>, each to be for a period of not less than
8-22 three (3) years prior to the date of registration. These financial
8-23 statements shall reflect the financial condition of the issuer as
8-24 of a date not more than ninety (90) days prior to the date of such
8-25 filing with the Commissioner;
8-26 7. A copy of the prospectus, if any,
8-27 describing such securities;
8-28 8. Filing of a consent to service of
8-29 process conforming to the requirements of Section 8 of this Act, if
8-30 the issuer is registering the securities and is not a resident of
8-31 this state or is not incorporated under the laws of this state.
8-32 b. Such filing with the Commissioner shall
8-33 constitute the registration of securities by notification and such
8-34 registration shall become effective five (5) days after receipt of
8-35 the registration statement and all accompanying papers by the
8-36 Commissioner; provided that the Commissioner may in his discretion
8-37 waive or reduce the five (5) days waiting period in any case where
8-38 he finds no injury to the public will result therefrom. Upon such
8-39 registration by notification, securities may be sold in this state
8-40 by registered dealers and registered salesmen. Upon the receipt of
8-41 a registration statement, prospectus, if any, payment of the filing
8-42 fee and registration fee, and, if required, a consent to service of
8-43 process, the Commissioner shall record the registration by
8-44 notification of the securities described. Such registration shall
8-45 be effective for a period of one (1) year and may be renewed for
8-46 additional periods of one (1) year, if the securities are entitled
8-47 to registration under this subsection at the time of renewal, by a
8-48 new filing under this section together with the payment of the
8-49 renewal fee of Ten Dollars ($10.00).
8-50 c. If at any time, before or after registration
8-51 of securities under this section, in the opinion of the
8-52 Commissioner the information in a registration statement filed with
8-53 him is insufficient to establish the fact that the securities
8-54 described therein are, or were, entitled to registration by
8-55 notification under this section, or that the registration
8-56 information contains, or contained, false, misleading or fraudulent
8-57 facts, he may order the applicant who filed such statement to cease
8-58 and desist from selling, or offering for sale, such securities
8-59 registered, or proposed to be registered, under provisions of this
8-60 section, until there is filed with the Commissioner such further
8-61 information as may in his judgment be necessary to establish the
8-62 fact that such securities are, or were, entitled to registration
8-63 under this section. The provisions of Section 24 of this Act as
8-64 to hearing shall be applicable to an order issued hereunder.
8-65 C. Registration by Coordination.
8-66 (1) Any security for which a registration statement
8-67 has been filed under the federal <Federal> Securities Act of 1933,
8-68 as amended, in connection with the same offering, may be registered
8-69 by coordination. A registration statement under this section shall
8-70 be filed with the Commissioner by the issuer or any registered
9-1 dealer, <and> shall contain the following information, and shall be
9-2 accompanied by the following documents:
9-3 a. One copy <Three copies> of the prospectus
9-4 filed under the <Federal> Securities Act of 1933 together with all
9-5 amendments thereto;
9-6 b. The amount of securities to be offered in
9-7 this state;
9-8 c. The states in which a registration statement
9-9 or similar document in connection with the offering has been or is
9-10 expected to be filed;
9-11 d. Any adverse order, judgment or decree
9-12 previously entered in connection with the offering by any court or
9-13 the Securities and Exchange Commission;
9-14 e. A copy of the articles of incorporation and
9-15 by-laws (or their substantial equivalents) currently in effect, a
9-16 copy of any agreements with or among underwriters, a copy of any
9-17 indenture or other instrument governing the issuance of the
9-18 security to be registered, and a specimen or copy of the security;
9-19 f. If the Commissioner requests any other
9-20 information, or copies of any other documents, filed under the
9-21 Federal Securities Act of 1933;
9-22 g. An undertaking to forward promptly all
9-23 amendments to the federal registration statement, other than an
9-24 amendment which merely delays the effective date; and
9-25 h. If the registration statement is filed by the
9-26 issuer, or by a dealer who will offer such securities for sale as
9-27 the agent of the issuer, and the issuer is not a resident of this
9-28 state or is not incorporated under the laws of this state, a
9-29 consent to service of process conforming to the requirements of
9-30 Section 8.
