1-1 AN ACT
1-2 relating to regulation of the issuance of a security to a
1-3 charitable organization.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 5, The Securities Act (Article 581-5,
1-6 Vernon's Texas Civil Statutes), is amended to read as follows:
1-7 Sec. 5. EXEMPT TRANSACTIONS. Except as hereinafter in this
1-8 Act specifically provided, the provisions of this Act shall not
1-9 apply to the sale of any security when made in any of the following
1-10 transactions and under any of the following conditions, and the
1-11 company or person engaged therein shall not be deemed a dealer
1-12 within the meaning of this Act; that is to say, the provisions of
1-13 this Act shall not apply to any sale, offer for sale, solicitation,
1-14 subscription, dealing in or delivery of any security under any of
1-15 the following transactions or conditions:
1-16 A. At any judicial, executor's, administrator's,
1-17 guardian's or conservator's sale, or any sale by a receiver or
1-18 trustee in insolvency or bankruptcy.
1-19 B. The sale by or for the account of a pledge holder
1-20 or mortgagee, selling or offering for sale or delivery in the
1-21 ordinary course of business to liquidate a bona fide debt, of a
1-22 security pledged in good faith as security for such debt.
1-23 C. (1) Sales of securities made by or in behalf of a
1-24 vendor, whether by dealer or other agent, in the ordinary course of
2-1 bona fide personal investment of the personal holdings of such
2-2 vendor, or change in such investment, if such vendor is not engaged
2-3 in the business of selling securities and the sale or sales are
2-4 isolated transactions not made in the course of repeated and
2-5 successive transactions of a like character; provided, that in no
2-6 event shall such sales or offerings be exempt from the provisions
2-7 of this Act when made or intended by the vendor or his agent, for
2-8 the benefit, either directly or indirectly, of any company or
2-9 corporation except the individual vendor (other than a usual
2-10 commission to said agent), and provided further, that any person
2-11 acting as agent for said vendor shall be registered pursuant to
2-12 this Act;
2-13 (2) Sales by or on behalf of any insurance
2-14 company subject to the supervision or control of the Texas
2-15 Department of Insurance of any security owned by such company as a
2-16 legal and bona fide investment, provided that in no event shall any
2-17 such sale or offering be exempt from the provisions of this Act
2-18 when made or intended, either directly or indirectly, for the
2-19 benefit of any other company as that term is defined in this Act.
2-20 D. The distribution by a corporation of securities
2-21 direct to its stockholders as a stock dividend or other
2-22 distribution paid out of earnings or surplus.
2-23 E. Any offer and any transaction pursuant to any offer
2-24 by the issuer of its securities to its existing security holders
2-25 (including persons who at the time of the transaction are holders
2-26 of convertible securities or nontransferable warrants) if no
2-27 commission or other remuneration (other than a stand-by commission)
3-1 is paid or given directly or indirectly for soliciting any security
3-2 holder in this State.
3-3 F. The issue in good faith of securities by a company
3-4 to its security holders, or creditors, in the process of a bona
3-5 fide reorganization of the company made in good faith, or the issue
3-6 in good faith of securities by a company, organized solely for the
3-7 purpose of taking over the assets and continuing the business of a
3-8 predecessor company, to the security holders or creditors of such
3-9 predecessor company, provided that in either such case such
3-10 securities are issued in exchange for the securities of such
3-11 holders or claims of such creditors, or both, and in either such
3-12 case security holders or creditors do not pay or give or promise
3-13 and are not obligated to pay or give any consideration for the
3-14 securities so issued other than the securities of or claims against
3-15 said company or its predecessor then held or owned by them.
3-16 G. The issue or sale of securities (a) by one
3-17 corporation to another corporation or the security holders thereof
3-18 pursuant to a vote by one or more classes of such security holders,
3-19 as required by the certificate of incorporation or the applicable
3-20 corporation statute, in connection with a merger, consolidation or
3-21 sale of corporate assets, or (b) by one corporation to its own
3-22 stockholders in connection with the change of par value stock to no
3-23 par value stock or vice versa, or the exchange of outstanding
3-24 shares for the same or a greater or smaller number of shares;
3-25 provided that in any such case such security holders do not pay or
3-26 give or promise and are not obligated to pay or give any
3-27 consideration for the securities so issued or sold other than the
4-1 securities of the corporation then held by them.
