SRC-SLL S.B. 808 75(R)BILL ANALYSIS


Senate Research CenterS.B. 808
By: Ratliff
Jurisprudence
4-15-97
Committee Report (Amended)


DIGEST 

Due to the increased risk of jury findings of liability and the potential
for enormous damages, a growing number of attorneys, accountants, and
other professionals are declining to provide services in connection with
the issuance of small securities in offerings for which the professional
can earn only a small amount of fees for services performed in connection
with the offering.  Many professionals have indicated that it would
substantially increase the likelihood of professional involvement in small
securities offerings if the amount of potential liability could be
limited.  This bill will limit the liability of certain persons involved
in the issuance of securities by a small business. 

PURPOSE

As proposed, S.B. 808 limits the liability of certain persons involved in
the issuance of securities by a small business. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 33, Article 581-33, V.T.C.S. (The Securities
Act), by adding Subsection N, as follows: 

N.  Limitation of Liability in Small Business Issuances.  Defines "small
business issuer." Provides that Section 33N applies only to an offer of
securities made by a small business issuer or by the seller of securities
of a small business issuer that is in an aggregate amount that does not
exceed $5 million and a person who has been engaged to provide services
relating to an offer of securities described by Section 33N(2)(a),
including an attorney, an accountant, a consultant, or the firm of the
attorney, accountant, or consultant.  Authorizes the maximum amount to be
recovered against a  person to which Section 33N applies in any action or
series of actions under Section 33 relating to an offer of securities to
which Section 33N applies is an amount equal to three times the fee paid
by the issuer or other seller to the person for the services related to
the offer of securities, unless the trier of fact finds the person engaged
in intentional wrongdoing in providing the services.  Requires a small
business issuer making an offer of securities to provide to the
prospective buyer a written disclosure of the limitation of liability
created by this subsection. 

SECTION 2. Makes application of this Act prospective.

SECTION 3. Emergency clause.
  Effective date: upon passage.

SUMMARY OF COMMITTEE CHANGES

Amendment 1.

(1) Page 1, lines 9, 11, and 18, and on page 2, lines 3 and 4, replace the
word "subsection"  with "Section N". 

(2) Page 1, lines 23-24, replace "Paragraph (a) of this subdivision" with
"Section N(2)(a)". 

(3) Page 2, line 3, replace "all actions" with "any action or series of
actions under Section 33". 

(4) Page 2, lines 7-8, delete "in an action described by this subdivision".

Amendment 2.

Page 2, lines 9 and 10, insert the following:

(4) a small business issuer making an offer of securities shall provide to
the prospective buyer a written disclosure of the limitation of liability
created by this subsection.