9-31 (2) Upon receipt of a registration statement under
9-32 this section the Commissioner shall examine such registration
9-33 statement and he may enter an order denying registration of the
9-34 securities described therein if he finds that the registrant has
9-35 not proven the proposed plan of business of the issuer to be fair,
9-36 just and equitable, and also that any consideration paid, or to be
9-37 paid, for such securities by promoters is fair, just and equitable
9-38 when such consideration for such securities is less than the
9-39 proposed offering price to the public, and that the securities
9-40 which it proposes to issue and the methods to be used by it in
9-41 issuing and disposing of the same will be such as will not work a
9-42 fraud upon the purchaser thereof. If the Commissioner enters an
9-43 order denying the registration of securities under this section, he
9-44 shall notify the registrant immediately. The provisions of Section
9-45 24 of this Act as to hearing shall be applicable to an order issued
9-46 hereunder. A registration statement under this section
9-47 automatically becomes effective at the moment the federal
9-48 registration statement becomes effective if all the following
9-49 conditions are satisfied:
9-50 a. No order has been entered by the Commissioner
9-51 denying registration of the securities;
9-52 b. The registration statement has been on file
9-53 with the Commissioner for at least ten (10) days; and
9-54 c. A statement of the maximum and minimum
9-55 proposed offering prices and the maximum underwriting discounts and
9-56 commissions has been on file for two full business days or such
9-57 shorter period as the Commissioner expressly permits and the
9-58 offering is made within those limitations. The registrant shall
9-59 promptly notify the Commissioner by telephone or telegram of the
9-60 date and time when the federal registration statement became
9-61 effective and the content of the price amendment, if any, and shall
9-62 promptly file a post-effective amendment containing the information
9-63 and documents in the price amendment. "Price amendment" means the
9-64 final federal amendment which includes a statement of the offering
9-65 price, underwriting and selling discounts or commissions, amount of
9-66 proceeds, conversion rates, call prices, and other matters
9-67 dependent upon the offering price.
9-68 Upon failure to receive the required notification and
9-69 post-effective amendment with respect to the price amendment, the
9-70 Commissioner may enter a stop order, without notice or hearing,
10-1 retroactively denying effectiveness to the registration statement
10-2 or suspending its effectiveness until compliance with this
10-3 subsection, if he promptly notifies the registrant by telephone or
10-4 telegram (and promptly confirms by letter or telegram when he
10-5 notifies by telephone) of the issuance of the order. If the
10-6 registrant proves compliance with the requirements of this
10-7 subsection as to notice and post-effective amendment, the stop
10-8 order is void as of the time of its entry. The Commissioner may
10-9 waive either or both of the conditions specified in clauses b and
10-10 c. If the federal registration statement becomes effective before
10-11 all these conditions are satisfied and they are not waived, the
10-12 registration statement automatically becomes effective as soon as
10-13 all the conditions are satisfied. If the registrant advises the
10-14 Commissioner of the date when the federal registration statement is
10-15 expected to become effective the Commissioner shall promptly advise
10-16 the registrant by telephone or telegram, at the registrant's
10-17 expense, whether all the conditions are satisfied and whether he
10-18 then contemplates the issuance of an order denying registration;
10-19 but this advice by the Commissioner does not preclude the issuance
10-20 of such an order at any time.
10-21 (3) Registration of securities under this subsection
10-22 shall be effective for the following periods:
10-23 a. The initial registration of securities of an
10-24 open-end investment company, as defined in the Investment Company
10-25 Act of 1940, shall be effective until two (2) months after the end
10-26 of the issuer's fiscal year. After the initial registration, the
10-27 issuer or its agent may renew the registration by submitting the
10-28 appropriate registration forms and renewal fees within two (2)
10-29 months after the end of the issuer's fiscal year.
10-30 b. The registration of securities of a unit
10-31 investment trust, as defined in the Investment Company Act of 1940,
10-32 shall be effective until one (1) year from the date of
10-33 effectiveness granted by the federal Securities and Exchange
10-34 Commission.
10-35 c. Any other registration of securities shall be
10-36 effective for a period of one (1) year from the date the
10-37 registration is declared effective by the Commissioner.
10-38 (4) Registrations of securities under subdivision (3)
10-39 <and> may be renewed for additional periods of one (1) year<,> if
10-40 the appropriate registration forms and <a> renewal fees are
10-41 received prior to the expiration date. The <fee of Ten Dollars
10-42 ($10.00) is paid, and if the securities are entitled to
10-43 registration at the time of renewal by the> same standards of
10-44 fairness, justice and equity as prescribed by this subsection for
10-45 original approval will apply to the renewal of all registrations.
