By Craddick                                           H.B. No. 2846
         77R9211 CLG-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the application of state securities law to certain
 1-3     investment advisers.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Subsection A, Section 12, The Securities Act
 1-6     (Article 581-12, Vernon's Texas Civil Statutes), is amended to read
 1-7     as follows:
 1-8           A.  (1)  Except as provided in Section 5 of this Act, no
 1-9     person, firm, or corporation [or dealer] shall, directly or through
1-10     agents or salesmen, offer for sale, sell or make a sale of any
1-11     securities in this state without first being registered as in this
1-12     Act provided.  No salesman or agent shall, in behalf of any dealer,
1-13     sell, offer for sale, or make sale of any securities within the
1-14     state unless registered as a salesman or agent of a registered
1-15     dealer under the provisions of this Act.
1-16                 (2)  No person, firm, or corporation shall, directly or
1-17     through agents, render services as an investment adviser in this
1-18     state without first being registered as in this Act provided.  No
1-19     agent shall, on behalf of a dealer, render services as an
1-20     investment adviser in this state unless registered as an agent of a
1-21     registered dealer under this Act.  These registration requirements
1-22     do not apply, however, to an investment adviser or agent of an
1-23     investment adviser who during the preceding 12-month period had
1-24     fewer than 15 clients, who does not hold itself out to the public
 2-1     as an investment adviser, and who does not act as an investment
 2-2     adviser to an investment company registered under the Investment
 2-3     Company Act or to a company that has elected to be a business
 2-4     development company under Section 54, Investment Company Act, and
 2-5     has not withdrawn its election.  For purposes of determining the
 2-6     number of clients an investment adviser had, the definition of a
 2-7     client under Rule 203(b)(3)-1, as amended, adopted under the
 2-8     Investment Company Act applies, and a shareholder, partner, or
 2-9     beneficial owner of a business development company, as defined by
2-10     the Investment Company Act, is not considered to be a client of
2-11     that investment adviser unless the person is a client separate and
2-12     apart from being a shareholder, partner, or beneficial owner.  In
2-13     this subsection, "Investment Company Act" means the Investment
2-14     Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), as amended.
2-15           SECTION 2. This Act takes effect September 1, 2001.