By McCall, Tillery, Bosse, Chisum, Gallego H.B. No. 2255
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the continuation and functions of the State Securities
1-3 Board; providing penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 ARTICLE 1. GENERAL OPERATIONS AND ADMINISTRATION OF THE STATE
1-6 SECURITIES BOARD
1-7 SECTION 1.01. Subsections A, B, D, E, F, L, and O, Section
1-8 2, The Securities Act (Article 581-2, Vernon's Texas Civil
1-9 Statutes), are amended to read as follows:
1-10 A. The State Securities Board is hereby created. The Board
1-11 shall consist of five [three] citizens of the state appointed by
1-12 the governor with[. With] the advice and consent of the Senate[,
1-13 the Governor shall biennially appoint one member]. Members of the
1-14 Board serve for staggered terms of six years, with as near as
1-15 possible to one-third of the members' terms expiring January 20 of
1-16 each odd-numbered year [The term of each member shall be six (6)
1-17 years from the time of his appointment and qualification, and until
1-18 his successor shall qualify]. Vacancies shall be filled by the
1-19 Governor for the unexpired term. Members shall be eligible for
1-20 reappointment. Appointments to the Board shall be made without
1-21 regard to the race, color, disability [creed], sex, religion, age,
1-22 or national origin of the appointees.
1-23 B. Board members must be members of the general public. A
1-24 person is not eligible for appointment as a member if the person or
2-1 the person's spouse:
2-2 (1) is registered as a dealer, [salesman,] agent, [or]
2-3 investment adviser, or investment adviser representative;
2-4 (2) has an active notice filing under this Act to
2-5 engage in business in this state as an investment adviser or
2-6 investment adviser representative;
2-7 (3) is employed by or participates in the management
2-8 of a business entity engaged in business as a securities dealer or
2-9 investment adviser; or
2-10 (4) [(3)] has, other than as a consumer, a financial
2-11 interest in a business entity engaged in business as a securities
2-12 dealer or investment adviser.
2-13 D. Each member of the Board is entitled to per diem as set
2-14 by legislative appropriation for each day that the member engages
2-15 in the business of the Board.
2-16 The Governor shall designate a member of the Board as the
2-17 presiding officer of the Board to serve in that capacity at the
2-18 will of the Governor [They shall select their own chairman]. A
2-19 majority of the members shall constitute a quorum for the
2-20 transaction of any business.
2-21 E. It is a ground for removal from the Board that [if] a
2-22 member:
2-23 (1) does not have at the time of taking office
2-24 [appointment] the qualifications required by Subsection A or B of
2-25 this section for appointment to the Board;
2-26 (2) does not maintain during [the] service on the
2-27 Board the qualifications required by Subsection A or B of this
3-1 section for appointment to the Board; [or]
3-2 (3) is ineligible for membership under Subsection B or
3-3 C of this section or Section 2-1 of this Act;
3-4 (4) cannot, because of illness or disability,
3-5 discharge the member's duties for a substantial part of the
3-6 member's term; or
3-7 (5) is absent from more than half of the regularly
3-8 scheduled Board meetings that the member is eligible to attend
3-9 during a calendar year without an excuse approved by a majority
3-10 vote of the Board [violates a prohibition established by
3-11 Subsection C of this section].
3-12 F. The validity of an action of the Board is not affected by
3-13 the fact that it is [was] taken when a ground for removal of a
3-14 Board member exists [of the Board existed]. If the Commissioner
3-15 has knowledge that a potential ground for removal exists, the
3-16 Commissioner shall notify the presiding officer of the Board of the
3-17 potential ground. The presiding officer shall then notify the
3-18 Governor and the attorney general that a potential ground for
3-19 removal exists. If the potential ground for removal involves the
3-20 presiding officer, the Commissioner shall notify the next highest
3-21 ranking officer of the Board, who shall then notify the Governor
3-22 and the attorney general that a potential ground for removal
3-23 exists.
3-24 L. The Board shall prepare information of consumer interest
3-25 describing the regulatory functions of the Board and Commissioner
3-26 and describing the Board's and Commissioner's procedures by which
3-27 consumer complaints are filed with and resolved by the Board or
4-1 Commissioner. The Board shall make the information available to
4-2 the general public and appropriate state agencies. There shall be
4-3 prominently displayed at all times in the place of business of each
4-4 dealer, [salesman, or] agent, investment adviser, or investment
4-5 adviser representative regulated under this Act, a sign containing
4-6 the name, mailing address, and telephone number of the Board and a
4-7 statement informing consumers that complaints against a dealer,
4-8 [salesman, or] agent, investment adviser, or investment adviser
4-9 representative may be directed to the Board.
4-10 O. The State Securities Board is subject to Chapter 325,
4-11 Government Code (Texas Sunset Act). Unless continued in existence
4-12 as provided by that chapter, the board is abolished and this Act
4-13 expires September 1, 2013 [2001].
4-14 SECTION 1.02. The Securities Act (Article 581-1 et seq.,
4-15 Vernon's Texas Civil Statutes) is amended by adding Sections 2-1,
4-16 2-2, 2-3, 2-4, 2-5, 2-6, 2-7, and 2-8 to read as follows:
4-17 Sec. 2-1. CONFLICT OF INTEREST. A. In this section, "Texas
4-18 trade association" means a cooperative and voluntarily joined
4-19 association of business or professional competitors in this state
4-20 designed to assist its members and its industry or profession in
4-21 dealing with mutual business or professional problems and in
4-22 promoting their common interest.
4-23 B. A person may not be a member of the Board and may not be
4-24 a Board employee employed in a "bona fide executive,
4-25 administrative, or professional capacity," as that phrase is used
4-26 for purposes of establishing an exemption to the overtime
4-27 provisions of the federal Fair Labor Standards Act of 1938 (29
5-1 U.S.C. Section 201 et seq.) and its subsequent amendments, if:
5-2 (1) the person is an officer, employee, or paid
5-3 consultant of a Texas trade association in a field regulated by the
5-4 Board; or
5-5 (2) the person's spouse is an officer, manager, or
5-6 paid consultant of a Texas trade association in a field regulated
5-7 by the Board.
5-8 C. A person may not be a member of the Board or act as the
5-9 general counsel to the Board if the person is required to register
5-10 as a lobbyist under Chapter 305, Government Code, because of the
5-11 person's activities for compensation on behalf of a profession
5-12 related to the operation of the Board.
5-13 Sec. 2-2. INFORMATION ABOUT STANDARDS OF CONDUCT. The
5-14 Commissioner or the Commissioner's designee shall provide to
5-15 members of the Board and to Board employees, as often as necessary,
5-16 information regarding the requirements for office or employment
5-17 under this Act, including information regarding a person's
5-18 responsibilities under applicable laws relating to standards of
5-19 conduct for state officers or employees.
5-20 Sec. 2-3. TRAINING. A. A person who is appointed to and
5-21 qualifies for office as a member of the Board may not vote,
5-22 deliberate, or be counted as a member in attendance at a meeting of
5-23 the Board until the person completes a training program that
5-24 complies with this section.
5-25 B. The training program must provide the person with
5-26 information regarding:
5-27 (1) the legislation that created the Board;
6-1 (2) the programs operated by the Board;
6-2 (3) the role and functions of the Board;
6-3 (4) the rules of the Board with an emphasis on the
6-4 rules that relate to disciplinary and investigatory authority;
6-5 (5) the current budget for the Board;
6-6 (6) the results of the most recent formal audit of the
6-7 Board;
6-8 (7) the requirements of:
6-9 (A) the open meetings law, Chapter 551,
6-10 Government Code;
6-11 (B) the public information law, Chapter 552,
6-12 Government Code;
6-13 (C) the administrative procedure law, Chapter
6-14 2001, Government Code; and
6-15 (D) other laws relating to public officials,
6-16 including conflict-of-interest laws; and
6-17 (8) any applicable ethics policies adopted by the
6-18 Board or the Texas Ethics Commission.
6-19 C. A person appointed to the Board is entitled to
6-20 reimbursement, as provided by the General Appropriations Act, for
6-21 the travel expenses incurred in attending the training program
6-22 regardless of whether the attendance at the program occurs before
6-23 or after the person qualifies for office.
6-24 Sec. 2-4. DIVISION OF POLICY AND MANAGEMENT
6-25 RESPONSIBILITIES. The Board shall develop and implement policies
6-26 that clearly separate the policymaking responsibilities of the
6-27 Board and the management responsibilities of the Commissioner and
7-1 employees of the Board.
7-2 Sec. 2-5. PUBLIC TESTIMONY. The Board shall develop and
7-3 implement policies that provide the public with a reasonable
7-4 opportunity to appear before the Board and to speak on any issue
7-5 under the jurisdiction of the Board.
7-6 Sec. 2-6. COMPLAINTS INFORMATION. A. The Commissioner or
7-7 the Commissioner's designee shall maintain a file on each written
7-8 complaint filed with the Commissioner or Board concerning an
7-9 employee, former employee, or person registered under this Act.
7-10 The file must include:
7-11 (1) the name of the person who filed the complaint;
7-12 (2) the date the complaint is received by the
7-13 Commissioner or Board;
7-14 (3) the subject matter of the complaint;
7-15 (4) the name of each person contacted in relation to
7-16 the complaint;
7-17 (5) a summary of the results of the review or
7-18 investigation of the complaint; and
7-19 (6) an explanation of the reason the file was closed,
7-20 if the Commissioner closed the file without taking action other
7-21 than to investigate the complaint.
7-22 B. The Commissioner or the Commissioner's designee shall
7-23 provide to the person filing the complaint and to each person who
7-24 is a subject of the complaint a copy of the Board's policies and
7-25 procedures relating to complaint investigation and resolution.
7-26 C. The Commissioner or the Commissioner's designee, at least
7-27 quarterly until final disposition of the complaint, shall notify
8-1 the person filing the complaint and each person who is a subject of
8-2 the complaint of the status of the investigation unless the notice
8-3 would jeopardize an undercover investigation.
8-4 Sec. 2-7. EQUAL EMPLOYMENT OPPORTUNITY POLICY STATEMENT. A.
8-5 The Commissioner or the Commissioner's designee shall prepare and
8-6 maintain a written policy statement that implements a program of
8-7 equal employment opportunity to ensure that all personnel decisions
8-8 are made without regard to race, color, disability, sex, religion,
8-9 age, or national origin.
8-10 B. The policy statement must include:
8-11 (1) personnel policies, including policies relating to
8-12 recruitment, evaluation, selection, training, and promotion of
8-13 personnel, that show the intent of the Board to avoid the unlawful
8-14 employment practices described by Chapter 21, Labor Code; and
8-15 (2) an analysis of the extent to which the composition
8-16 of the Board's personnel is in accordance with state and federal
8-17 law and a description of reasonable methods to achieve compliance
8-18 with state and federal law.
8-19 C. The policy statement must:
8-20 (1) be updated annually;
8-21 (2) be reviewed by the state Commission on Human
8-22 Rights for compliance with Subsection B(1) of this section; and
8-23 (3) be filed with the governor's office.
8-24 Sec. 2-8. INFORMATION ABOUT STATE EMPLOYEE INCENTIVE
8-25 PROGRAM. The Commissioner or the Commissioner's designee shall
8-26 provide to Board employees information and training on the benefits
8-27 and methods of participation in the state employee incentive
9-1 program.
9-2 SECTION 1.03. The Securities Act (Article 581-1 et seq.,
9-3 Vernon's Texas Civil Statutes) is amended by adding Section 43 to
9-4 read as follows:
9-5 Sec. 43. INVESTOR EDUCATION. A. The Board by rule shall
9-6 develop and implement an investor education initiative to inform
9-7 the public about the basics of investing in securities, with a
9-8 special emphasis placed on the prevention and detection of
9-9 securities fraud. Materials developed for and distributed as part
9-10 of the initiative must be published in both Spanish and English.
9-11 B. In developing and implementing the initiative, the Board
9-12 shall use its best efforts to collaborate with public or nonprofit
9-13 entities with an interest in investor education.
9-14 C. Subject to Chapter 575, Government Code, the Board may
9-15 accept grants and donations from a person who is not affiliated
9-16 with the securities industry or from a nonprofit association,
9-17 regardless of whether the entity is affiliated with the securities
9-18 industry, for use by the investor education initiative.
9-19 SECTION 1.04. As soon as possible after the effective date of
9-20 this Act, the governor shall appoint one member to the State
9-21 Securities Board for a term expiring January 20, 2005, and another
9-22 member to the State Securities Board for a term expiring January
9-23 20, 2007. As those terms expire, the governor shall appoint
9-24 members to full six-year terms.
9-25 SECTION 1.05. Not later than December 31, 2001, the State
9-26 Securities Board shall implement the investor education initiative
9-27 as required by Section 43, The Securities Act (Article 581-43,
10-1 Vernon's Texas Civil Statutes), as added by this Act.
10-2 ARTICLE 2. REGULATORY PROVISIONS
10-3 SECTION 2.01. Section 4, The Securities Act (Article 581-4,
10-4 Vernon's Texas Civil Statutes), is amended by amending Subsections
10-5 B, C, D, and E and adding Subsections N, O, P, and Q to read as
10-6 follows:
10-7 B. The terms "person" and "company" shall include a
10-8 corporation, person, joint stock company, partnership, limited
10-9 partnership, association, company, firm, syndicate, trust,
10-10 incorporated or unincorporated, heretofore or hereafter formed
10-11 under the laws of this or any other state, country, sovereignty or
10-12 political subdivision thereof, and shall include a government, or a
10-13 political subdivision or agency thereof. As used herein, the term
10-14 "trust" shall be deemed to include a common law trust, but shall
10-15 not include a trust created or appointed under or by virtue of a
10-16 last will and testament or by a court of law or equity. [Under the
10-17 criminal penal provisions of Section 29 of this Act, the word
10-18 "person" shall mean a natural person.]
10-19 C. The term "dealer" shall include every person or company
10-20 [other than a salesman,] who engages in this state, either for all
10-21 or part of his or its time, directly or through an agent, in
10-22 selling, offering for sale or delivery or soliciting subscriptions
10-23 to or orders for, or undertaking to dispose of, or to invite offers
10-24 for any security or securities [and every person or company who
10-25 engages in rendering services as an investment adviser,] and every
10-26 person or company who deals in any other manner in any security or
10-27 securities within this state. Any issuer other than a registered
11-1 dealer of a security or securities, who, directly or through any
11-2 person or company, other than a registered dealer, offers for sale,
11-3 sells or makes sales of its own security or securities shall be
11-4 deemed a dealer and shall be required to comply with the provisions
11-5 hereof; provided, however, this section or provision shall not
11-6 apply to such issuer when such security or securities are offered
11-7 for sale or sold either to a registered dealer or only by or
11-8 through a registered dealer acting as fiscal agent for the issuer;
11-9 and provided further, this section or provision shall not apply to
11-10 such issuer if the transaction is within the exemptions contained
11-11 in the provisions of Section 5 of this Act.