10-46 SECTION 6. Section 8, The Securities Act (Article 581-8,
10-47 Vernon's Texas Civil Statutes), is amended to read as follows:
10-48 Sec. 8. Consent to Service <and Certificate of Good
10-49 Standing>. Unless the Board by rule otherwise specifies, any <If
10-50 the application for a permit to sell securities be filed by an
10-51 issuer, or by a dealer who will offer such securities for sale as
10-52 the agent of the issuer, and the issuer is organized under the laws
10-53 of any other state, territory, or government, or domiciled in any
10-54 other state than Texas, such application shall also contain a
10-55 certificate executed by the proper officer of such state, territory
10-56 or government dated not more than thirty (30) days prior to the
10-57 date of filing of the application showing that such issuer is
10-58 authorized to transact business in such state, territory or
10-59 government, and is not delinquent in any taxes or assessments
10-60 required to be paid to such state, territory or government. Such>
10-61 application filed by an issuer, or by a dealer who will offer such
10-62 securities for sale as the agent of the issuer, and the issuer is
10-63 organized under the laws of any other state, territory, or
10-64 government, or domiciled in any other state than Texas, shall
10-65 <also> contain a written instrument <duly executed by an executive
10-66 officer of such issuer, under proper resolution of its board of
10-67 directors, and authenticated and attested by the seal of said
10-68 issuer,> appointing the Commissioner the issuer's <irrevocably its>
10-69 true and lawful attorney upon whom all process may be served in any
10-70 action or proceedings against such issuer arising out of any
11-1 transaction subject to this Act <may be served> with the same
11-2 effect as if such issuer were organized or created under the laws
11-3 of this state and had been lawfully served with process therein.
11-4 Such instrument shall be duly executed by an authorized agent of
11-5 the issuer under proper resolution or authority. Whenever the
11-6 Commissioner shall have been served with any process as is herein
11-7 provided, it <It> shall be the duty of the Commissioner<, whenever
11-8 he shall have been served with any process as is herein provided,>
11-9 to forward same by United States mail to the last known address
11-10 <home office> of such issuer.
11-11 SECTION 7. Section 12, The Securities Act (Article 581-12,
11-12 Vernon's Texas Civil Statutes), is amended to read as follows:
11-13 Sec. 12. Registration of Persons Selling. A. Except as
11-14 provided in Section 5 of this Act, no person, firm, corporation or
11-15 dealer shall, directly or through agents or salesmen, offer for
11-16 sale, sell or make a sale of any securities in this state without
11-17 first being registered as in this Act provided. No salesman or
11-18 agent shall, in behalf of any dealer, sell, offer for sale, or make
11-19 sale of any securities within the state unless registered as a
11-20 salesman or agent of a registered dealer under the provisions of
11-21 this Act.
11-22 B. The Board may adopt rules and regulations exempting
11-23 certain classes of persons from the dealer and agent registration
11-24 requirements, or providing conditional exemptions from
11-25 registration, if the Board determines that such rules and
11-26 regulations are consistent with the purposes of this Act.
11-27 SECTION 8. Subsection K, Section 13, The Securities Act
11-28 (Article 581-13, Vernon's Texas Civil Statutes), is amended to read
11-29 as follows:
11-30 K. The Commissioner <Board> may accept some or all of the
11-31 examinations administered by the National Association of Securities
11-32 Dealers to fulfill the examination requirements of Subsection D
11-33 <waive any registration requirement for an applicant with a valid
11-34 registration from another state having registration requirements
11-35 substantially equivalent to those of this state>.
11-36 SECTION 9. Subsections A and D, Section 14, The Securities
11-37 Act (Article 581-14, Vernon's Texas Civil Statutes), are amended to
11-38 read as follows:
11-39 A. The Commissioner may deny, revoke, or suspend a
11-40 registration, place on probation a dealer, agent, or salesman whose
11-41 registration has been suspended, or reprimand a person registered
11-42 under this Act if the person:
11-43 (1) has been convicted of any <a> felony<, or of any
11-44 misdemeanor of which fraud is an essential element>;
11-45 (2) has been convicted of any misdemeanor which
11-46 directly relates to the person's securities-related duties and
11-47 responsibilities;
11-48 (3) has engaged in any inequitable practice in the
11-49 sale of securities or in any fraudulent business practice;
11-50 (4) <(3)> is <in the case of> a dealer who<,> is
11-51 insolvent;
11-52 (5) <(4)> is <in the case of> a dealer who<,> is
11-53 selling or has sold securities in this state through a salesman
11-54 other than a registered salesman, or, is <in the case of> a
11-55 salesman<,> who is selling or has sold securities in this state for
11-56 a dealer, issuer or controlling person with knowledge that such
11-57 dealer, issuer or controlling person has not complied with the
11-58 provisions of this Act;
11-59 (6) <(5)> has violated any of the provisions of this
11-60 Act or a rule of the Board;
11-61 (7) <(6)> has made any material misrepresentation to
11-62 the Commissioner or Board in connection with any information deemed
11-63 necessary by the Commissioner or Board to determine a dealer's
11-64 financial responsibility or a dealer's or salesman's business