4-2 H. The sale of any security to any bank, trust
4-3 company, building and loan association, insurance company, surety
4-4 or guaranty company, savings institution, investment company as
4-5 defined in the Investment Company Act of 1940, small business
4-6 investment company as defined in the Small Business Investment Act
4-7 of 1958, as amended, or to any registered dealer actually engaged
4-8 in buying and selling securities.
4-9 I. Provided such sale is made without any public
4-10 solicitation or advertisements:
4-11 (a) the sale of any security by the issuer
4-12 thereof so long as the total number of security holders of the
4-13 issuer thereof does not exceed thirty-five (35) persons after
4-14 taking such sale into account;
4-15 (b) the sale or distribution by an employer or
4-16 its participating subsidiary, if any, of a security under a thrift,
4-17 savings, stock purchase, retirement, pension, profit-sharing,
4-18 option, bonus, appreciation right, incentive, or similar employee
4-19 benefit plan for employees or directors of the employer or its
4-20 subsidiary; or
4-21 (c) the sale by an issuer of its securities
4-22 during the period of twelve (12) months ending with the date of the
4-23 sale in question to not more than fifteen (15) persons (excluding,
4-24 in determining such fifteen (15) persons, purchasers of securities
4-25 in transactions exempt under other provisions of this Section 5,
4-26 purchasers of securities exempt under Section 6 hereof and
4-27 purchasers of securities which are part of an offering registered
5-1 under Section 7 hereof), provided such persons purchased such
5-2 securities for their own account and not for distribution.
5-3 J. Wherein the securities disposed of consist
5-4 exclusively of notes or bonds secured by mortgage or vendor's lien
5-5 upon real estate or tangible personal property, and the entire
5-6 mortgage is sold or transferred with all of the notes or bonds
5-7 secured thereby in a single transaction.
5-8 K. Any security or membership issued by a corporation
5-9 or association, organized exclusively for religious, educational,
5-10 benevolent, fraternal, charitable, or reformatory purposes and not
5-11 for pecuniary profit, and no part of the net earnings of which
5-12 inures to the benefit of any stockholder, shareholder, or
5-13 individual members, and where no commission or remuneration is paid
5-14 or given or is to be paid or given in connection with the
5-15 disposition thereof.
5-16 L. The sale by the issuer itself, or by a registered
5-17 dealer, of any security issued or guaranteed by any bank organized
5-18 and subject to regulation under the laws of the United States or
5-19 under the laws of any State or territory of the United States, or
5-20 any insular possession thereof, or by any savings and loan
5-21 association organized and subject to regulation under the laws of
5-22 this State, or the sale by the issuer itself of any security issued
5-23 by any federal savings and loan association.
5-24 M. The sale by the issuer itself, or by a registered
5-25 dealer, of any security either issued or guaranteed by the United
5-26 States or by any territory or insular possession thereof, or by the
5-27 District of Columbia, or by any state of the United States, or
6-1 political subdivision thereof (including but not limited to any
6-2 county, city, municipal corporation, district, or authority), or by
6-3 any public or governmental agency or instrumentality of any of the
6-4 foregoing.
6-5 N. The sale and issuance of any securities issued by
6-6 any farmers' cooperative marketing association organized under
6-7 Chapter 52, Agriculture Code, or the predecessor of that law
6-8 (Article 5737 et seq., Revised Statutes); the sale and issuance of
6-9 any securities issued by any mutual loan corporation organized
6-10 under Chapter 54, Agriculture Code, or the predecessor of that law
6-11 (Article 2500 et seq., Revised Statutes); the sale and issuance of
6-12 any equity securities issued by any cooperative association
6-13 organized under the Cooperative Association Act, as amended
6-14 (Article 1396-50.01, Vernon's Texas Civil Statutes); and the sale
6-15 of any securities issued by any farmers' cooperative society
6-16 organized under Chapter 51, Agriculture Code, or the predecessor of
6-17 that law (Article 2514 et seq., Revised Statutes). Provided,
6-18 however, this exemption shall not be applicable to agents and
6-19 salesmen of any farmers' cooperative marketing association, mutual
6-20 loan corporation, cooperative association, or farmers' cooperative
6-21 society when the sale of such securities is made to non-members, or
6-22 when the sale of such securities is made to members or non-members
6-23 and a commission is paid or contracted to be paid to the said
6-24 agents or salesmen.