11-12 D. The term ["salesman" or] "agent" shall include every
11-13 person or company employed or appointed or authorized by a dealer
11-14 to sell, offer for sale or delivery, or solicit subscriptions to or
11-15 orders for, or deal in any other manner, in securities within this
11-16 state, whether by direct act or through subagents; provided, that
11-17 the officers of a corporation or partners of a partnership shall
11-18 not be deemed [salesmen or] agents solely because of their status
11-19 as officers or partners, where such corporation or partnership is
11-20 registered as a dealer hereunder.
11-21 E. The terms "sale" or "offer for sale" or "sell" shall
11-22 include every disposition, or attempt to dispose of a security for
11-23 value. The term "sale" means and includes contracts and agreements
11-24 whereby securities are sold, traded or exchanged for money,
11-25 property or other things of value, or any transfer or agreement to
11-26 transfer, in trust or otherwise. Any security given or delivered
11-27 with or as a bonus on account of any purchase of securities or
12-1 other thing of value, shall be conclusively presumed to constitute
12-2 a part of the subject of such purchase and to have been sold for
12-3 value. The term "sell" means any act by which a sale is made, and
12-4 the term "sale" or "offer for sale" shall include a subscription,
12-5 an option for sale, a solicitation of sale, a solicitation of an
12-6 offer to buy, an attempt to sell, or an offer to sell, directly or
12-7 by an agent [or salesman], by a circular, letter, or advertisement
12-8 or otherwise, including the deposit in a United States Post Office
12-9 or mail box or in any manner in the United States mails within this
12-10 State of a letter, circular or other advertising matter. Nothing
12-11 herein shall limit or diminish the full meaning of the terms
12-12 "sale," "sell" or "offer for sale" as used by or accepted in courts
12-13 of law or equity. The sale of a security under conditions which
12-14 entitle the purchaser or subsequent holder to exchange the same
12-15 for, or to purchase some other security, shall not be deemed a sale
12-16 or offer for sale of such other security; but no exchange for or
12-17 sale of such other security shall ever be made unless and until the
12-18 sale thereof shall have been first authorized in Texas under this
12-19 Act, if not exempt hereunder, or by other provisions of law.
12-20 N. "Investment adviser" includes a person who, for
12-21 compensation, engages in the business of advising another, either
12-22 directly or through publication or in writing, with respect to the
12-23 value of a security or to the advisability of investing in,
12-24 purchasing, or selling a security or a person who, for compensation
12-25 and as part of a regular business, issues or adopts analyses or a
12-26 report concerning a security, as may be further defined by Board
12-27 rule. The term does not include:
13-1 (1) a bank or a holding company, as defined by the
13-2 Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et seq.),
13-3 as amended, that is not an investment company;
13-4 (2) a lawyer, accountant, engineer, teacher, or
13-5 geologist whose performance of the services is solely incidental to
13-6 the practice of the person's profession;
13-7 (3) a broker or dealer who receives no special
13-8 compensation for those services and whose performance of those
13-9 services is solely incidental to transacting business as a broker
13-10 or dealer;
13-11 (4) the publisher of a bona fide newspaper, news
13-12 magazine, or business or financial publication of general and
13-13 regular circulation; or
13-14 (5) a person whose advice, analyses, or report does
13-15 not concern a security other than a security that is:
13-16 (A) a direct obligation of or an obligation the
13-17 principal or interest of which is guaranteed by the United States
13-18 government; or
13-19 (B) issued or guaranteed by a corporation in
13-20 which the United States has a direct or indirect interest and
13-21 designated by the United States Secretary of the Treasury under
13-22 Section 3(a)(12), Securities Exchange Act of 1934 (15 U.S.C.
13-23 Section 78c(a)(12)), as amended, as an exempt security for purposes
13-24 of that Act.
13-25 O. "Federal covered investment adviser" means an investment
13-26 adviser who is registered under the Investment Advisers Act of 1940
13-27 (15 U.S.C. Section 80b-1 et seq.), as amended.
14-1 P. "Investment adviser representative" or "representative of
14-2 an investment adviser" includes each person or company who, for
14-3 compensation, is employed, appointed, or authorized by an
14-4 investment adviser to solicit clients for the investment adviser or
14-5 who, on behalf of an investment adviser, provides investment
14-6 advice, directly or through subagents, as defined by Board rule, to
14-7 the investment adviser's clients. The term does not include a
14-8 partner of a partnership or an officer of a corporation or other
14-9 entity that is registered as an investment adviser under this Act
14-10 solely because of the person's status as an officer or partner of
14-11 that entity.
14-12 Q. "Registered investment adviser" means an investment
14-13 adviser who has been issued a registration certificate by the
14-14 Commissioner under Section 15 of this Act.
14-15 SECTION 2.02. Section 5, The Securities Act (Article 581-5,
14-16 Vernon's Texas Civil Statutes), is amended to read as follows:
14-17 Sec. 5. EXEMPT TRANSACTIONS. Except as hereinafter in this
14-18 Act specifically provided, the provisions of this Act shall not
14-19 apply to the sale of any security when made in any of the following
14-20 transactions and under any of the following conditions, and the
14-21 company or person engaged therein shall not be deemed a dealer
14-22 within the meaning of this Act; that is to say, the provisions of
14-23 this Act shall not apply to any sale, offer for sale, solicitation,
14-24 subscription, dealing in or delivery of any security under any of
14-25 the following transactions or conditions:
14-26 A. At any judicial, executor's, administrator's,
14-27 guardian's or conservator's sale, or any sale by a receiver or
15-1 trustee in insolvency or bankruptcy.
15-2 B. The sale by or for the account of a pledge holder
15-3 or mortgagee, selling or offering for sale or delivery in the
15-4 ordinary course of business to liquidate a bona fide debt, of a
15-5 security pledged in good faith as security for such debt.
15-6 C. (1) Sales of securities made by or in behalf of a
15-7 vendor, whether by dealer or other agent, in the ordinary course of
15-8 bona fide personal investment of the personal holdings of such
15-9 vendor, or change in such investment, if such vendor is not engaged
15-10 in the business of selling securities and the sale or sales are
15-11 isolated transactions not made in the course of repeated and
15-12 successive transactions of a like character; provided, that in no
15-13 event shall such sales or offerings be exempt from the provisions
15-14 of this Act when made or intended by the vendor or his agent, for
15-15 the benefit, either directly or indirectly, of any company or
15-16 corporation except the individual vendor (other than a usual
15-17 commission to said agent), and provided further, that any person
15-18 acting as agent for said vendor shall be registered pursuant to
15-19 this Act;
15-20 (2) Sales by or on behalf of any insurance
15-21 company subject to the supervision or control of the Texas
15-22 Department of Insurance of any security owned by such company as a
15-23 legal and bona fide investment, provided that in no event shall any
15-24 such sale or offering be exempt from the provisions of this Act
15-25 when made or intended, either directly or indirectly, for the
15-26 benefit of any other company as that term is defined in this Act.
15-27 D. The distribution by a corporation of securities
16-1 direct to its stockholders as a stock dividend or other
16-2 distribution paid out of earnings or surplus.
16-3 E. Any offer and any transaction pursuant to any offer
16-4 by the issuer of its securities to its existing security holders
16-5 (including persons who at the time of the transaction are holders
16-6 of convertible securities or nontransferable warrants) if no
16-7 commission or other remuneration (other than a stand-by commission)
16-8 is paid or given directly or indirectly for soliciting any security
16-9 holder in this State.
16-10 F. The issue in good faith of securities by a company
16-11 to its security holders, or creditors, in the process of a bona
16-12 fide reorganization of the company made in good faith, or the issue
16-13 in good faith of securities by a company, organized solely for the
16-14 purpose of taking over the assets and continuing the business of a
16-15 predecessor company, to the security holders or creditors of such
16-16 predecessor company, provided that in either such case such
16-17 securities are issued in exchange for the securities of such
16-18 holders or claims of such creditors, or both, and in either such
16-19 case security holders or creditors do not pay or give or promise
16-20 and are not obligated to pay or give any consideration for the
16-21 securities so issued other than the securities of or claims against
16-22 said company or its predecessor then held or owned by them.
16-23 G. The issue or sale of securities (a) by one
16-24 corporation to another corporation or the security holders thereof
16-25 pursuant to a vote by one or more classes of such security holders,
16-26 as required by the certificate of incorporation or the applicable
16-27 corporation statute, in connection with a merger, consolidation or
17-1 sale of corporate assets, or (b) by one corporation to its own
17-2 stockholders in connection with the change of par value stock to no
17-3 par value stock or vice versa, or the exchange of outstanding
17-4 shares for the same or a greater or smaller number of shares;
17-5 provided that in any such case such security holders do not pay or
17-6 give or promise and are not obligated to pay or give any
17-7 consideration for the securities so issued or sold other than the
17-8 securities of the corporation then held by them.
17-9 H. The sale of any security to any bank, trust
17-10 company, building and loan association, insurance company, surety
17-11 or guaranty company, savings institution, investment company as
17-12 defined in the Investment Company Act of 1940, small business
17-13 investment company as defined in the Small Business Investment Act
17-14 of 1958, as amended, or to any registered dealer actually engaged
17-15 in buying and selling securities.
17-16 I. Provided such sale is made without any public
17-17 solicitation or advertisements:
17-18 (a) the sale of any security by the issuer
17-19 thereof so long as the total number of security holders of the
17-20 issuer thereof does not exceed thirty-five (35) persons after
17-21 taking such sale into account;
17-22 (b) the sale or distribution by an employer or
17-23 its participating subsidiary, if any, of a security under a thrift,
17-24 savings, stock purchase, retirement, pension, profit-sharing,
17-25 option, bonus, appreciation right, incentive, or similar employee
17-26 benefit plan for employees or directors of the employer or its
17-27 subsidiary; or
18-1 (c) the sale by an issuer of its securities
18-2 during the period of twelve (12) months ending with the date of the
18-3 sale in question to not more than fifteen (15) persons (excluding,
18-4 in determining such fifteen (15) persons, purchasers of securities
18-5 in transactions exempt under other provisions of this Section 5,
18-6 purchasers of securities exempt under Section 6 hereof and
18-7 purchasers of securities which are part of an offering registered
18-8 under Section 7 hereof, provided such persons purchased such
18-9 securities for their own account and not for distribution.
18-10 J. Wherein the securities disposed of consist
18-11 exclusively of notes or bonds secured by mortgage or vendor's lien
18-12 upon real estate or tangible personal property, and the entire
18-13 mortgage is sold or transferred with all of the notes or bonds
18-14 secured thereby in a single transaction.
18-15 K. Any security or membership issued by a corporation
18-16 or association, organized exclusively for religious, educational,
18-17 benevolent, fraternal, charitable, or reformatory purposes and not
18-18 for pecuniary profit, and no part of the net earnings of which
18-19 inures to the benefit of any stockholder, shareholder, or
18-20 individual members, and where no commission or remuneration is paid
18-21 or given or is to be paid or given in connection with the
18-22 disposition thereof.
18-23 L. The sale by the issuer itself, or by a registered
18-24 dealer, of any security issued or guaranteed by any bank organized
18-25 and subject to regulation under the laws of the United States or
18-26 under the laws of any State or territory of the United States, or
18-27 any insular possession thereof, or by any savings and loan
19-1 association organized and subject to regulation under the laws of
19-2 this State, or the sale by the issuer itself of any security issued
19-3 by any federal savings and loan association.
19-4 M. The sale by the issuer itself, or by a registered
19-5 dealer, of any security either issued or guaranteed by the United
19-6 States or by any territory or insular possession thereof, or by the
19-7 District of Columbia, or by any state of the United States, or
19-8 political subdivision thereof (including but not limited to any
19-9 county, city, municipal corporation, district, or authority), or by
19-10 any public or governmental agency or instrumentality of any of the
19-11 foregoing.
19-12 N. The sale and issuance of any securities issued by
19-13 any farmers' cooperative marketing association organized under
19-14 Chapter 52, Agriculture Code, or the predecessor of that law
19-15 (Article 5737 et seq., Revised Statutes); the sale and issuance of
19-16 any securities issued by any mutual loan corporation organized
19-17 under Chapter 54, Agriculture Code, or the predecessor of that law
19-18 (Article 2500 et seq., Revised Statutes); the sale and issuance of
19-19 any equity securities issued by any cooperative association
19-20 organized under the Cooperative Association Act, as amended
19-21 (Article 1396-50.01, Vernon's Texas Civil Statutes); and the sale
19-22 of any securities issued by any farmers' cooperative society
19-23 organized under Chapter 51, Agriculture Code, or the predecessor of
19-24 that law (Article 2514 et seq., Revised Statutes). Provided,
19-25 however, this exemption shall not be applicable to agents [and
19-26 salesmen] of any farmers' cooperative marketing association, mutual
19-27 loan corporation, cooperative association, or farmers' cooperative
20-1 society when the sale of such securities is made to non-members, or
20-2 when the sale of such securities is made to members or non-members
20-3 and a commission is paid or contracted to be paid to the said
20-4 agents [or salesmen].
20-5 O. The sale by a registered dealer of outstanding
20-6 securities provided that:
20-7 (1) Such securities form no part of an unsold
20-8 allotment to or subscription by such dealer as a participant in the
20-9 distribution of such securities by the issuer thereof; and
20-10 (2) Securities of the same class, of the same
20-11 issuer, are outstanding in the hands of the public; and
20-12 (3) Such securities are offered for sale, in
20-13 good faith, at prices reasonably related to the current market
20-14 price of such securities at the time of such sale; and
20-15 (4) No part of the proceeds of such sale are
20-16 paid directly or indirectly to the issuer of such securities; and
20-17 (5) Such sale is not directly or indirectly for
20-18 the purposes of providing or furthering any scheme to violate or
20-19 evade any provision of this Act; and
20-20 (6) The right to sell or resell such securities
20-21 has not been enjoined by any court of competent jurisdiction in
20-22 this State by proceedings instituted by an officer or agency of
20-23 this State charged with enforcement of this Act; and
20-24 (7) The right to sell such securities has not
20-25 been revoked or suspended by the commissioner under any of the
20-26 provisions of this Act, or, if so, revocation or suspension is not
20-27 in force and effect; and
21-1 (8) At the time of such sale, the issuer of such
21-2 securities shall be a going concern actually engaged in business
21-3 and shall then be neither in an organization stage nor in
21-4 receivership or bankruptcy; and
21-5 (9) Such securities or other securities of the
21-6 issuer of the same class have been registered by qualification,
21-7 notification or coordination under Section 7 of this Act; or at the
21-8 time of such sale at least the following information about the
21-9 issuer shall appear in a recognized securities manual or in a
21-10 statement, in form and extent acceptable to the commissioner, filed
21-11 with the commissioner by the issuer or by a registered dealer:
21-12 (a) A statement of the issuer's principal
21-13 business;
21-14 (b) A balance sheet as of a date within
21-15 eighteen (18) months of the date of such sale; and
21-16 (c) Profit and loss statements and a
21-17 record of the dividends paid, if any, for a period of not less than
21-18 three (3) years prior to the date of such balance sheet or for the
21-19 period of existence of the issuer, if such period of existence is
21-20 less than three (3) years.