11-65 repute or qualifications, or has refused to furnish any such
11-66 information requested by the Commissioner or Board; <or>
11-67 (8) <(7)> became registered as a dealer or salesman
11-68 after August 23, 1963, and has not complied with a condition
11-69 imposed by the Commissioner under Section 13-D;
11-70 (9) is the subject of any of the following orders that
12-1 are currently effective and were issued within the last five years:
12-2 (a) an order by the securities agency or
12-3 administrator of another state, by the financial regulatory
12-4 authority of a foreign country, or by the Securities and Exchange
12-5 Commission, entered after notice and opportunity for hearing,
12-6 denying, suspending, or revoking the person's license as a dealer,
12-7 agent, salesman, or investment adviser, or the substantial
12-8 equivalent of those terms;
12-9 (b) a suspension or expulsion from membership in
12-10 or association with a member of a self-regulatory organization;
12-11 (c) a United States Postal Service fraud order;
12-12 (d) an order by the securities agency or
12-13 administrator of another state, the financial regulatory authority
12-14 of a foreign country, the Securities and Exchange Commission, or by
12-15 the Commodity Futures Trading Commission, finding, after notice and
12-16 opportunity for hearing, that the person engaged in acts involving
12-17 fraud, deceit, false statements or omissions, or wrongful taking of
12-18 property;
12-19 (e) an order by the Commodity Futures Trading
12-20 Commission denying, suspending, or revoking registration under the
12-21 Commodity Exchange Act;
12-22 (10) is subject to any order, judgment, or decree
12-23 entered by any court of competent jurisdiction which permanently
12-24 restrains or enjoins such person from engaging in or continuing any
12-25 conduct, action, or practice in connection with any aspect of the
12-26 purchase or sale of securities; or
12-27 (11) has violated any provision of any order issued by
12-28 the Commissioner or has violated any provision of any undertaking
12-29 or agreement with the Commissioner<. Provided, however, that this
12-30 subdivision shall not apply to any person or company registered as
12-31 a dealer or salesman on August 23, 1963>.
12-32 D. If the Commissioner proposes to suspend or revoke a
12-33 person's registration, the person is entitled to a hearing before
12-34 the Commissioner or a hearings officer as now or hereafter required
12-35 by law. Proceedings for the suspension or revocation of a
12-36 registration are governed by Chapter 2001, Government Code <the
12-37 Administrative Procedure and Texas Register Act, as amended
12-38 (Article 6252-13a, Vernon's Texas Civil Statutes)>.
12-39 SECTION 10. Section 16, The Securities Act (Article 581-16,
12-40 Vernon's Texas Civil Statutes), is amended to read as follows:
12-41 Sec. 16. Consent to Suit in this State<,> by Certain Dealers
12-42 <Who Are Foreign Companies or Non-residents>. Every company
12-43 organized under the laws of any other state or of any foreign
12-44 country, or having its principal office therein, and every
12-45 non-resident individual, shall file with its or his application for
12-46 registration as a dealer an irrevocable <a> written consent<,
12-47 irrevocable,> that actions growing out of any transaction subject
12-48 to this Act may be commenced against the applicant <it or him,> in
12-49 the proper court of any county of this state in which the cause of
12-50 action may arise, or in which the plaintiff may reside, by a
12-51 service of process upon the Commissioner as the applicant's <its or
12-52 his> agent. The consent shall stipulate<, and stipulating> and
12-53 agree <agreeing> that such service of process shall be taken and
12-54 held in all courts to be as valid and binding as if due service had
12-55 been made upon the person or company itself according to the laws
12-56 of this or any other state or foreign country. Such <, and such>
12-57 instrument shall be authorized by the seal of such corporation, or
12-58 by the signature of all the members of such co-partnership, or by
12-59 the signature of the president and secretary of the association, if
12-60 it is a corporation or association, and shall be accompanied by a
12-61 duly certified copy of the resolutions of the board of directors,
12-62 trustees, or managers of the corporation authorizing the said
12-63 secretary and president to execute the same.
12-64 SECTION 11. Subsection C, Section 19, The Securities Act
12-65 (Article 581-19, Vernon's Texas Civil Statutes), is amended to read
12-66 as follows:
12-67 C. Renewal of Registration. (1) A person may renew an
12-68 unexpired registration by filing a renewal application in the form
12-69 prescribed by the Commissioner and paying to the Board, before the
12-70 expiration date of the registration, the required renewal fee.
13-1 (2) If a person's registration has been expired for
13-2 <not longer than> ninety (90) days or less, the person may renew
13-3 the registration by filing a renewal application with the
13-4 Commissioner and paying to the Board the required renewal fee and a
13-5 fee that is equal to one-half of the original application fee for
13-6 the registration.
13-7 (3) If a person's registration has been expired for
13-8 longer than ninety (90) days but less than two years, the person
13-9 may renew the registration by filing a renewal application with the
13-10 Commissioner and paying to the Board all unpaid renewal fees and a
13-11 fee that is equal to the original application fee for the
13-12 registration.