6-25 O. The sale by a registered dealer of outstanding
6-26 securities provided that:
6-27 (1) Such securities form no part of an unsold
7-1 allotment to or subscription by such dealer as a participant in the
7-2 distribution of such securities by the issuer thereof; and
7-3 (2) Securities of the same class, of the same
7-4 issuer, are outstanding in the hands of the public; and
7-5 (3) Such securities are offered for sale, in
7-6 good faith, at prices reasonably related to the current market
7-7 price of such securities at the time of such sale; and
7-8 (4) No part of the proceeds of such sale are
7-9 paid directly or indirectly to the issuer of such securities; and
7-10 (5) Such sale is not directly or indirectly for
7-11 the purposes of providing or furthering any scheme to violate or
7-12 evade any provision of this Act; and
7-13 (6) The right to sell or resell such securities
7-14 has not been enjoined by any court of competent jurisdiction in
7-15 this State by proceedings instituted by an officer or agency of
7-16 this State charged with enforcement of this Act; and
7-17 (7) The right to sell such securities has not
7-18 been revoked or suspended by the commissioner under any of the
7-19 provisions of this Act, or, if so, revocation or suspension is not
7-20 in force and effect; and
7-21 (8) At the time of such sale, the issuer of such
7-22 securities shall be a going concern actually engaged in business
7-23 and shall then be neither in an organization stage nor in
7-24 receivership or bankruptcy; and
7-25 (9) Such securities or other securities of the
7-26 issuer of the same class have been registered by qualification,
7-27 notification or coordination under Section 7 of this Act; or at the
8-1 time of such sale at least the following information about the
8-2 issuer shall appear in a recognized securities manual or in a
8-3 statement, in form and extent acceptable to the commissioner, filed
8-4 with the commissioner by the issuer or by a registered dealer:
8-5 (a) A statement of the issuer's principal
8-6 business;
8-7 (b) A balance sheet as of a date within eighteen
8-8 (18) months of the date of such sale; and
8-9 (c) Profit and loss statements and a record of
8-10 the dividends paid, if any, for a period of not less than three (3)
8-11 years prior to the date of such balance sheet or for the period of
8-12 existence of the issuer, if such period of existence is less than
8-13 three (3) years.
8-14 The term "recognized securities manual" means a nationally
8-15 distributed manual of securities that is approved for use hereunder
8-16 by the Board.
8-17 The Commissioner may issue a stop order or by order prohibit,
8-18 revoke or suspend the exemption under this Subsection O with
8-19 respect to any security if the Commissioner has reasonable cause to
8-20 believe that the plan of business of the issuer of such security,
8-21 the security, or the sale thereof would tend to work a fraud or
8-22 deceit upon any purchaser or purchasers thereof, such order to be
8-23 subject to review in the manner provided by Section 24 of this Act.
8-24 Notice of any court injunction enjoining the sale, or resale, of
8-25 any such security, or of an order revoking or suspending the
8-26 exemption under this subdivision with respect to any security,
8-27 shall be delivered or shall be mailed by certified or registered
9-1 mail with return receipt requested, to any dealers believed to be
9-2 selling, or offering for sale, securities of the type referred to
9-3 in the notice; and the prohibitions of (6) and (7) above of this
9-4 Subsection O shall be inapplicable to any dealer until the dealer
9-5 has received actual notice from the commissioner of such revocation
9-6 or suspension.