21-21 The term "recognized securities manual" means a
21-22 nationally distributed manual of securities that is approved for
21-23 use hereunder by the Board.
21-24 The Commissioner may issue a stop order or by order
21-25 prohibit, revoke or suspend the exemption under this Subsection O
21-26 with respect to any security if the Commissioner has reasonable
21-27 cause to believe that the plan of business of the issuer of such
22-1 security, the security, or the sale thereof would tend to work a
22-2 fraud or deceit upon any purchaser or purchasers thereof, such
22-3 order to be subject to review in the manner provided by Section 24
22-4 of this Act. Notice of any court injunction enjoining the sale, or
22-5 resale, of any such security, or of an order revoking or suspending
22-6 the exemption under this subdivision with respect to any security,
22-7 shall be delivered or shall be mailed by certified or registered
22-8 mail with return receipt requested, to any dealers believed to be
22-9 selling, or offering for sale, securities of the type referred to
22-10 in the notice; and the prohibitions of (6) and (7) above of this
22-11 Subsection O shall be inapplicable to any dealer until the dealer
22-12 has received actual notice from the commissioner of such revocation
22-13 or suspension.
22-14 The Board may for cause shown revoke or suspend the
22-15 recognition hereunder of any manuals previously approved under this
22-16 Subsection but no such action may be taken unless upon notice and
22-17 opportunity for hearing before the Board or a hearings officer as
22-18 now or hereafter required by law. A judgment sustaining the Board
22-19 in the action complained of shall not bar after one year an
22-20 application by the plaintiff for approval of its manual or manuals
22-21 hereunder, nor shall a judgment in favor of the plaintiff prevent
22-22 the Board from thereafter revoking such recognition for any proper
22-23 cause which may thereafter accrue or be discovered.
22-24 P. The execution by a dealer of an unsolicited order
22-25 for the purchase of securities, where the initial offering of such
22-26 securities has been completed and provided that the dealer acts
22-27 solely as an agent for the purchaser, has no direct or indirect
23-1 interest in the sale or distribution of the security ordered, and
23-2 receives no commission, profit, or other compensation from any
23-3 source other than the purchaser.
23-4 Q. The sales of interests in and under oil, gas or
23-5 mining leases, fees or titles, or contracts relating thereto, where
23-6 (1) the total number of sales by any one owner of interests,
23-7 whether whole, fractional, segregated or undivided in any single
23-8 oil, gas or mineral lease, fee or title, or contract relating
23-9 thereto, shall not exceed thirty-five (35) within a period of
23-10 twelve (12) consecutive months and (2) no use is made of
23-11 advertisement or public solicitation; provided, however, if such
23-12 sale or sales are made by an agent for such owner or owners, such
23-13 agent shall be licensed pursuant to this Act. No oil, gas or
23-14 mineral unitization or pooling agreement shall be deemed a sale
23-15 under this Act.
23-16 R. The sale by the issuer itself, or by a subsidiary
23-17 of such issuer, of any securities which would be exempt if sold by
23-18 a registered dealer under Section 6 (other than Section 6E) of this
23-19 Act.
23-20 S. The sale by or through a registered dealer of any
23-21 option if at the time of the sale of the option:
23-22 (1) the performance of the terms of the option
23-23 is guaranteed by any broker-dealer registered under the federal
23-24 Securities Exchange Act of 1934, as amended, which guaranty and
23-25 broker-dealer are in compliance with such requirements or
23-26 regulations as may be approved or adopted by the board;
23-27 (2) the option is not sold by or for the benefit
24-1 of the issuer of the security which may be purchased or sold upon
24-2 exercise of the option;
24-3 (3) the security which may be purchased or sold
24-4 upon exercise of the option is either (a) exempted under
24-5 Subsection F of Section 6 of this Act or (b) quoted on the National
24-6 Association of Securities Dealers Automated Quotation system and
24-7 meets the requirements of Paragraphs (1), (6), (7), and (8) of
24-8 Subsection O of Section 5 of this Act; and
24-9 (4) such sale is not directly or indirectly for
24-10 the purposes of providing or furthering any scheme to violate or
24-11 evade any provisions of this Act.
24-12 For purposes of this subsection the term "option" shall
24-13 mean and include any put, call, straddle, or other option or
24-14 privilege of buying or selling a specified number of securities at
24-15 a specified price from or to another person, without being bound to
24-16 do so, on or prior to a specified date, but such term shall not
24-17 include any option or privilege which by its terms may terminate
24-18 prior to such specified date upon the occurrence of a specified
24-19 event.
24-20 T. Such other transactions or conditions as the board
24-21 by rule, regulation, or order may define or prescribe,
24-22 conditionally or unconditionally.
24-23 SECTION 2.03. Section 6, The Securities Act (Article 581-6,
24-24 Vernon's Texas Civil Statutes), is amended to read as follows:
24-25 Sec. 6. EXEMPT SECURITIES. Except as hereinafter in this Act
24-26 expressly provided, the provisions of this Act shall not apply to
24-27 any of the following securities when offered for sale, or sold, or
25-1 dealt in by a registered dealer or agent [salesman] of a registered
25-2 dealer:
25-3 D. Any security issued or guaranteed either as to
25-4 principal, interest, or dividend, by a corporation owning or
25-5 operating a railroad or any other public service utility;
25-6 provided, that such corporation is subject to regulation or
25-7 supervision either as to its rates and charges or as to the issue
25-8 of its own securities by the Railroad Commission of Texas, or by a
25-9 public commission, agency, board or officers of the Government of
25-10 the United States, or of any territory or insular possession
25-11 thereof, or of any state or municipal corporation, or of the
25-12 District of Columbia, or of the Dominion of Canada, or any province
25-13 thereof; also equipment trust certificates or equipment notes or
25-14 bonds based on chattel mortgages, leases or agreements for
25-15 conditional sale of cars, motive power or other rolling stock
25-16 mortgages, leased or sold to or furnished for the use of or upon a
25-17 railroad or other public service utility corporation, provided that
25-18 such corporation is subject to regulation or supervision as above;
25-19 or equipment trust certificates, or equipment notes or bonds where
25-20 the ownership or title of such equipment is pledged or retained in
25-21 accordance with the provisions of the laws of the United States, or
25-22 of any state, territory or insular possession thereof, or of the
25-23 District of Columbia, or the Dominion of Canada, or any province
25-24 thereof, to secure the payment of such equipment trust
25-25 certificates, bonds or notes.
25-26 E. Any security issued and sold by a domestic
25-27 corporation without capital stock and not organized and not engaged
26-1 in business for profit.
26-2 F. Securities which at the time of sale have been
26-3 fully listed upon the American Stock Exchange, the Boston Stock
26-4 Exchange, the Midwest Stock Exchange or the New York Stock
26-5 Exchange, have been designated or approved for designation on
26-6 notice of issuance on the National Association of Securities
26-7 Dealers Automated Quotation National Market System, or have been
26-8 fully listed upon any recognized and responsible stock exchange
26-9 approved by the Commissioner as hereinafter in this section
26-10 provided, and also all securities senior to, or if of the same
26-11 issues, upon a parity with, any securities so listed or designated
26-12 or represented by subscription rights which have been so listed or
26-13 designated, or evidence of indebtedness guaranteed by any company,
26-14 any stock of which is so listed or designated, such securities to
26-15 be exempt only so long as the exchange upon which such securities
26-16 are so listed remains approved under the provisions of this
26-17 Section. Application for approval by the Commissioner may be made
26-18 by any organized stock exchange in such manner and upon such forms
26-19 as may be prescribed by the Commissioner, but no approval of any
26-20 exchange shall be given unless the facts and data supplied with the
26-21 application shall be found to establish:
26-22 (1) That the requirements for the listing of
26-23 securities upon the exchange so seeking approval are such as to
26-24 effect reasonable protection to the public;
26-25 (2) That the governing constitution, by-laws or
26-26 regulations of such exchange shall require:
26-27 1st: An adequate examination into the
27-1 affairs of the issuer of the securities which are to be listed
27-2 before permitting trading therein;
27-3 2nd: That the issuer of such securities,
27-4 so long as they be listed, shall periodically prepare, make public
27-5 and furnish promptly to the exchange, appropriate financial,
27-6 income, and profit and loss statements;
27-7 3rd: Securities listed and traded in on
27-8 such exchange to be restricted to those of ascertained, sound asset
27-9 or income value;
27-10 4th: A reasonable surveillance of its
27-11 members, including a requirement for periodical financial
27-12 statements and a determination of the financial responsibility of
27-13 its members and the right and obligation in the governing body of
27-14 such exchange to suspend or expel any member found to be
27-15 financially embarrassed or irresponsible or found to have been
27-16 guilty of misconduct in his business dealings, or conduct
27-17 prejudicial of the rights and interests of his customers;
27-18 The approval of any such exchange by the Commissioner
27-19 shall be made only after a reasonable investigation and hearing,
27-20 and shall be by a written order of approval upon a finding of fact
27-21 substantially in accordance with the requirements hereinabove
27-22 provided. The Commissioner, upon ten (10) days notice and hearing,
27-23 shall have power at any time to withdraw approval theretofore
27-24 granted by him to any such stock exchange which does not at the
27-25 time of hearing meet the standards of approval under this Act, and
27-26 thereupon securities so listed upon such exchange shall be no
27-27 longer entitled to the benefit of such exemption except upon the
28-1 further order of said Commissioner approving such exchange.
28-2 By the same procedure set out in the preceding
28-3 paragraph with respect to exchanges approved by the Commissioner,
28-4 the Commissioner may suspend the exempt status of any trading
28-5 system exempted by the Legislature on or after January 1, 1989, if
28-6 that system does not at the time of hearing meet the applicable
28-7 standards for approval of exchanges prescribed by this Act. The
28-8 suspension has the same effect as the removal of approval of an
28-9 exchange. The suspension remains in effect until the Commissioner
28-10 by order determines that the trading system has corrected the
28-11 deficiency or deficiencies on which the suspension was based and
28-12 maintains standards and procedures that provide reasonable
28-13 protection to the public.
28-14 H. Any commercial paper that arises out of a current
28-15 transaction or the proceeds of which have been or are to be used
28-16 for current transactions, and that evidences an obligation to pay
28-17 cash within nine months of the date of issuance, exclusive of days
28-18 of grace, or any renewal of such paper that is likewise limited, or
28-19 any guarantee of such paper or of any such renewal.
28-20 I. Notes, bonds, or other evidence of indebtedness or
28-21 certificates of ownership which are equally and proportionately
28-22 secured without reference of priority of one over another, and
28-23 which, by the terms of the instrument creating the lien, shall
28-24 continue to be so secured by the deposit with a trustee of
28-25 recognized responsibility approved by the Commissioner of any of
28-26 the securities specified in Subsection M of Section 5 or Subsection
28-27 D of Section 6; such deposited securities, if of the classes
29-1 described in Subsection M of Section 5, having an aggregate par
29-2 value of not less than one hundred and ten per cent (110%) of the
29-3 par value of the securities thereby secured, and if of class
29-4 specified in Subsection D of Section 6, having an aggregate par
29-5 value of not less than one hundred and twenty five per cent (125%)
29-6 of the par value of the securities thereby secured.
29-7 J. Notes, bonds or other evidence of indebtedness of
29-8 religious, charitable or benevolent corporations.
29-9 SECTION 2.04. Subsection A, Section 7, The Securities Act
29-10 (Article 581-7, Vernon's Texas Civil Statutes), is amended to read
29-11 as follows:
29-12 A. Qualification of Securities. (1) No dealer or [,] agent
29-13 [or salesman] shall sell or offer for sale any securities issued
29-14 after September 6, 1955, except those which shall have been
29-15 registered by Notification under subsection B or by Coordination
29-16 under subsection C of this Section 7 and except those which come
29-17 within the classes enumerated in Section 5 or Section 6 of this
29-18 Act, until the issuer of such securities or a dealer registered
29-19 under the provisions of this Act shall have been granted a permit
29-20 by the Commissioner; and no such permit shall be granted by the
29-21 Commissioner until the issuer of such securities or a dealer
29-22 registered under the provisions of this Act shall have filed with
29-23 the Commissioner a sworn statement verified under the oath of an
29-24 executive officer or partner of the issuer, or of such registered
29-25 dealer, and attested by the secretary or partner thereof, setting
29-26 forth the following information:
29-27 a. The names, residences and post office
30-1 addresses of the officers and directors of the company;
30-2 b. The location of its principal office and of
30-3 all branch offices in this State, if any;
30-4 c. A copy of its articles of incorporation or
30-5 partnership or association, as the case may be, and of any
30-6 amendments thereto, if any; if a corporation, a copy of all minutes
30-7 of any proceedings of its directors, stockholders or members
30-8 relating to or affecting the issue of said security; if a
30-9 corporation, a copy of its bylaws and of any amendments thereto;
30-10 if a trustee, a copy of all instruments by which the trust is
30-11 created and in which it is accepted, acknowledged or declared;
30-12 d. A statement showing the amount of capital
30-13 stock, if any, and if no capital stock, the amount of capital of
30-14 the issuer that is contemplated to be employed; the number of
30-15 shares into which such stock is divided, or if not divided into
30-16 shares of stock, what division is to be made or is contemplated;
30-17 the par value of each share, or if no par stock, the price at which
30-18 such security is proposed to be sold; the promotional fees or
30-19 commissions to be paid for the sale of same, including any and all
30-20 compensations of every nature that are in any way to be allowed the
30-21 promoters or allowed for the sale of same; and how such
30-22 compensation is to be paid, whether in cash, securities, service or
30-23 otherwise, or partly of either or both; also, the amount of cash
30-24 to be paid, or securities to be issued, given, transferred or sold
30-25 to promoters for promotion or organization services and expenses,
30-26 and the amount of promotion or organization services and expenses
30-27 which will be assumed or in any way paid by the issuer;
31-1 e. Copies of certificates of the stock and all
31-2 other securities to be sold, or offered for sale, together with
31-3 application blanks therefor; a copy of any contract it proposes to
31-4 make concerning such security; a copy of any prospectus or
31-5 advertisement or other description of security prepared by or for
31-6 it for distribution or publication;
31-7 f. 1. A detailed statement prepared in
31-8 accordance with generally accepted auditing standards and
31-9 procedures and generally accepted accounting principles, showing
31-10 all the assets and all the liabilities of the issuer, said
31-11 statement to reflect the financial condition of the issuer on a day
31-12 not more than ninety (90) days prior to the date such statement is
31-13 filed. Such statement shall list all assets in detail and shall
31-14 show how the value of such assets was determined, that is, whether
31-15 the value set forth in said statement represents the actual cost in
31-16 money of such assets, or whether such value represents their
31-17 present market value, or some other value than the actual cost in
31-18 money, and shall show the present actual value of said assets;
31-19 also, whether the value set forth in the statement is greater or
31-20 less than the actual cost value in money and greater or less than
31-21 the present market value of such assets. If any of the assets
31-22 consist of real estate, then said statement shall show the amount
31-23 for which said real estate is rendered for State and county taxes,
31-24 or assessed for taxes. If any such assets listed shall consist of
31-25 anything other than cash and real estate, same shall be set out in
31-26 detail so as to give the Commissioner the fullest possible
31-27 information concerning same, and the Commissioner shall have the
32-1 power to require the filing of such additional information as the
32-2 Commissioner may deem necessary to determine whether or not the
32-3 true value of said assets are reflected in the statement filed.