13-13 (4) If a person's registration has been expired for
13-14 two years or more <longer>, the person may not renew the
13-15 registration. The person may obtain a new registration by
13-16 submitting to reexamination and complying with the requirements and
13-17 procedures for obtaining an original registration. The person must
13-18 pay to the Board a fee that is equal to the original application
13-19 fee.
13-20 (5) At least thirty (30) days before the expiration of
13-21 a person's registration, the Commissioner shall send to the person
13-22 at the person's last known address according to the records of the
13-23 Board a written notice <shall be notified in writing> of the
13-24 impending <registration> expiration of the registration.
13-25 (6) A person who sells securities or renders
13-26 investment advisory services after the person's registration has
13-27 expired and before it is renewed is subject to the sanctions
13-28 provided by this Act for selling securities or rendering investment
13-29 advice without being registered.
13-30 SECTION 12. Section 23, The Securities Act (Article 581-23,
13-31 Vernon's Texas Civil Statutes), is amended to read as follows:
13-32 Sec. 23. Cease and Desist <Cease-Desist> Orders; Cease
13-33 Publication Orders; List of Securities Offered. Anything in this
13-34 Act to the contrary notwithstanding,
13-35 A. If it appears to the commissioner at any time that
13-36 the sale or proposed sale or method of sale of any securities,
13-37 whether exempt or not, would not be in compliance with this Act or
13-38 would tend to work a fraud on any purchaser thereof or would not be
13-39 fair, just or equitable to any purchaser thereof, the commissioner
13-40 may hold a hearing on a date determined by the commissioner within
13-41 30 days after the date of receipt of actual notice by, or notice by
13-42 registered or certified mail to the person's last known address is
13-43 given to, the issuer, the registrant, the person on whose behalf
13-44 such securities are being or are to be offered, or any person
13-45 acting as a dealer in violation of this Act. If the commissioner
13-46 shall determine at such hearing that such sale would not be in
13-47 compliance with the Act or would tend to work a fraud on any
13-48 purchaser thereof or would not be fair, just or equitable to any
13-49 purchaser thereof, the commissioner may issue a written cease and
13-50 desist order, prohibiting or suspending the sale of such securities
13-51 or denying or revoking the registration of such securities or
13-52 prohibiting an unregistered person from acting as a dealer. No
13-53 dealer, agent or salesman shall thereafter knowingly sell or offer
13-54 for sale any security named in such cease and desist order.
13-55 B. If it appears to the Commissioner at any time that
13-56 an <No person shall make an offer within this State after a cease
13-57 publication order has been issued by the commissioner stating that,
13-58 in the commissioner's opinion, the> offer contains any statement
13-59 that is materially false or misleading or is otherwise likely to
13-60 deceive the public, the Commissioner may issue a cease publication
13-61 order. No person shall make an offer prohibited by such cease
13-62 publication order <a reader thereof>.
13-63 C. The commissioner may, in the exercise of reasonable
13-64 discretion hereunder, at any time, require a dealer to file with
13-65 the commissioner a list of securities which he has offered for sale
13-66 or has advertised for sale within this State during the preceding
13-67 six months, or which he is at the time offering for sale or
13-68 advertising, or any portion thereof.
13-69 SECTION 13. The Securities Act (Article 581-1 et seq.,
13-70 Vernon's Texas Civil Statutes) is amended by adding Section 23-1 to
14-1 read as follows:
14-2 Sec. 23-1. ASSESSMENT OF ADMINISTRATIVE FINES. A. After
14-3 giving notice and opportunity for a hearing, the Commissioner may
14-4 issue an order which assesses an administrative fine against any
14-5 person or company found to have violated any provision of this Act,
14-6 Board rule, or Board order.
14-7 B. Any administrative fine assessed under this Section must
14-8 be in an amount that does not exceed $10,000 for a single violation
14-9 or $100,000 for multiple violations in a single proceeding or a
14-10 series of related proceedings.
14-11 C. For purposes of determining the amount of an
14-12 administrative fine assessed under this Section, the Commissioner
14-13 shall consider factors set out in guidelines established by the
14-14 Board.
14-15 D. For purposes of private civil litigation, the payment of
14-16 a fine assessed in an agreed order under this Act shall not
14-17 constitute an admission of any misconduct described in the agreed
14-18 order.
14-19 E. Any proceeding for the assessment of an administrative
14-20 fine must be commenced within five years after the violation
14-21 occurs.
14-22 SECTION 14. Section 24, The Securities Act (Article 581-24,
14-23 Vernon's Texas Civil Statutes), is amended to read as follows:
14-24 Sec. 24. Hearings upon Exception to Actions of Commissioner.
14-25 A. If any person or company should take exception to the action of
14-26 the Commissioner under Sections 15 or 18, in failing or refusing to
14-27 register and issue certificate for a dealer or salesman, under
14-28 Section 23 in issuing an order against the sale of securities or
14-29 the use of materials therein, or in any other particular where this
14-30 Act specifies no other procedure, the complaining party may request
14-31 a hearing before the Commissioner or before a hearings officer as
14-32 now or hereafter required by law.
14-33 B. On complaint by a person aggrieved by a denial of a
14-34 permit for the sale of securities under Section 10 of this article
14-35 or a failure or refusal to register securities under Section 7 of
14-36 this article, the Board or a hearings officer as now or hereafter
14-37 required by law <appointed by the Board> shall conduct a hearing.
14-38 C. Hearings under this Section are subject to the
14-39 requirements of Chapter 2001, Government Code.
14-40 SECTION 15. Section 28, The Securities Act (Article 581-28,
14-41 Vernon's Texas Civil Statutes), is amended to read as follows:
14-42 Sec. 28. Investigations, Investigatory Materials, and
14-43 Registration Related Materials <Subpoenas or Other Process in
14-44 Investigations by Commissioner>. A. Subpoenas or Other Process in
14-45 Investigations by Commissioner. The Commissioner may require, by
14-46 subpoena or summons issued by the Commissioner, the attendance and
14-47 testimony of witnesses and the production of any books, accounts,
14-48 records, papers and correspondence or other records relating to any
14-49 matter which the Commissioner has authority by this Act to consider
14-50 or investigate. For<, and for> this purpose the Commissioner may
14-51 sign subpoenas, administer oaths and affirmations, examine
14-52 witnesses and receive evidence; provided, however, that all
14-53 information of every kind and nature contained therein shall be
14-54 treated as confidential by the Commissioner and shall not be
14-55 disclosed to the public except under order of court. However,
14-56 except for good cause the order may not extend to a record or
14-57 communication received from other law enforcement or regulatory
14-58 agencies or to the internal notes, memoranda, reports, or
14-59 communications made in connection with a matter that the
14-60 Commissioner has the authority by this Act to consider or
14-61 investigate. Nothing in this section shall be interpreted to
14-62 prohibit or limit the publication of rulings or decisions of the
14-63 Commissioner nor shall this limitation apply to hearings provided
14-64 for in Sections 24 and 25 of this Act. In case of disobedience of
14-65 any subpoena, or of the contumacy of any witness appearing before
14-66 the Commissioner, the Commissioner may invoke the aid of the
14-67 District Court within whose jurisdiction any witness may be found,
14-68 and such court may thereupon issue an order requiring the person
14-69 subpoenaed to obey the subpoena or give evidence, or produce books,
14-70 accounts, records, papers, and correspondence touching the matter
15-1 in question. Any failure to obey such order of the court may be
15-2 punished by such court as contempt thereof.
15-3 In the course of an investigation looking to the enforcement
15-4 of this Act, or in connection with the application of a person or
15-5 company for registration or to qualify securities, the Commissioner
15-6 or Deputy Commissioner shall have free access to all records <of
15-7 the State Board of Insurance, including company examination reports
15-8 to the Board and reports of special investigations made by
15-9 personnel of the Board, as well as records> and reports of and to
15-10 any <other> department or agency of the state government. In the
15-11 event, however, that the Commissioner or Deputy Commissioner should
15-12 give out any information which the law makes confidential, the
15-13 affected corporation, firm or person shall have a right of action
15-14 on the official bond of the Commissioner or Deputy for the
15-15 corporation's, firm's, or person's <his> injuries, in a suit
15-16 brought in the name of the state at the relation of the injured
15-17 party.
15-18 The Commissioner may in any investigation cause the
15-19 deposition of witnesses residing within or without the state to be
15-20 taken in the manner prescribed for depositions in civil actions
15-21 under the laws of Texas.
15-22 Each witness required to attend before the Commissioner shall
15-23 receive a fee, for each day's attendance, in an amount set by Board
15-24 rule. All disbursements made in the payment of such fees shall be
15-25 made in accordance with Board rule and shall be included in, and
15-26 paid in the same manner as is provided for, the payment of other
15-27 expenses incident to the administration and enforcement of this Act
15-28 <as hereinafter provided>.
15-29 The sheriff's or constable's fee for serving the subpoena
15-30 shall be the same as those paid the sheriff or constable for
15-31 similar services. The fees, expenses and costs incurred at or in
15-32 connection with any hearing may be imposed by the Commissioner upon
15-33 any party to the record, or may be divided between any and all
15-34 parties to the record in such proportions as the Commissioner may
15-35 determine.