32-4 Should any of the assets listed in said statement be subject to any
32-5 repurchase agreement, or any other agreement of like character, by
32-6 the terms of which the absolute ownership of, or title to said
32-7 assets is qualified or limited in any way, then the terms and
32-8 conditions of said agreement by which the absolute ownership of, or
32-9 title to said assets is qualified or limited, as well as the amount
32-10 and character of the assets subject thereto shall be fully stated.
32-11 Said statement shall list all current liabilities, that is, all
32-12 liabilities which will mature and become due within one year from
32-13 the date of such application, and shall list separately from such
32-14 current liabilities, all other liabilities, contingent or
32-15 otherwise, showing the amount of those which are secured by
32-16 mortgage or otherwise, the assets of the issuer which are subject
32-17 to such mortgage, and the dates of maturity of any such mortgage
32-18 indebtedness. Such application shall also include a detailed
32-19 income statement, prepared in accordance with generally accepted
32-20 auditing standards and procedures and generally accepted accounting
32-21 principles, which shall cover the last three (3) years' operations
32-22 of the issuer, if such issuer has been in operation for three (3)
32-23 years, but if not, said income statement shall cover the time that
32-24 said issuer has been operating. If said issuer has not been
32-25 operating, but is taking over a concern of any kind which has been
32-26 previously operating, an income statement showing the operations of
32-27 the concern thus taken over for a period of the last three (3)
33-1 years next preceding the taking over of said concern shall be
33-2 included in said statement; said income statement shall clearly
33-3 reflect the amount of net income or net loss incurred during each
33-4 of the years shown.
33-5 2. The financial statements required in
33-6 subparagraph (1) of this paragraph for a small business issuer, as
33-7 defined by Board rule, may be reviewed by an independent certified
33-8 public accountant in accordance with the Statements on Standards
33-9 for Accounting and Review Services promulgated by the American
33-10 Institute of Certified Public Accountants in lieu of being audited
33-11 and certified, provided that the small business issuer otherwise
33-12 meets all of the requirements that the Board by rule, regulation,
33-13 or order may prescribe, conditionally or unconditionally.
33-14 SECTION 2.05. Subsection C, Section 10, The Securities Act
33-15 (Article 581-10, Vernon's Texas Civil Statutes), is amended to read
33-16 as follows:
33-17 C. Use of Permit to Aid Sale of Securities Prohibited. It
33-18 shall be unlawful for any dealer, [or] issuer, or agent [or
33-19 salesman,] to use a permit authorizing the issuance of securities
33-20 in connection with any sale or effort to sell any security.
33-21 SECTION 2.06. Section 11, The Securities Act (Article 581-11,
33-22 Vernon's Texas Civil Statutes), is amended to read as follows:
33-23 Sec. 11. PAPERS FILED WITH COMMISSIONER; RECORDS OPEN TO
33-24 INSPECTION. All information, papers, documents, instruments and
33-25 affidavits required by this Act to be filed with the Commissioner
33-26 shall be deemed public records of this state, and shall be open to
33-27 the inspection and examination of any purchaser or prospective
34-1 purchaser of said securities or the agent or representative of such
34-2 purchaser or prospective purchaser; and the Commissioner shall give
34-3 out to any such purchaser or prospective purchaser or his agent or
34-4 representative any information required to be filed with him under
34-5 the provisions of this section, or any other part of this Act, and
34-6 shall furnish any such purchaser, prospective purchaser, or his
34-7 agent or representative requesting it, certified copies of any and
34-8 all papers, documents, instruments and affidavits filed with him
34-9 under the provisions of this section or of any part of this Act.
34-10 The Commissioner shall maintain a record, which shall be open for
34-11 public inspection, upon which shall be entered the names and
34-12 addresses of all registered dealers, registered agents, registered
34-13 investment advisers, registered investment adviser representatives,
34-14 and persons who have submitted a notice filing under this Act, [and
34-15 salesmen] and all orders of the Commissioner denying, suspending or
34-16 revoking registration.
34-17 SECTION 2.07. Section 12, The Securities Act (Article 581-12,
34-18 Vernon's Texas Civil Statutes), is amended to read as follows:
34-19 Sec. 12. REGISTRATION OF PERSONS SELLING A SECURITY OR
34-20 RENDERING INVESTMENT ADVICE. A. Except as provided in Section 5 of
34-21 this Act, no person, firm, corporation or dealer shall, directly or
34-22 through agents [or salesmen], offer for sale, sell or make a sale
34-23 of any securities in this state without first being registered as
34-24 in this Act provided. No [salesman or] agent shall, in behalf of
34-25 any dealer, sell, offer for sale, or make sale of any securities
34-26 within the state unless registered as an [a salesman or] agent of a
34-27 registered dealer under the provisions of this Act.
35-1 B. Except as provided by Section 5 of this Act, a person may
35-2 not, directly or through an investment adviser representative,
35-3 render services as an investment adviser in this state unless the
35-4 person holds a certificate of authority issued under Section 15 of
35-5 this Act, submits a proper notice filing as provided by Section
35-6 12-1 of this Act, or is otherwise exempt under this Act. A person
35-7 may not act or render services as an investment adviser
35-8 representative for a certain investment adviser in this state
35-9 unless the person is registered or submits a proper notice filing
35-10 as an investment adviser representative for that particular
35-11 investment adviser as provided in Section 18 or 12-1 of this Act.
35-12 C. The Board may adopt rules and regulations exempting
35-13 certain classes of persons from the dealer, [and] agent, investment
35-14 adviser, and investment adviser representative registration
35-15 requirements, or providing conditional exemptions from
35-16 registration, if the Board determines that such rules and
35-17 regulations are consistent with the purposes of this Act.
35-18 SECTION 2.08. The Securities Act (Article 581-1 et seq.,
35-19 Vernon's Texas Civil Statutes) is amended by adding Section 12-1 to
35-20 read as follows:
35-21 Sec. 12-1. NOTICE FILING FOR FEDERAL COVERED INVESTMENT
35-22 ADVISER AND REPRESENTATIVE OF FEDERAL COVERED INVESTMENT ADVISER.
35-23 A. This section does not apply to an investment adviser or
35-24 investment adviser representative that is exempt from registration
35-25 under this Act or Board rule.
35-26 B. The Board by rule shall authorize a federal covered
35-27 investment adviser or a representative of a federal covered
36-1 investment adviser to engage in the business of rendering
36-2 investment advice in this state on submission to and receipt by the
36-3 Commissioner of:
36-4 (1) a notice filing on the form and containing the
36-5 information prescribed by the Commissioner and, if applicable, the
36-6 written instrument appointing the Commissioner as the adviser's
36-7 agent for service of process as required by Section 16 of this Act;
36-8 and
36-9 (2) a fee in the amount determined under Section 35 of
36-10 this Act.
36-11 C. After the notice filing fee is paid and all the
36-12 requirements for a proper notice filing under Subsection B of this
36-13 section are met, a notice filing submitted under this section takes
36-14 effect and is valid for one year. A federal covered investment
36-15 adviser or federal covered investment adviser representative may
36-16 renew a notice filing on or before its expiration date on
36-17 submission to and receipt by the Commissioner of:
36-18 (1) a renewal notice; and
36-19 (2) a renewal fee in the amount determined under
36-20 Section 35 of this Act.
36-21 SECTION 2.09. Section 13, The Securities Act (Article 581-13,
36-22 Vernon's Texas Civil Statutes), is amended to read as follows:
36-23 Sec. 13. METHOD AND CONDITION OF REGISTRATION REQUIRED FOR
36-24 DEALER, AGENT, INVESTMENT ADVISER, OR INVESTMENT ADVISER
36-25 REPRESENTATIVE [OF EACH DEALER AND EACH AGENT OR SALESMAN OF EACH
36-26 DEALER]. A. A dealer or investment adviser to be registered must
36-27 submit a sworn application therefor to the Commissioner, which
37-1 shall be in such form as the Commissioner may determine and which
37-2 shall state:
37-3 (1) The principal place of business of the applicant
37-4 wherever situated;
37-5 (2) The location of the principal place of business
37-6 and all branch offices in this state, if any;
37-7 (3) The name or style of doing business and the
37-8 address of the applicant [dealer];
37-9 (4) The names, residences and the business addresses
37-10 of all persons interested in the business as principal, officer,
37-11 director or managing agent, specified as to each his capacity and
37-12 title; and
37-13 (5) The general plan and character of business of such
37-14 applicant and the length of time during and the places at which the
37-15 applicant [dealer] has been engaged in the business.
37-16 B. An [Such] application filed by a dealer or investment
37-17 adviser shall also contain such additional information as to the
37-18 applicant's previous history, record, associations and present
37-19 financial condition as may be required by the Commissioner, or as
37-20 is necessary to enable the Commissioner to determine whether the
37-21 sale of any securities proposed to be issued or dealt in by such
37-22 applicant would result in fraud.
37-23 C. Each application shall be accompanied by certificates or
37-24 other evidences satisfactory to the Commissioner establishing the
37-25 good reputation of the applicant, his directors, officers,
37-26 copartners or principals.
37-27 D. The Commissioner shall require as a condition of
38-1 registration for all registrations granted after the effective date
38-2 of this Subsection D that the applicant (and, in the case of a
38-3 corporation or partnership, the officers, directors or partners to
38-4 be licensed by the applicant) pass successfully a written
38-5 examination to determine the applicant's qualifications and
38-6 competency to engage in the business of dealing in and selling
38-7 securities as a dealer or agent [as a salesman], or rendering
38-8 services as an investment adviser or investment adviser
38-9 representative. This condition may be waived as to any applicant
38-10 or class of applicants by action of the State Securities Board.
38-11 E. Not later than the 30th day after the date a person takes
38-12 a registration [day on which an] examination [is administered]
38-13 under this Act, the Board shall notify the person [each examinee]
38-14 of the results of the examination. If the [However, if an]
38-15 examination is graded or reviewed by a [national] testing service:
38-16 (1) [,] the Board shall notify the person [examinees]
38-17 of the results of the examination not later than the 14th day after
38-18 the date [day on which] the Board receives the results from the
38-19 testing service; and
38-20 (2) if [. If the] notice of the examination results
38-21 will be delayed for longer than 90 [ninety (90)] days after the
38-22 examination date, the Board shall notify the person [examinee] of
38-23 the reason for the delay before the 90th day.
38-24 F. The Board may require a testing service to notify a
38-25 person of the results of the person's examination. If requested in
38-26 writing by a person who fails a registration [an] examination
38-27 administered under this Act, the Board shall furnish the person
39-1 with an analysis of the person's performance on the examination.
39-2 G. If the applicant is a corporation organized under the
39-3 laws of any other state or territory or government or shall have
39-4 its principal place of business therein, it shall accompany the
39-5 application with a copy of its Articles of Incorporation and all
39-6 amendments thereto, certified by the proper officer of such state
39-7 or government or of the corporation, and its regulations and by
39-8 laws.
39-9 H. If a limited partnership, either a copy of its Articles
39-10 of Copartnership or a verified statement of the plan of doing
39-11 business.
39-12 I. If an unincorporated association or organization under
39-13 the laws of any other state, territory or government, or having its
39-14 principal place of business therein, a copy of its Articles of
39-15 Association, Trust Agreement or other form of organization.
39-16 J. It shall be the duty of the Commissioner to prepare a
39-17 proper form to be used by the applicant under the terms of this
39-18 Section, and the Commissioner shall furnish copies thereof to all
39-19 persons desiring to make application to be registered as a dealer
39-20 or investment adviser.
39-21 K. The Commissioner may accept some or all of the
39-22 examinations administered by the National Association of Securities
39-23 Dealers to fulfill the examination requirements of Subsection D.
39-24 SECTION 2.10. Section 15, The Securities Act (Article 581-15,
39-25 Vernon's Texas Civil Statutes), is amended to read as follows:
39-26 Sec. 15. ISSUANCE OF REGISTRATION CERTIFICATES TO DEALERS
39-27 AND INVESTMENT ADVISERS. If the Commissioner is satisfied that the
40-1 applicant for a dealer's or investment adviser's certificate of
40-2 registration has complied with the requirements of the Act above,
40-3 that the applicant has filed a written consent to service as and
40-4 when required by Section 16 of this Act, and upon the payment of
40-5 the fees required by Section 35 of this Act, the Commissioner shall
40-6 register the applicant and issue to it or him a registration
40-7 certificate, stating the principal place of business and address of
40-8 the dealer or investment adviser, the names and business addresses
40-9 of all persons interested in the business as principals, officers,
40-10 directors or managing agents, and the fact that the dealer or
40-11 investment adviser has been registered for a current calendar year
40-12 as a dealer in securities or as an investment adviser. Pending
40-13 final disposition of an application, the Commissioner may, for
40-14 special cause shown, grant temporary permission, revocable at any
40-15 time and subject to such terms and conditions as the Commissioner
40-16 may prescribe, to transact business as a dealer or investment
40-17 adviser under this Act. Any dealer or investment adviser acting
40-18 under such a temporary permission, shall be considered a registered
40-19 dealer or investment adviser for all purposes of this Act.
40-20 SECTION 2.11. Section 16, The Securities Act (Article 581-16,
40-21 Vernon's Texas Civil Statutes), is amended to read as follows:
40-22 Sec. 16. CONSENT TO SUIT IN THIS STATE BY CERTAIN DEALERS OR
40-23 INVESTMENT ADVISERS. Every company organized under the laws of any
40-24 other state or of any foreign country, or having its principal
40-25 office therein, and every non-resident individual, shall file with
40-26 its or his application for registration as a dealer or investment
40-27 adviser or any notice filing submitted by an investment adviser
41-1 under this Act an irrevocable written consent that actions growing
41-2 out of any transaction subject to this Act may be commenced against
41-3 the person or company [applicant] in the proper court of any county
41-4 of this state in which the cause of action may arise, or in which
41-5 the plaintiff may reside, by a service of process upon the
41-6 Commissioner as the person's or company's [applicant's] agent for
41-7 that service. The consent shall stipulate and agree that such
41-8 service of process shall be taken and held in all courts to be as
41-9 valid and binding as if due service had been made upon the person
41-10 or company itself according to the laws of this or any other state
41-11 or foreign country. Such instrument shall be authorized by the
41-12 seal of such corporation, or by the signature of all the members of
41-13 such co-partnership, or by the signature of the president and
41-14 secretary of the association, if it is a corporation or
41-15 association, and shall be accompanied by a duly certified copy of
41-16 the resolutions of the board of directors, trustees, or managers of
41-17 the corporation authorizing the said secretary and president to
41-18 execute the same.
41-19 SECTION 2.12. Section 17, The Securities Act (Article 581-17,
41-20 Vernon's Texas Civil Statutes), is amended to read as follows:
41-21 Sec. 17. FORM OF CERTIFICATES TO DEALERS AND INVESTMENT
41-22 ADVISERS. The certificate shall be in such form as the Commissioner
41-23 may determine. Any changes in the personnel of a partnership or in
41-24 the principals, officers, directors or managing agents of any
41-25 dealer or investment adviser shall be immediately certified under
41-26 oath to the Commissioner and any change in the certificate
41-27 necessitated thereby may be made at any time, upon written
42-1 application setting forth the fact necessitating the change. Upon
42-2 the issue of the amended certificates, the original certificate and
42-3 the certified copies thereof outstanding shall be promptly
42-4 surrendered to the Commissioner.
42-5 SECTION 2.13. Section 18, The Securities Act (Article 581-18,
42-6 Vernon's Texas Civil Statutes), is amended to read as follows:
42-7 Sec. 18. REGISTRATION OF AGENTS [OR SALESMEN] OF DEALERS OR
42-8 OF REPRESENTATIVES OF INVESTMENT ADVISERS. Upon written application
42-9 by a registered dealer or investment adviser, and upon satisfactory
42-10 compliance with the requirements of the Act above, the Commissioner
42-11 shall register as an agent [agents or salesmen] of such dealer or
42-12 as a representative of the investment adviser such persons as the
42-13 dealer or investment adviser may request. The application shall be
42-14 in such form as the Commissioner may prescribe and shall state the
42-15 residences and addresses of the persons whose registration is
42-16 requested, together with such information as to such agent's or
42-17 investment adviser representative's [salesman's] previous history,
42-18 record and association as may be required by the Commissioner.
42-19 Such application shall also be signed and sworn to by the agent or
42-20 investment adviser representative [salesman] for whom registration
42-21 is requested. The Commissioner shall issue to such dealer or
42-22 investment adviser, to be retained by such dealer or investment
42-23 adviser for each person so registered, evidence of registration
42-24 stating the person's name, the address of the dealer or investment
42-25 adviser, and the fact that the person is registered for the current
42-26 calendar year as an agent or investment adviser representative
42-27 [salesman] of the dealer or investment adviser, as appropriate.
43-1 The evidence of registration shall be in such form as the
43-2 Commissioner shall determine. Upon application by the dealer or
43-3 the investment adviser, the registration of any agent or investment
43-4 adviser representative [salesman] shall be cancelled.
43-5 SECTION 2.14. Subsection D, Section 19, The Securities Act
43-6 (Article 581-19, Vernon's Texas Civil Statutes), is amended to
43-7 read as follows:
43-8 D. The Board may recognize, prepare, or administer
43-9 continuing education programs for a person who is registered under
43-10 this Act [dealers, salesmen, or agents]. If participation is
43-11 required by the Board as a condition of maintaining the certificate
43-12 or evidence of registration, a person who is registered under this
43-13 Act must participate in the continuing education programs
43-14 [Participation in the programs is voluntary].
43-15 SECTION 2.15. Section 20, The Securities Act (Article 581-20,
43-16 Vernon's Texas Civil Statutes), is amended to read as follows:
43-17 Sec. 20. DISPLAY OR ADVERTISEMENT OF FACT OF REGISTRATION
43-18 UNLAWFUL. It shall be unlawful for any dealer, agent, investment
43-19 adviser, or investment adviser representative [salesman] to use the
43-20 fact of his registry, by public display or advertisement, except as
43-21 hereinafter expressly provided, for the registration certificate or
43-22 evidence of registration or any certified copy thereof, in
43-23 connection with any sale or effort to sell any security or any
43-24 rendering of services as an investment adviser.
43-25 SECTION 2.16. Section 21, The Securities Act (Article 581-21,
43-26 Vernon's Texas Civil Statutes), is amended to read as follows:
43-27 Sec. 21. POSTING CERTIFICATES OF AUTHORITY. Immediately upon
44-1 receipt of the dealer's or investment adviser's registration
44-2 certificate issued pursuant to the authority of this Act, the
44-3 dealer or investment adviser named therein shall cause such
44-4 certificate to be posted and at all times conspicuously displayed
44-5 in such dealer's or investment adviser's principal place of
44-6 business, if one is maintained in this state, and shall likewise
44-7 forthwith cause a duplicate of such certificate to be posted and at
44-8 all times conspicuously displayed in each branch office located
44-9 within this state.
44-10 SECTION 2.17. Subsections A and B, Section 22, The Securities
44-11 Act (Article 581-22, Vernon's Texas Civil Statutes), are amended to
44-12 read as follows:
44-13 A. Permitted Written, Pictorial, or Broadcast Offers. A
44-14 written or printed offer (including a pictorial demonstration with
44-15 any accompanying script) or a broadcast offer (i.e., an offer
44-16 disseminated by radio, television, recorded telephone presentation,
44-17 or other mass media) to sell a security may be made in this State
44-18 if:
44-19 (1) a copy of the offer is filed with the Commissioner
44-20 within 10 days after the date of its first use in this State; and
44-21 (2) the person making or distributing the offer in
44-22 this State is a registered dealer or a registered agent [salesman]
44-23 of a registered dealer, as required by this Act; and
44-24 (3) either:
44-25 (a) the security is registered under Subsection
44-26 B or C of Section 7 or a permit has been granted for the security
44-27 under Section 10, or
45-1 (b) an application for registration under
45-2 Subsection B or C of Section 7 or for a permit under Section 10 has
45-3 been filed with the Commissioner; and
45-4 (4) if registration has not become effective under
45-5 Subsection B or C of Section 7 or a permit has not been granted
45-6 under Section 10, the offer prominently states on the first page of
45-7 a written or printed offer or as a preface to any pictorial or
45-8 broadcast offer either:
45-9 (a)
45-10 INFORMATIONAL ADVERTISING ONLY.
45-11 THE SECURITIES HEREIN DESCRIBED HAVE NOT BEEN QUALIFIED OR
45-12 REGISTERED FOR SALE IN TEXAS. ANY REPRESENTATION TO THE CONTRARY
45-13 OR CONSUMMATION OF SALE OF THESE SECURITIES IN TEXAS PRIOR TO
45-14 QUALIFICATION OR REGISTRATION THEREOF IS A CRIMINAL OFFENSE.
45-15 or
45-16 (b) other language required by the United States
45-17 Securities and Exchange Commission that in the Commissioner's
45-18 opinion will inform investors that the securities may not yet be
45-19 sold; and
45-20 (5) the person making or distributing the offer in
45-21 this State;
45-22 (a) has not received notice in writing of an
45-23 order prohibiting the offer under Subsection A or B of Section 23,
45-24 or
45-25 (b) has received such notice but the order is no
45-26 longer in effect; and
45-27 (6) payment is not accepted from the offeree and no
46-1 contract of sale is made before registration is effective under
46-2 Subsection B or C of Section 7 or a permit is granted under Section
46-3 10.
46-4 B. Permitted Oral Offers. An oral offer (not broadcast,
46-5 i.e., not disseminated by radio, television, recorded telephone
46-6 presentation, or other mass media) to sell a security may be made
46-7 in this State in person, by telephone, or by other direct
46-8 individual communication if:
46-9 (1) the person making the offer in this State is a
46-10 registered dealer or a registered agent [salesman] of a registered
46-11 dealer, as required by this Act; and
46-12 (2) either:
46-13 (a) the security is registered under Subsection
46-14 B or C of Section 7 or a permit has been granted for the security
46-15 under Section 10, or
46-16 (b) an application for registration under
46-17 Subsection B or C of Section 7 or for a permit under Section 10 has
46-18 been filed with the Commissioner; and
46-19 (3) the person making or distributing the offer in
46-20 this State:
46-21 (a) has not received notice in writing of an
46-22 order prohibiting the offer under Subsection A or B of Section 23,
46-23 or
46-24 (b) has received such notice but the order is no
46-25 longer in effect; and
46-26 (4) payment is not accepted from the offeree and no
46-27 contract of sale is made before registration is effective under
47-1 Subsection B or C of Section 7 or before a permit is granted under
47-2 Section 10.
47-3 SECTION 2.18. Section 26, The Securities Act (Article 581-26,
47-4 Vernon's Texas Civil Statutes), is amended to read as follows:
47-5 Sec. 26. NOTICES BY REGISTERED MAIL. Any notice required by
47-6 this Act shall be sufficient if sent by registered or certified
47-7 mail unless otherwise specified in this Act, addressed to the
47-8 dealer, agent, investment adviser, or investment adviser
47-9 representative [salesman], as the case may be, at the address
47-10 designated in the application for registration or notice filing
47-11 submitted to the Commissioner. All testimony taken at any hearing
47-12 before the Commissioner shall be reported stenographically and a
47-13 full and complete record shall be kept of all proceedings had
47-14 before the Commissioner on any hearing or investigation.
47-15 SECTION 2.19. Section 35, The Securities Act (Article 581-35,
47-16 Vernon's Texas Civil Statutes), is amended to read as follows:
47-17 Sec. 35. FEES. The Commissioner or Board shall charge and
47-18 collect the following fees and shall daily pay all fees received
47-19 into the State Treasury:
47-20 A. For the filing of any original application of a
47-21 dealer or investment adviser or for the submission of a notice
47-22 filing for a federal covered investment adviser, Seventy-five
47-23 Dollars ($75.00), and for the filing of any renewal application of
47-24 a dealer or investment adviser or for the submission of a renewal
47-25 notice filing for a federal covered investment adviser, Forty
47-26 Dollars ($40.00);
47-27 B. For the filing of any original application for each
48-1 agent, officer, or investment adviser representative or for the
48-2 submission of a notice filing for each representative of a federal
48-3 covered investment adviser [salesman], Thirty-five Dollars
48-4 ($35.00), and for the filing of any renewal application for each
48-5 agent, officer, or investment adviser representative or for the
48-6 submission of a renewal notice filing for each representative of a
48-7 federal covered investment adviser [salesman], Twenty Dollars
48-8 ($20.00);
48-9 C. For any filing to amend the registration
48-10 certificate of a dealer or investment adviser or evidence of
48-11 registration of an agent or investment adviser representative [a
48-12 salesman], issue a duplicate certificate or evidence of
48-13 registration, or register a branch office, Twenty-five Dollars
48-14 ($25.00);
48-15 D. For the filing of any original, amended or renewal
48-16 application to sell or dispose of securities, Ten Dollars ($10.00);
48-17 E. For the examination of any original or amended
48-18 application filed under Subsection A, B, or C of Section 7 of this
48-19 Act, regardless of whether the application is denied, abandoned,
48-20 withdrawn, or approved, a fee of one-tenth (1/10) of one percent
48-21 (1%) of the aggregate amount of securities described and proposed
48-22 to be sold to persons located within this state based upon the
48-23 price at which such securities are to be offered to the public;
48-24 F. For certified copies of any papers filed in the
48-25 office of the Commissioner, the Commissioner shall charge such fees
48-26 as are reasonably related to costs; however, in no event shall
48-27 such fees be more than those which the Secretary of State is
49-1 authorized to charge in similar cases;
49-2 G. For the filing of any application for approval of a
49-3 stock exchange so that securities fully listed thereon will be
49-4 exempt, a fee of Ten Thousand Dollars ($10,000.00);
49-5 H. For the filing of a request to take the Texas
49-6 Securities Law Examination, Thirty-five Dollars ($35.00);
49-7 I. For the filing of an initial notice required by the
49-8 Commissioner to claim a secondary trading exemption, a fee of Five
49-9 Hundred Dollars ($500.00), and for the filing of a secondary
49-10 trading exemption renewal notice, a fee of Five Hundred Dollars
49-11 ($500.00);
49-12 J. For the filing of an initial notice required by the
49-13 Commissioner to claim a limited offering exemption, a fee of
49-14 one-tenth (1/10) of one percent (1%) of the aggregate amount of
49-15 securities described as being offered for sale, but in no case more
49-16 than Five Hundred Dollars ($500.00); and
49-17 K. For an interpretation by the Board's general
49-18 counsel of this Act or a rule adopted under this Act, a fee of One
49-19 Hundred Dollars ($100.00), except that an officer or employee of a
49-20 governmental entity and the entity that the officer or employee
49-21 represents are exempt from the fee under this subsection when the
49-22 officer or employee is conducting official business of the entity.
49-23 SECTION 2.20. Section 41(a), The Securities Act (Article
49-24 581-41, Vernon's Texas Civil Statutes), is amended to read as
49-25 follows:
49-26 (a) Each of the following fees imposed by or under another
49-27 section of this Act is increased by $200:
50-1 (1) fee for filing any original application of a
50-2 dealer or investment adviser;
50-3 (2) fee for filing any renewal application of a dealer
50-4 or investment adviser;
50-5 (3) fee for filing any original application for agent,
50-6 officer, or investment adviser representative [or salesman]; [and]
50-7 (4) fee for filing any renewal application for agent,
50-8 officer, or investment adviser representative;
50-9 (5) fee for submission of a notice filing for a
50-10 federal covered investment adviser;
50-11 (6) fee for submission of a renewal notice filing for
50-12 a federal covered investment adviser;
50-13 (7) fee for submission of a notice filing for a
50-14 representative of a federal covered investment adviser; and
50-15 (8) fee for submission of a renewal notice filing for
50-16 a representative of a federal covered investment adviser
50-17 [salesman].