15-36 Any subpoena, summons, or other process issued by the
15-37 Commissioner may be served, at the Commissioner's discretion, by
15-38 the Commissioner, the Commissioner's <his> authorized agent, a
15-39 sheriff, or a constable.
15-40 The Commissioner may, at the Commissioner's <his> discretion,
15-41 disclose any confidential information in the Commissioner's <his>
15-42 possession to any governmental authority approved by Board rule;
15-43 <or> to any quasi-governmental authority charged with overseeing
15-44 securities activities which is approved by Board rule; or to any
15-45 receiver appointed under Section 25-1 of this Act. The disclosure
15-46 does not violate any other provision of this Act or Chapter 552,
15-47 Government Code <any provision of Chapter 424, Acts of the 63rd
15-48 Legislature, Regular Session, 1973 (Article 6252-17a, Vernon's
15-49 Texas Civil Statutes)>.
15-50 B. Confidentiality of Certain Registration-Related and Other
15-51 Materials. To the extent not already provided for by this Act,
15-52 any intraagency or interagency notes, memoranda, reports, or other
15-53 communications consisting of advice, analyses, opinions, or
15-54 recommendations shall be treated as confidential by the
15-55 Commissioner and shall not be disclosed to the public, except under
15-56 order of court, for good cause shown. The Commissioner may, at the
15-57 Commissioner's discretion, disclose any confidential information in
15-58 the Commissioner's possession to any governmental authority
15-59 approved by Board rule; to any quasi-governmental authority charged
15-60 with overseeing securities activities which is approved by Board
15-61 rule; or to any receiver appointed under Section 25-1 of this Act.
15-62 The disclosure does not violate any other provision of this Act or
15-63 Chapter 552, Government Code.
15-64 SECTION 16. Section 29, The Securities Act (Article 581-29,
15-65 Vernon's Texas Civil Statutes), is amended to read as follows:
15-66 Sec. 29. Penal Provisions. Any person who shall:
15-67 A. Sell, offer for sale or delivery, solicit
15-68 subscriptions or orders for, dispose of, invite offers for, or who
15-69 shall deal in any other manner in any security or securities
15-70 without being a registered dealer or salesman or agent as in this
16-1 Act provided shall be deemed guilty of a felony, and upon
16-2 conviction thereof shall be sentenced to pay a fine of not more
16-3 than $5,000 or imprisonment in the penitentiary for not less than
16-4 two or more than 10 years, or by both such fine and imprisonment.
16-5 B. Sell, offer for sale or delivery, solicit
16-6 subscriptions to and orders for, dispose of, invite orders for, or
16-7 who shall deal in any other manner in any security or securities
16-8 issued after September 6, 1955, unless said security or securities
16-9 have been registered or granted a permit as provided in Section 7
16-10 of this Act, shall be deemed guilty of a felony, and upon
16-11 conviction thereof shall be sentenced to pay a fine of not more
16-12 than $5,000 or imprisonment in the penitentiary for not less than
16-13 two or more than 10 years, or by both such fine and imprisonment.
16-14 C. In connection with the sale, offering for sale or
16-15 delivery of, the purchase, offer to purchase, invitation of offers
16-16 to purchase, invitations of offers to sell, or dealing in any other
16-17 manner in any security or securities, whether or not the
16-18 transaction or security is exempt under Section 5 or 6 of this Act,
16-19 directly or indirectly:
16-20 (1) engage in any fraud or fraudulent practice;
16-21 (2) employ any device, scheme, or artifice to
16-22 defraud;
16-23 (3) knowingly make any untrue statement of a
16-24 material fact or omit to state a material fact necessary in order
16-25 to make the statements made, in the light of the circumstances
16-26 under which they are made, not misleading; or
16-27 (4) engage in any act, practice or course of
16-28 business which operates or will operate as a fraud or deceit upon
16-29 any person, is guilty of a felony and upon conviction shall be:
16-30 (a) imprisoned for not less than 2 or more
16-31 than 10 years and fined not more than $10,000, if the amount
16-32 involved in the offense is less than $10,000;
16-33 (b) imprisoned for not less than 2 or more
16-34 than 20 years and fined not more than $10,000, if the amount
16-35 involved in the offense is $10,000 or more but less than $100,000;
16-36 or
16-37 (c) imprisoned for life or for not less
16-38 than 5 or more than 99 years and fined not more than $10,000, if
16-39 the amount involved is $100,000 or more.
16-40 D. Sell or offer for sale any security or securities
16-41 named or listed in a notice in writing given him by the
16-42 commissioner under the authority of Section 23A of this Act shall
16-43 be deemed guilty of a felony, and upon conviction thereof shall be
16-44 sentenced to pay a fine of not more than $5,000 or imprisonment in
16-45 the penitentiary for not more than two years, or by both such fine
16-46 and imprisonment.
16-47 E. Knowingly make or cause to be made, in any document
16-48 filed with the commissioner or in any proceeding under this Act,
16-49 whether or not such document or proceeding relates to a transaction
16-50 or security exempt under the provisions of Sections 5 or 6 of this
16-51 Act, any statement which is, at the time and in the light of the
16-52 circumstances under which it is made, false or misleading in any
16-53 material respect shall be deemed guilty of a felony, and upon
16-54 conviction thereof shall be sentenced to pay a fine of not more
16-55 than $5,000 or imprisonment in the penitentiary for not less than
16-56 two or more than 10 years, or by both such fine and imprisonment.
16-57 F. Knowingly make any false statement or
16-58 representation concerning any registration made under the
16-59 provisions of this Act shall be deemed guilty of a felony, and upon
16-60 conviction thereof shall be sentenced to pay a fine of not more
16-61 than $5,000 or imprisonment in the penitentiary for not more than
16-62 two years, or by both such fine and imprisonment.
16-63 G. Make an offer of any security within this State <as
16-64 to any security> that is not in compliance with the requirements
16-65 governing offers set forth in Section 22 of this Act shall be
16-66 deemed guilty of a felony, and upon conviction thereof, shall be
16-67 sentenced to pay a fine of not more than $5,000 or imprisonment in
16-68 the penitentiary for not more than two years, or by both such fine
16-69 and imprisonment.
16-70 H. Knowingly make an offer of any security within this
17-1 State prohibited by a cease publication order issued by the
17-2 Commissioner under Section 23B of this Act shall be deemed guilty
17-3 of a felony, and upon conviction thereof, shall be sentenced to pay
17-4 a fine of not more than $5,000 or imprisonment in the penitentiary
17-5 for not more than two years, or by both such fine and imprisonment.
17-6 SECTION 17. Section 34, The Securities Act (Article 581-34,
17-7 Vernon's Texas Civil Statutes), is amended to read as follows:
17-8 Sec. 34. Actions for Commission; Allegations and Proof of
17-9 Compliance. No person or company shall bring or maintain any
17-10 action in the courts of this state for collection of a commission
17-11 or compensation for services rendered in the sale or purchase of
17-12 securities, as that term is <herein> defined in this Act, without
17-13 alleging and proving that such person or company was duly
17-14 registered <licensed> under the provisions of this Act (or duly
17-15 exempt from such registration pursuant to rules adopted under
17-16 Section 12B of this Act) <hereof> and the securities so sold were
17-17 duly registered under the provisions of this Act <hereof> at the
17-18 time the alleged cause of action arose; provided, however, that
17-19 this section <or provision of this Act> shall not apply <(1)> to
17-20 any company or person that rendered services in connection with any
17-21 transaction exempted by Section 5 of this Act or by any rule
17-22 promulgated by the Board pursuant to Subsection T of Section 5 of
17-23 this Act if the company or person was not required to be registered
17-24 by the terms of the exemption<, nor (2) to the sale or purchase of
17-25 any security exempted by Section 6 of this Act>.
17-26 SECTION 18. The Securities Act (Article 581-1 et seq.
17-27 Vernon's Texas Civil Statutes) is amended by adding Section 42 to
17-28 read as follows:
17-29 Sec. 42. REDUCED FEES. A. The Board by rule may adopt
17-30 reduced fees, under Sections 35 and 41 of this Act, for original
17-31 and renewal applications of dealers, agents, officers, or salesmen
17-32 who have assumed inactive status as defined by the Board.
17-33 B. The Board by rule may adopt reduced fees, under
17-34 Sections 35 and 41 of this Act, for persons required by this Act to
17-35 register in two or more of the following capacities:
17-36 (1) dealer;
17-37 (2) agent or salesman; or
17-38 (3) officer.
17-39 SECTION 19. (a) The change in law made by this Act applies
17-40 only to a violation of The Securities Act (Article 581-1 et seq.,
17-41 Vernon's Texas Civil Statutes), as amended, that occurs on or after
17-42 the effective date of this Act. A violation occurs before the
17-43 effective date of this Act if any element of the violation occurs
17-44 before the effective date.
17-45 (b) A violation that occurs before the effective date of
17-46 this Act is covered by the law in effect at the time the violation
17-47 occurred, and the former law is continued in effect for that
17-48 purpose.
17-49 SECTION 20. This Act takes effect September 1, 1995.
17-50 SECTION 21. The importance of this legislation and the
17-51 crowded condition of the calendars in both houses create an
17-52 emergency and an imperative public necessity that the
17-53 constitutional rule requiring bills to be read on three several
17-54 days in each house be suspended, and this rule is hereby suspended.
17-55 * * * * *