50-18 SECTION 2.21. Section 42, The Securities Act (Article 581-42,
50-19 Vernon's Texas Civil Statutes), is amended to read as follows:
50-20 Sec. 42. REDUCED FEES. A. The Board by rule may adopt
50-21 reduced fees, under Sections 35 and 41 of this Act, for original
50-22 and renewal applications of dealers, agents, officers, investment
50-23 advisers, or investment adviser representatives [salesmen] who have
50-24 assumed inactive status as defined by the Board.
50-25 B. The Board by rule may adopt reduced fees, under Sections
50-26 35 and 41 of this Act, for persons required by this Act to register
50-27 in two or more of the following capacities:
51-1 (1) dealer;
51-2 (2) agent [or salesman]; [or]
51-3 (3) investment adviser;
51-4 (4) investment adviser representative; or
51-5 (5) officer.
51-6 C. Notwithstanding Sections 35 and 41 of this Act, a person
51-7 shall pay only one fee required under those sections to engage in
51-8 business in this state concurrently for the same person or company
51-9 as:
51-10 (1) a dealer and an investment adviser; or
51-11 (2) an agent and investment adviser representative.
51-12 SECTION 2.22. The changes in law made by this Act apply only
51-13 to a fee that becomes due on or after the effective date of this
51-14 Act. A fee that becomes due before the effective date of this Act
51-15 is governed by the law in effect on the date the fee is due, and
51-16 the former law is continued in effect for that purpose.
51-17 ARTICLE 3. ENFORCEMENT PROVISIONS
51-18 SECTION 3.01. The Securities Act (Article 581-1 et seq.,
51-19 Vernon's Texas Civil Statutes) is amended by adding Section 13-1 to
51-20 read as follows:
51-21 Sec. 13-1. INSPECTION. A. The Commissioner, without notice,
51-22 may inspect a registered dealer or registered investment adviser as
51-23 necessary to ensure compliance with this Act and rules adopted
51-24 under this Act.
51-25 B. The Commissioner, during regular business hours, may:
51-26 (1) enter the business premises of a registered dealer
51-27 or registered investment adviser; and
52-1 (2) examine and copy books and records pertinent to
52-2 the inspection.
52-3 C. During the inspection, the dealer or investment adviser
52-4 shall:
52-5 (1) provide to the Commissioner or the Commissioner's
52-6 authorized representative immediate and complete access to the
52-7 person's office, place of business, files, safe, and any other
52-8 location in which books and records pertinent to the inspection are
52-9 located; and
52-10 (2) allow the Commissioner or the Commissioner's
52-11 authorized representative to make photostatic or electronic copies
52-12 of books or records subject to inspection.
52-13 D. A dealer or investment adviser may not charge a fee for
52-14 copying information under this section.
52-15 E. Information obtained under this section and any
52-16 intra-agency or interagency notes, memoranda, reports, or other
52-17 communications consisting of advice, analyses, opinions, or
52-18 recommendations that are made in connection with the inspection are
52-19 confidential and may not be disclosed to the public or released by
52-20 the Commissioner except to the same extent provided for the release
52-21 or disclosure of confidential documents or other information made
52-22 or obtained in connection with an investigation under Section 28 of
52-23 this Act.
52-24 SECTION 3.02. Section 14, The Securities Act (Article 581-14,
52-25 Vernon's Texas Civil Statutes), is amended to read as follows:
52-26 Sec. 14. DENIAL, SUSPENSION OR REVOCATION OF REGISTRATION AS
52-27 DEALER, AGENT, INVESTMENT ADVISER, OR INVESTMENT ADVISER
53-1 REPRESENTATIVE [SALESMAN]. A. The Commissioner may deny, revoke,
53-2 or suspend a registration issued under this Act, place on probation
53-3 a dealer, agent, investment adviser, or investment adviser
53-4 representative [salesman] whose registration has been suspended
53-5 under this Act, or reprimand a person registered under this Act if
53-6 the person:
53-7 (1) has been convicted of any felony;
53-8 (2) has been convicted of any misdemeanor which
53-9 directly relates to the person's securities-related duties and
53-10 responsibilities;
53-11 (3) has engaged in any inequitable practice in the
53-12 sale of securities or in the rendering of investment advice, or in
53-13 any fraudulent business practice;
53-14 (4) is a dealer or investment adviser who is
53-15 insolvent;
53-16 (5) meets one of the following criteria:
53-17 (a) is a dealer who is selling or has sold
53-18 securities in this state through an agent [a salesman] other than a
53-19 registered agent;
53-20 (b) is an investment adviser who is engaging or
53-21 has engaged in rendering investment advice in this state through a
53-22 representative who is not registered to perform services for that
53-23 investment adviser as required by this Act;
53-24 (c) [salesman, or,] is an agent [a salesman] who
53-25 is selling or has sold securities in this state for a dealer,
53-26 issuer or controlling person with knowledge that such dealer,
53-27 issuer or controlling person has not complied with the provisions
54-1 of this Act; or
54-2 (d) is an investment adviser representative who
54-3 is rendering or has rendered investment advice for an investment
54-4 adviser in this state, other than an investment adviser who submits
54-5 a notice filing under this Act, for whom the representative is or
54-6 was not registered to represent as required by this Act;
54-7 (6) has violated any of the provisions of this Act or
54-8 a rule of the Board;
54-9 (7) has made any material misrepresentation to the
54-10 Commissioner or Board in connection with any information deemed
54-11 necessary by the Commissioner or Board to determine a dealer's or
54-12 investment adviser's financial responsibility or a dealer's,
54-13 agent's, investment adviser's or investment adviser
54-14 representative's [or salesman's] business repute or qualifications,
54-15 or has refused to furnish any such information requested by the
54-16 Commissioner or Board;
54-17 (8) became registered as a dealer, agent, investment
54-18 adviser, or investment adviser representative [or salesman] after
54-19 August 23, 1963, and has not complied with a condition imposed by
54-20 the Commissioner under Section 13-D;
54-21 (9) is the subject of any of the following orders that
54-22 are currently effective and were issued within the last five years:
54-23 (a) an order by the securities agency or
54-24 administrator of another state, by the financial regulatory
54-25 authority of a foreign country, or by the Securities and Exchange
54-26 Commission, entered after notice and opportunity for hearing,
54-27 denying, suspending, or revoking the person's license as a dealer,
55-1 agent, [salesman, or] investment adviser, or investment adviser
55-2 representative or the substantial equivalent of those terms;
55-3 (b) a suspension or expulsion from membership in
55-4 or association with a member of a self-regulatory organization;
55-5 (c) a United States Postal Service fraud order;
55-6 (d) an order by the securities agency or
55-7 administrator of another state, the financial regulatory authority
55-8 of a foreign country, the Securities and Exchange Commission, or by
55-9 the Commodity Futures Trading Commission, finding, after notice and
55-10 opportunity for hearing, that the person engaged in acts involving
55-11 fraud, deceit, false statements or omissions, or wrongful taking of
55-12 property;
55-13 (e) an order by the Commodity Futures Trading
55-14 Commission denying, suspending, or revoking registration under the
55-15 Commodity Exchange Act;
55-16 (10) is subject to any order, judgment, or decree
55-17 entered by any court of competent jurisdiction which permanently
55-18 restrains or enjoins such person from engaging in or continuing any
55-19 conduct, action, or practice in connection with any aspect of the
55-20 purchase or sale of securities or the rendering of security
55-21 investment advice; or
55-22 (11) has violated any provision of any order issued by
55-23 the Commissioner or has violated any provision of any undertaking
55-24 or agreement with the Commissioner.
55-25 B. [The Commissioner shall keep an information file about
55-26 each complaint filed with the Commissioner or Board relating to a
55-27 person registered under this Act.]
56-1 [C. If a written complaint is filed with the Commissioner or
56-2 Board relating to a person registered under this Act, the
56-3 Commissioner, at least as frequently as quarterly and until final
56-4 disposition of the complaint, shall notify the parties to the
56-5 complaint of the status of the complaint unless the notice would
56-6 jeopardize an undercover investigation.]
56-7 [D.] If the Commissioner proposes to suspend or revoke a
56-8 person's registration, the person is entitled to a hearing before
56-9 the Commissioner or a hearings officer as now or hereafter required
56-10 by law. Proceedings for the suspension or revocation of a
56-11 registration are governed by Chapter 2001, Government Code.
56-12 C. [E.] This section does not affect the confidentiality of
56-13 investigative records maintained by the Commissioner or Board.
56-14 SECTION 3.03. Section 23, The Securities Act (Article
56-15 581-23, Vernon's Texas Civil Statutes), is amended to read as
56-16 follows:
56-17 Sec. 23. CEASE AND DESIST ORDERS; CEASE PUBLICATION ORDERS;
56-18 LIST OF SECURITIES OFFERED.
56-19 Anything in this Act to the contrary notwithstanding,
56-20 A. If it appears to the commissioner at any time that the
56-21 sale or proposed sale or method of sale of any securities, whether
56-22 exempt or not, is a fraudulent practice or would not be in
56-23 compliance with this Act or would tend to work a fraud on any
56-24 purchaser thereof or would not be fair, just or equitable to any
56-25 purchaser thereof, the commissioner may hold a hearing on a date
56-26 determined by the commissioner within 30 days after the date of
56-27 receipt of actual notice by, or notice by registered or certified
57-1 mail to the person's last known address is given to, the issuer,
57-2 the registrant, the person on whose behalf such securities are
57-3 being or are to be offered, or any person acting as a dealer or
57-4 agent in violation of this Act. If the commissioner shall
57-5 determine at such hearing that such sale would not be in compliance
57-6 with the Act, is a fraudulent practice, or would tend to work a
57-7 fraud on any purchaser thereof or would not be fair, just or
57-8 equitable to any purchaser thereof, the commissioner may issue a
57-9 written cease and desist order, prohibiting or suspending the sale
57-10 of such securities or denying or revoking the registration of such
57-11 securities, [or] prohibiting an unregistered person from acting as
57-12 a dealer or an agent, or prohibiting the fraudulent conduct. No
57-13 dealer or[,] agent [or salesman] shall thereafter knowingly sell or
57-14 offer for sale any security named in such cease and desist order.
57-15 B. The Commissioner may serve a proposed cease and desist
57-16 order on an investment adviser that the Commissioner believes is
57-17 engaging or is likely to engage in fraud or a fraudulent practice
57-18 with respect to rendering services as an investment adviser or
57-19 investment adviser representative or on a person acting as an
57-20 investment adviser or investment adviser representative in
57-21 violation of this Act. The order must be sent by personal delivery
57-22 or registered or certified mail, return receipt requested, to the
57-23 investment adviser's, investment adviser representative's, or
57-24 unauthorized person's last known address and must state the acts or
57-25 practices alleged to be fraudulent or other specific charges. The
57-26 Commissioner shall hold a hearing not later than the 30th day after
57-27 the date on which notice is served on the investment adviser or
58-1 investment adviser representative. After the hearing, the
58-2 Commissioner shall issue or decline to issue a cease and desist
58-3 order. An order issued under this subsection must:
58-4 (1) require the investment adviser or investment
58-5 adviser representative to immediately cease and desist from the
58-6 fraudulent conduct; or
58-7 (2) prohibit an unregistered or other unauthorized
58-8 person who is not exempt from the registration or notice filing
58-9 requirements of this Act from acting as an investment adviser or
58-10 investment adviser representative in violation of this Act.
58-11 C. If it appears to the Commissioner at any time that an
58-12 offer contains any statement that is materially false or misleading
58-13 or is otherwise likely to deceive the public, the Commissioner may
58-14 issue a cease publication order. No person shall make an offer
58-15 prohibited by such cease publication order.
58-16 D. [C.] The commissioner may, in the exercise of reasonable
58-17 discretion hereunder, at any time, require a dealer to file with
58-18 the commissioner a list of securities which he has offered for sale
58-19 or has advertised for sale within this State during the preceding
58-20 six months, or which he is at the time offering for sale or
58-21 advertising, or any portion thereof.
58-22 SECTION 3.04. The Securities Act (Article 581-1 et seq.,
58-23 Vernon's Texas Civil Statutes) is amended by adding Section 23-2 to
58-24 read as follows:
58-25 Sec. 23-2. EMERGENCY CEASE AND DESIST ORDER. A. On the
58-26 Commissioner's determination that the conduct, act, or practice
58-27 threatens immediate and irreparable public harm, the Commissioner
59-1 may issue an emergency cease and desist order to a person whom the
59-2 Commissioner reasonably believes:
59-3 (1) is engaging in or is about to engage in fraud or a
59-4 fraudulent practice in connection with:
59-5 (A) the offer for sale or sale of a security; or
59-6 (B) the rendering of services as an investment
59-7 adviser or investment adviser representative; or
59-8 (2) has made an offer containing a statement that is
59-9 materially misleading or is otherwise likely to deceive the public;
59-10 or
59-11 (3) is engaging in an act or practice that violates
59-12 this Act or a Board rule.
59-13 B. The order must:
59-14 (1) be sent on issuance to each person affected by the
59-15 order by personal delivery or registered or certified mail, return
59-16 receipt requested, to the person's last known address;
59-17 (2) state the specific charges and require the person
59-18 to immediately cease and desist from the unauthorized activity; and
59-19 (3) contain a notice that a request for hearing may be
59-20 filed under this section.
59-21 C. Unless a person against whom the emergency order is
59-22 directed requests a hearing in writing before the 31st day after
59-23 the date it is served on the person, the emergency order is final
59-24 and nonappealable as to that person. A request for a hearing must:
59-25 (1) be in writing and directed to the Commissioner;
59-26 and
59-27 (2) state the grounds for the request to set aside or
60-1 modify the order.
60-2 D. On receiving a request for a hearing, the Commissioner
60-3 shall serve notice of the time and place of the hearing by personal
60-4 delivery or registered or certified mail, return receipt requested.
60-5 The hearing must be held not later than the 10th day after the date
60-6 the Commissioner receives the request for a hearing unless the
60-7 parties agree to a later hearing date. At the hearing, the
60-8 Commissioner has the burden of proof and must present evidence in
60-9 support of the order.
60-10 E. After the hearing, the Commissioner shall affirm, modify,
60-11 or set aside in whole or part the emergency order. An order
60-12 affirming or modifying the emergency order is immediately final for
60-13 purposes of enforcement and appeal.
60-14 F. An emergency order continues in effect unless the order
60-15 is stayed by the Commissioner. The Commissioner may impose any
60-16 condition before granting a stay of the order.
60-17 SECTION 3.05. Subsection A, Section 24, The Securities Act
60-18 (Article 581-24, Vernon's Texas Civil Statutes), is amended to read
60-19 as follows:
60-20 A. If any person or company should take exception to the
60-21 action of the Commissioner under Sections 15 or 18, in failing or
60-22 refusing to register and issue certificate for a dealer or
60-23 investment adviser or evidence of registration for an investment
60-24 adviser representative or agent [salesman], under Section 23 or
60-25 23-2 in issuing an order against the sale of securities or the use
60-26 of materials therein or against the rendering of investment advice
60-27 with respect to a security, or in any other particular where this
61-1 Act specifies no other procedure, the complaining party may request
61-2 a hearing before the Commissioner or before a hearings officer as
61-3 now or hereafter required by law.
61-4 SECTION 3.06. Section 25, The Securities Act (Article 581-25,
61-5 Vernon's Texas Civil Statutes), is amended to read as follows:
61-6 Sec. 25. REVOCATION OF REGISTRATION OF ANY DEALER, AGENT,
61-7 INVESTMENT ADVISER, OR INVESTMENT ADVISER REPRESENTATIVE
61-8 [SALESMAN]. The revocation of a dealer's or investment adviser's
61-9 registration shall constitute a revocation of the registration of
61-10 any agent [or salesman] of the dealer or any investment adviser
61-11 representative of the investment adviser and notice of its
61-12 operation on such agent or investment adviser representative
61-13 [salesman] shall be forthwith sent by the Commissioner to each of
61-14 such agents or investment adviser representatives [salesmen]. All
61-15 registrations and evidences of registration revoked shall at once
61-16 be surrendered to the Commissioner upon request.
61-17 SECTION 3.07. Subsections A and B, Section 25-1, The
61-18 Securities Act (Article 581-25-1, Vernon's Texas Civil Statutes),
61-19 are amended to read as follows:
61-20 A. Whenever it shall appear to the commissioner, either upon
61-21 complaint or otherwise, that:
61-22 (1) any person or company acting as a dealer, agent,
61-23 investment adviser, investment adviser representative [salesman],
61-24 or issuer (as defined in Section 4 of this Act), or an affiliate of
61-25 a dealer, agent, investment adviser, investment adviser
61-26 representative [salesman], or issuer, whether or not required to be
61-27 registered by the commissioner as in this Act provided, shall have
62-1 engaged in any act, transaction, practice, or course of business
62-2 declared by Section 32 of this Act to be a fraudulent practice;
62-3 (2) such person or company shall have acted as a
62-4 dealer, agent, investment adviser, investment adviser
62-5 representative [salesman], or issuer or an affiliate of a dealer,
62-6 agent, investment adviser, investment adviser representative
62-7 [salesman], or issuer in connection with such fraudulent practice;
62-8 and
62-9 (3) the appointment of a receiver for such person or
62-10 company, or the assets of such a person or company is necessary in
62-11 order to conserve and protect the assets of such person or company
62-12 for the benefit of customers, security holders, and other actual
62-13 and potential claimants of such person or company the commissioner
62-14 may request the attorney general to bring an action for the
62-15 appointment of a receiver for such person or company or the assets
62-16 of such person or company.
62-17 B. Upon request by the commissioner pursuant to Subsection A
62-18 of this Section 25-1, and if it appears to the attorney general
62-19 that the facts enumerated in Paragraphs (1) through (3) of
62-20 Subsection A of this Section 25-1 exist with respect to any person
62-21 or company, the attorney general may bring an action in the name
62-22 and on behalf of the State of Texas for the appointment of a
62-23 receiver for such person or company. The facts set forth in the
62-24 petition for such relief shall be verified by the commissioner upon
62-25 information and belief. Such action may be brought in a district
62-26 court of any county wherein the fraudulent practice complained of
62-27 has been committed in whole or part, or of any county wherein any
63-1 defendant with respect to whom appointment of a receiver is sought
63-2 has its principal place of business, and such district court shall
63-3 have jurisdiction and venue of such action; this provision shall
63-4 be superior to any other provision of law fixing jurisdiction or
63-5 venue with regard to suits for receivership. In any such action
63-6 the attorney general may apply for and on due showing be entitled
63-7 to have issued the court's subpoena requiring the forthwith
63-8 appearance of any defendant and his employees, investment adviser
63-9 representatives [salesmen], or agents and the production of
63-10 documents, books, and records as may appear necessary for any
63-11 hearing, to testify and give evidence concerning matters relevant
63-12 to the appointment of a receiver.
63-13 SECTION 3.08. Section 29, The Securities Act (Article 581-29,
63-14 Vernon's Texas Civil Statutes), is amended to read as follows:
63-15 Sec. 29. PENAL PROVISIONS. Any person who shall:
63-16 A. Sell, offer for sale or delivery, solicit
63-17 subscriptions or orders for, dispose of, invite offers for, or who
63-18 shall deal in any other manner in any security or securities
63-19 without being a registered dealer [or salesman] or agent as in this
63-20 Act provided shall be deemed guilty of a felony, and upon
63-21 conviction thereof shall be sentenced to pay a fine of not more
63-22 than $5,000 or imprisonment in the penitentiary for not less than
63-23 two or more than 10 years, or by both such fine and imprisonment.
63-24 B. Sell, offer for sale or delivery, solicit
63-25 subscriptions to and orders for, dispose of, invite orders for, or
63-26 who shall deal in any other manner in any security or securities
63-27 issued after September 6, 1955, unless said security or securities
64-1 have been registered or granted a permit as provided in Section 7
64-2 of this Act, shall be deemed guilty of a felony, and upon
64-3 conviction thereof shall be sentenced to pay a fine of not more
64-4 than $5,000 or imprisonment in the penitentiary for not less than
64-5 two or more than 10 years, or by both such fine and imprisonment.
64-6 C. In connection with the sale, offering for sale or
64-7 delivery of, the purchase, offer to purchase, invitation of offers
64-8 to purchase, invitations of offers to sell, or dealing in any other
64-9 manner in any security or securities, whether or not the
64-10 transaction or security is exempt under Section 5 or 6 of this Act,
64-11 directly or indirectly:
64-12 (1) engage in any fraud or fraudulent practice;
64-13 (2) employ any device, scheme, or artifice to
64-14 defraud;
64-15 (3) knowingly make any untrue statement of a
64-16 material fact or omit to state a material fact necessary in order
64-17 to make the statements made, in the light of the circumstances
64-18 under which they are made, not misleading; or
64-19 (4) engage in any act, practice or course of
64-20 business which operates or will operate as a fraud or deceit upon
64-21 any person, is guilty of a felony and upon conviction shall be:
64-22 (a) imprisoned for not less than 2 or more
64-23 than 10 years and fined not more than $10,000, if the amount
64-24 involved in the offense is less than $10,000;
64-25 (b) imprisoned for not less than 2 or more
64-26 than 20 years and fined not more than $10,000, if the amount
64-27 involved in the offense is $10,000 or more but less than $100,000;
65-1 or
65-2 (c) imprisoned for life or for not less
65-3 than 5 or more than 99 years and fined not more than $10,000, if
65-4 the amount involved is $100,000 or more.
65-5 D. Sell or offer for sale any security or securities
65-6 named or listed in a notice in writing given him by the
65-7 commissioner under the authority of Section 23A or 23-2 of this Act
65-8 shall be deemed guilty of a felony, and upon conviction thereof
65-9 shall be sentenced to pay a fine of not more than $5,000 or
65-10 imprisonment in the penitentiary for not more than two years, or by
65-11 both such fine and imprisonment.
65-12 E. Knowingly make or cause to be made, in any document
65-13 filed with the commissioner or in any proceeding under this Act,
65-14 whether or not such document or proceeding relates to a transaction
65-15 or security exempt under the provisions of Sections 5 or 6 of this
65-16 Act, any statement which is, at the time and in the light of the
65-17 circumstances under which it is made, false or misleading in any
65-18 material respect shall be deemed guilty of a felony, and upon
65-19 conviction thereof shall be sentenced to pay a fine of not more
65-20 than $5,000 or imprisonment in the penitentiary for not less than
65-21 two or more than 10 years, or by both such fine and imprisonment.
65-22 F. Knowingly make any false statement or
65-23 representation concerning any registration made under the
65-24 provisions of this Act shall be deemed guilty of a felony, and upon
65-25 conviction thereof shall be sentenced to pay a fine of not more
65-26 than $5,000 or imprisonment in the penitentiary for not more than
65-27 two years, or by both such fine and imprisonment.
66-1 G. Make an offer of any security within this State
66-2 that is not in compliance with the requirements governing offers
66-3 set forth in Section 22 of this Act shall be deemed guilty of a
66-4 felony, and upon conviction thereof, shall be sentenced to pay a
66-5 fine of not more than $5,000 or imprisonment in the penitentiary
66-6 for not more than two years, or by both such fine and imprisonment.
66-7 H. Knowingly make an offer of any security within this
66-8 State prohibited by a cease publication order issued by the
66-9 Commissioner under Section 23C [23B] of this Act shall be deemed
66-10 guilty of a felony, and upon conviction thereof, shall be sentenced
66-11 to pay a fine of not more than $5,000 or imprisonment in the
66-12 penitentiary for not more than two years, or by both such fine and
66-13 imprisonment.
66-14 SECTION 3.09. The Securities Act (Article 581-1 et seq.,
66-15 Vernon's Texas Civil Statutes) is amended by adding Section 29-3 to
66-16 read as follows:
66-17 Sec. 29-3. CRIMINAL RESPONSIBILITY OF CORPORATION OR
66-18 ASSOCIATION. A. In this section:
66-19 (1) "Association" and "corporation" have the meanings
66-20 assigned by Section 1.07, Penal Code.
66-21 (2) "High managerial agent" has the meaning assigned
66-22 by Section 7.21, Penal Code.
66-23 B. If conduct constituting an offense under Section 29 of
66-24 this Act is performed by an agent acting in behalf of a corporation
66-25 or association and within the scope of the person's office or
66-26 employment, the corporation or association is criminally
66-27 responsible for the offense only if its commission was authorized,
67-1 requested, commanded, performed, or recklessly tolerated by:
67-2 (1) a majority of the governing board acting in behalf
67-3 of the corporation or association; or
67-4 (2) a high managerial agent acting in behalf of the
67-5 corporation or association and within the scope of the high
67-6 managerial agent's office or employment.
67-7 C. It is an affirmative defense to prosecution of a
67-8 corporation or association under Subsection B of this section that
67-9 the high managerial agent having supervisory responsibility over
67-10 the subject matter of the offense employed due diligence to prevent
67-11 its commission.
67-12 SECTION 3.10. Section 30, The Securities Act (Article 581-30,
67-13 Vernon's Texas Civil Statutes), is amended to read as follows:
67-14 Sec. 30. CERTIFIED COPIES OF PAPERS FILED WITH COMMISSIONER
67-15 AS EVIDENCE. Copies of all papers, instruments, or documents filed
67-16 in the office of the Commissioner, certified by the Commissioner,
67-17 shall be admitted to be read in evidence in all courts of law and
67-18 elsewhere in this state in all cases where the original would be
67-19 admitted in evidence; provided, that in any proceeding in the court
67-20 having jurisdiction, the court may, on cause shown, require the
67-21 production of the originals.
67-22 The Commissioner shall assume custody of all records of the
67-23 Securities Divisions within the offices of the Secretary of State
67-24 and of the Board of Insurance Commissioners, and henceforth these
67-25 prior records shall be proven under certificate of the
67-26 Commissioner.
67-27 In any prosecution, action, suit or proceeding before any of
68-1 the several courts of this state based upon or arising out of or
68-2 under the provisions of this Act, a certificate under the state
68-3 seal, duly signed by the Commissioner, showing compliance or
68-4 non-compliance with the provisions of this Act respecting
68-5 compliance or non-compliance with the provisions of this Act by any
68-6 dealer, agent, investment adviser, or investment adviser
68-7 representative [salesman], shall constitute prima facie evidence of
68-8 such compliance or of such non-compliance with the provisions of
68-9 this Act, as the case may be, and shall be admissible in evidence
68-10 in any action at law or in equity to enforce the provisions of this
68-11 Act.
68-12 SECTION 3.11. Subsection A, Section 32, The Securities Act
68-13 (Article 581-32, Vernon's Texas Civil Statutes), is amended to read
68-14 as follows:
68-15 A. Whenever it shall appear to the Commissioner either upon
68-16 complaint or otherwise, that in the issuance, sale, promotion,
68-17 negotiations, advertisement or distribution of any securities
68-18 within this state, including any security embraced in the
68-19 subsections of Section 6, and including any transaction exempted
68-20 under the provisions of Section 5, or that in the business of
68-21 rendering investment advice, directly or on another person's
68-22 behalf, any person or company who shall have employed or is about
68-23 to employ any device, scheme or artifice to defraud or to obtain
68-24 money or property by means of any false pretense, representation or
68-25 promise, or that any such person or company shall have made, makes
68-26 or attempts to make in this state fictitious or pretended purchases
68-27 or sales of securities or shall have engaged in or is about to
69-1 engage in any practice or transaction or course of business or
69-2 rendering a service relating to the purchase, investment, or sale
69-3 of securities which is in violation of law or which is fraudulent
69-4 or which has operated or which would operate as a fraud upon the
69-5 purchaser, any one or all of which devices, schemes, artifices,
69-6 fictitious or pretended purchases, or sales of securities,
69-7 practices, investment advice, transactions and courses of business
69-8 are hereby declared to be and are hereafter referred to as
69-9 fraudulent practices; or that any person or company is acting as
69-10 dealer, agent, investment adviser, or investment adviser
69-11 representative [salesman] within this state without being duly
69-12 registered as such dealer, agent, investment adviser, or investment
69-13 adviser representative or without submitting a notice filing
69-14 [salesman] as provided in this Act, the Commissioner and Attorney
69-15 General may investigate, and whenever he shall believe from
69-16 evidence satisfactory to him that any such person or company has
69-17 engaged in, is engaged in, or is about to be engaged in any of the
69-18 practices or transactions heretofore referred to as and declared to
69-19 be fraudulent practices, or is selling or offering for sale any
69-20 securities in violation of this Act or is acting as a dealer,
69-21 agent, investment adviser, or investment adviser representative
69-22 [salesman] without being duly registered or submitting a notice
69-23 filing as provided in this Act, the Attorney General may, on
69-24 request by the Commissioner, and in addition to any other remedies,
69-25 bring action in the name and on behalf of the State of Texas
69-26 against such person or company and any person who, with intent to
69-27 deceive or defraud or with reckless disregard for the truth or the
70-1 law, has materially aided, is materially aiding, or is about to
70-2 materially aid such person and any other person or persons
70-3 heretofore concerned in or in any way participating in or about to
70-4 participate in such fraudulent practices or acting in such
70-5 violation of this Act, to enjoin such person or company and such
70-6 other person or persons from continuing such fraudulent practices
70-7 or engaging therein or doing any act or acts in furtherance thereof
70-8 or in violation of this Act. In any such court proceedings, the
70-9 Attorney General may apply for and on due showing be entitled to
70-10 have issued the court's subpoena requiring the forthwith appearance
70-11 of any defendant and his employees, investment adviser
70-12 representatives, [salesmen] or agents and the production of
70-13 documents, books and records as may appear necessary for the
70-14 hearing of such petition, to testify and give evidence concerning
70-15 the acts or conduct or things complained of in such application for
70-16 injunction. The District Court of any county, wherein it is shown
70-17 that the acts complained of have been or are about to be committed,
70-18 shall have jurisdiction of any action brought under this section,
70-19 and this provision shall be superior to any provision fixing the
70-20 jurisdiction or venue with regard to suits for injunction. No bond
70-21 for injunction shall be required of the Commissioner or Attorney
70-22 General in any such proceeding.
70-23 SECTION 3.12. The heading of Section 33, The Securities Act
70-24 (Article 581-33, Vernon's Texas Civil Statutes), is amended to read
70-25 as follows:
70-26 Sec. 33. CIVIL LIABILITY WITH RESPECT TO ISSUANCE OR SALE OF
70-27 A SECURITY [LIABILITIES].
71-1 SECTION 3.13. Subsection D, Section 33, The Securities Act
71-2 (Article 581-33, Vernon's Texas Civil Statutes), is amended to read
71-3 as follows:
71-4 D. Rescission and Damages. For this Section 33:
71-5 (1) On rescission, a buyer shall recover (a) the
71-6 consideration he paid for the security plus interest thereon at the
71-7 legal rate from the date of payment by him, less (b) the amount of
71-8 any income he received on the security, upon tender of the security
71-9 (or a security of the same class and series).
71-10 (2) On rescission, a seller shall recover the security
71-11 (or a security of the same class and series) upon tender of (a)
71-12 the consideration he received for the security plus interest
71-13 thereon at the legal rate from the date of receipt by him, less (b)
71-14 the amount of any income the buyer received on the security.
71-15 (3) In damages, a buyer shall recover (a) the
71-16 consideration the buyer [he] paid for the security plus interest
71-17 thereon at the legal rate from the date of payment by the buyer
71-18 [him], less (b) the greater of:
71-19 (i) the value of the security at the time
71-20 the buyer [he] disposed of it plus the amount of any income the
71-21 buyer [he] received on the security; or
71-22 (ii) the actual consideration received for
71-23 the security at the time the buyer disposed of it plus the amount
71-24 of any income the buyer received on the security.
71-25 (4) In damages, a seller shall recover (a) the value
71-26 of the security at the time of sale plus the amount of any income
71-27 the buyer received on the security, less (b) the consideration paid
72-1 the seller for the security plus interest thereon at the legal rate
72-2 from the date of payment to the seller.
72-3 (5) For a buyer suing under Section 33C, the
72-4 consideration he paid shall be deemed the lesser of (a) the price
72-5 he paid and (b) the price at which the security was offered to the
72-6 public.
72-7 (6) On rescission or as a part of damages, a buyer or
72-8 a seller shall also recover costs.
72-9 (7) On rescission or as a part of damages, a buyer or
72-10 a seller may also recover reasonable attorney's fees if the court
72-11 finds that the recovery would be equitable in the circumstances.
72-12 SECTION 3.14. Subsection L, Section 33, The Securities Act
72-13 (Article 581-33, Vernon's Texas Civil Statutes), is amended to read
72-14 as follows:
72-15 L. Waivers Void. A condition, stipulation, or provision
72-16 binding a buyer or seller of a security or a purchaser of services
72-17 rendered by an investment adviser or investment adviser
72-18 representative to waive compliance with a provision of this Act or
72-19 a rule or order or requirement hereunder is void.
72-20 SECTION 3.15. Subsection A, Section 33, The Securities Act
72-21 (Article 581-33, Vernon's Texas Civil Statutes), is amended to read
72-22 as follows:
72-23 A. Liability of Sellers. (1) Registration and Related
72-24 Violations. A person who offers or sells a security in violation
72-25 of Section 7, 9 (or a requirement of the Commissioner thereunder),
72-26 12, 23C [23B], or an order under 23A or 23-2 of this Act is liable
72-27 to the person buying the security from him, who may sue either at
73-1 law or in equity for rescission or for damages if the buyer no
73-2 longer owns the security.
73-3 (2) Untruth or Omission. A person who offers or sells
73-4 a security (whether or not the security or transaction is exempt
73-5 under Section 5 or 6 of this Act) by means of an untrue statement
73-6 of a material fact or an omission to state a material fact
73-7 necessary in order to make the statements made, in the light of the
73-8 circumstances under which they are made, not misleading, is liable
73-9 to the person buying the security from him, who may sue either at
73-10 law or in equity for rescission, or for damages if the buyer no
73-11 longer owns the security. However, a person is not liable if he
73-12 sustains the burden of proof that either (a) the buyer knew of the
73-13 untruth or omission or (b) he (the offeror or seller) did not know,
73-14 and in the exercise of reasonable care could not have known, of the
73-15 untruth or omission. The issuer of the security (other than a
73-16 government issuer identified in Section 5M) is not entitled to the
73-17 defense in clause (b) with respect to an untruth or omission (i) in
73-18 a prospectus required in connection with a registration statement
73-19 under Section 7A, 7B, or 7C, or (ii) in a writing prepared and
73-20 delivered by the issuer in the sale of a security.
73-21 SECTION 3.16. The Securities Act (Article 581-1 et seq.,
73-22 Vernon's Texas Civil Statutes) is amended by adding Section 33-1 to
73-23 read as follows:
73-24 Sec. 33-1. CIVIL LIABILITY OF INVESTMENT ADVISER AND
73-25 INVESTMENT ADVISER REPRESENTATIVE. A. Liability of Investment
73-26 Adviser and Investment Adviser Representative. (1) An investment
73-27 adviser or investment adviser representative who renders investment
74-1 advice in violation of Section 12 or an order under Section 23B or
74-2 23-2 of this Act is liable to the purchaser, who may sue at law or
74-3 in equity, for damages in the amount of any consideration paid for
74-4 that advice.
74-5 (2) Except as provided by Subsection C of this
74-6 section, an investment adviser or investment adviser representative
74-7 who commits fraud or engages in a fraudulent practice in rendering
74-8 investment advice is liable to the purchaser, who may sue at law or
74-9 in equity, for damages.
74-10 B. Damages. In damages under Subsection A(2) of this
74-11 section, the purchaser is entitled to recover:
74-12 (1) the amount of any consideration paid for that
74-13 advice, less the amount of any income the purchaser received from
74-14 acting on the investment advice;
74-15 (2) any loss incurred by the person in acting on the
74-16 investment advice provided by the adviser or representative;
74-17 (3) interest at the legal rate for judgments accruing
74-18 from the date of the payment of consideration; and
74-19 (4) to the extent the court considers equitable, court
74-20 costs and reasonable attorney's fees.
74-21 C. Untruth or Omission. An investment adviser or investment
74-22 adviser representative who in rendering investment advice makes a
74-23 false statement of a material fact or omits to state a material
74-24 fact necessary in order to make the statement made, in light of the
74-25 circumstances under which the statement is made, not misleading,
74-26 may not be found liable under Subsection A(2) of this section if
74-27 the adviser or representative proves:
75-1 (1) the purchaser knew of the truth or omission; or
75-2 (2) the adviser or representative did not know, and in
75-3 the exercise of reasonable care could not have known, of the
75-4 untruth or omission.
75-5 D. Statute of Limitations. (1) A person may not sue under
75-6 Subsection A(1) of this section more than three years after the
75-7 violation occurred.
75-8 (2) A person may not sue under Subsection A(2) of this
75-9 section more than five years after the violation occurs or more
75-10 than three years after the person knew or should have known, by the
75-11 exercise of reasonable diligence, of the occurrence of the
75-12 violation.
75-13 E. Liability of Control Persons and Assistants. (1) A
75-14 person who directly or indirectly controls an investment adviser is
75-15 jointly and severally liable with the investment adviser under this
75-16 section, and to the same extent as the investment adviser, unless
75-17 the controlling person sustains the burden of proof that the person
75-18 did not know, and in the exercise of reasonable care could not have
75-19 known, of the existence of the facts by reason of which liability
75-20 is alleged to exist.
75-21 (2) A person who directly or indirectly with intent to
75-22 deceive or defraud or with reckless disregard for the truth or the
75-23 law materially aids an investment adviser in conduct for which a
75-24 cause of action is authorized by this section is jointly and
75-25 severally liable with the investment adviser in an action to
75-26 recover damages under this section.
75-27 SECTION 3.17. (a) A change in law made by this Act that
76-1 applies to a criminal or civil penalty applies only to an offense
76-2 committed or a violation that occurs on or after the effective date
76-3 of this Act. For the purposes of this Act, an offense is committed
76-4 or a violation occurs before the effective date of this Act if any
76-5 element of the offense or violation occurs before that date.
76-6 (b) An offense committed or violation that occurs before the
76-7 effective date of this Act is covered by the law in effect when the
76-8 offense was committed or the violation occurred, and the former law
76-9 is continued in effect for that purpose.
76-10 ARTICLE 4. CONFORMING AMENDMENTS
76-11 SECTION 4.01. Section 54.6385, Education Code, is amended to
76-12 read as follows:
76-13 Sec. 54.6385. EXEMPTION FROM SECURITIES LAWS. The
76-14 registration requirements of The Securities Act (Article 581-1 et
76-15 seq., Vernon's Texas Civil Statutes) do not apply to the sale of a
76-16 prepaid tuition contract by the board or by a registered securities
76-17 dealer or registered investment adviser.
76-18 SECTION 4.02. Section 153.117(a), Finance Code, as amended by
76-19 Chapters 62, 344, and 356, Acts of the 76th Legislature, Regular
76-20 Session, 1999, is reenacted and amended to read as follows:
76-21 (a) The following persons are not required to be licensed
76-22 under this chapter:
76-23 (1) a federally insured financial institution, as that
76-24 term is defined by Section 201.101 [as that term is defined by
76-25 state law governing bank holding companies and interstate bank
76-26 operations], that is organized under the laws of this state,
76-27 another state, or the United States;
77-1 (2) a foreign bank branch or agency in the United
77-2 States established under the federal International Banking Act of
77-3 1978 (12 U.S.C. Section 3101 et seq.), as amended;
77-4 (3) [(2)] a license holder under Chapter 152, except
77-5 that the license holder is required to comply with the other
77-6 provisions of this chapter to the extent the license holder engages
77-7 in currency exchange, transportation, or transmission transactions;
77-8 (4) a person registered as a securities dealer or
77-9 investment adviser under The Securities Act (Article 581-1 et seq.,
77-10 Vernon's Texas Civil Statutes);
77-11 (5) an attorney or title company that in connection
77-12 with a real property transaction receives and disburses only
77-13 domestic currency on behalf of a party to the transaction;
77-14 (6) a Federal Reserve bank;
77-15 (7) a clearinghouse exercising bank payment,
77-16 collection, and clearing functions; or
77-17 (8) another person that the commissioner may exempt by
77-18 rule if the commissioner finds that the licensing of the person is
77-19 not necessary or appropriate to achieve the objectives of this
77-20 chapter.
77-21 SECTION 4.03. Subchapter A, Chapter 182, Finance Code, is
77-22 amended by adding Section 182.0211 to read as follows:
77-23 Sec. 182.0211. CONFORMANCE WITH SECURITIES ACT. For the
77-24 purposes of Section 182.021(7), "salesman" includes "agent" and
77-25 "adviser" includes "investment adviser."
77-26 SECTION 4.04. Section 2051.005, Occupations Code, is amended
77-27 to read as follows:
78-1 Sec. 2051.005. CERTAIN PROFESSIONAL SERVICES EXEMPT. This
78-2 chapter does not apply to a person who directly or indirectly
78-3 recruits or solicits an athlete to enter into a contract with the
78-4 person in which, for compensation, the person performs financial
78-5 services for the athlete if:
78-6 (1) the person is licensed or registered by the state
78-7 as:
78-8 (A) a dealer, investment adviser, or agent[, or
78-9 securities salesperson];
78-10 (B) a real estate broker or salesperson;
78-11 (C) an insurance agent; or
78-12 (D) another professional;
78-13 (2) the financial services performed by the person are
78-14 of a type that are customarily performed by a person licensed in
78-15 that profession; and
78-16 (3) the person does not:
78-17 (A) recruit or solicit the athlete to enter into
78-18 an agent contract or a professional services contract on behalf of
78-19 the person, an affiliate, a related entity, or a third party; or
78-20 (B) procure, offer, promise, or attempt to
78-21 obtain for the athlete employment with a professional sports team.
78-22 SECTION 4.05. Section 452.107(c), Transportation Code, is
78-23 amended to read as follows:
78-24 (c) The executive committee may authorize the negotiation of
78-25 a contract without competitive sealed bids or proposals if:
78-26 (1) the aggregate amount involved in the contract is
78-27 $25,000 or less;
79-1 (2) the contract is for construction for which not
79-2 more than one bid or proposal is received;
79-3 (3) the contract is for services or property for which
79-4 there is only one source or for which it is otherwise impracticable
79-5 to obtain competition;
79-6 (4) the contract is to respond to an emergency for
79-7 which the public exigency does not permit the delay incident to the
79-8 competitive process;
79-9 (5) the contract is for personal or professional
79-10 services or services for which competitive bidding is precluded by
79-11 law; or
79-12 (6) the contract, without regard to form and which may
79-13 include bonds, notes, loan agreements, or other obligations, is for
79-14 the purpose of borrowing money or is a part of a transaction
79-15 relating to the borrowing of money, including:
79-16 (A) a credit support agreement, such as a line
79-17 or letter of credit or other debt guaranty;
79-18 (B) a bond, note, debt sale or purchase,
79-19 trustee, paying agent, remarketing agent, indexing agent, or
79-20 similar agreement;
79-21 (C) an agreement with a securities dealer or
79-22 investment adviser, broker, or underwriter; and
79-23 (D) any other contract or agreement considered
79-24 by the executive committee to be appropriate or necessary in
79-25 support of the authority's financing activities.
79-26 ARTICLE 5. EFFECTIVE DATE
79-27 SECTION 5.01. This Act takes effect September 1, 2001.