9-7 The Board may for cause shown revoke or suspend the
9-8 recognition hereunder of any manuals previously approved under this
9-9 Subsection but no such action may be taken unless upon notice and
9-10 opportunity for hearing before the Board or a hearings officer as
9-11 now or hereafter required by law. A judgment sustaining the Board
9-12 in the action complained of shall not bar after one year an
9-13 application by the plaintiff for approval of its manual or manuals
9-14 hereunder, nor shall a judgment in favor of the plaintiff prevent
9-15 the Board from thereafter revoking such recognition for any proper
9-16 cause which may thereafter accrue or be discovered.
9-17 P. The execution by a dealer of an unsolicited order
9-18 for the purchase of securities, where the initial offering of such
9-19 securities has been completed and provided that the dealer acts
9-20 solely as an agent for the purchaser, has no direct or indirect
9-21 interest in the sale or distribution of the security ordered, and
9-22 receives no commission, profit, or other compensation from any
9-23 source other than the purchaser.
9-24 Q. The sales of interests in and under oil, gas or
9-25 mining leases, fees or titles, or contracts relating thereto, where
9-26 (1) the total number of sales by any one owner of interests,
9-27 whether whole, fractional, segregated or undivided in any single
10-1 oil, gas or mineral lease, fee or title, or contract relating
10-2 thereto, shall not exceed thirty-five (35) within a period of
10-3 twelve (12) consecutive months and (2) no use is made of
10-4 advertisement or public solicitation; provided, however, if such
10-5 sale or sales are made by an agent for such owner or owners, such
10-6 agent shall be licensed pursuant to this Act. No oil, gas or
10-7 mineral unitization or pooling agreement shall be deemed a sale
10-8 under this Act.
10-9 R. The sale by the issuer itself, or by a subsidiary
10-10 of such issuer, of any securities which would be exempt if sold by
10-11 a registered dealer under Section 6 (other than Section 6E) of this
10-12 Act.
10-13 S. The sale by or through a registered dealer of any
10-14 option if at the time of the sale of the option:
10-15 (1) the performance of the terms of the option
10-16 is guaranteed by any broker-dealer registered under the federal
10-17 Securities Exchange Act of 1934, as amended, which guaranty and
10-18 broker-dealer are in compliance with such requirements or
10-19 regulations as may be approved or adopted by the board;
10-20 (2) the option is not sold by or for the benefit
10-21 of the issuer of the security which may be purchased or sold upon
10-22 exercise of the option;
10-23 (3) the security which may be purchased or sold
10-24 upon exercise of the option is either (a) exempted under Subsection
10-25 F of Section 6 of this Act or (b) quoted on the National
10-26 Association of Securities Dealers Automated Quotation system and
10-27 meets the requirements of Paragraphs (1), (6), (7), and (8) of
11-1 Subsection O of Section 5 of this Act; and
11-2 (4) such sale is not directly or indirectly for
11-3 the purposes of providing or furthering any scheme to violate or
11-4 evade any provisions of this Act.
11-5 For purposes of this subsection the term "option" shall mean
11-6 and include any put, call, straddle, or other option or privilege
11-7 of buying or selling a specified number of securities at a
11-8 specified price from or to another person, without being bound to
11-9 do so, on or prior to a specified date, but such term shall not
11-10 include any option or privilege which by its terms may terminate
11-11 prior to such specified date upon the occurrence of a specified
11-12 event.
11-13 T. Such other transactions or conditions as the board
11-14 by rule, regulation, or order may define or prescribe,
11-15 conditionally or unconditionally.
11-16 U. The issuance or transfer of securities by the
11-17 issuer of its securities to a corporation or association, organized
11-18 exclusively for religious, educational, benevolent, fraternal,
11-19 charitable, or reformatory purposes and not for pecuniary profit,
11-20 only if:
11-21 (a) the corporation or association does not
11-22 provide anything of value for the securities other than, in the
11-23 case of any security that is an option, payment of the exercise
11-24 price of the option to acquire the securities at a price not to
11-25 exceed the fair market value of the underlying securities on the
11-26 date the option was granted;
11-27 (b) the issuance or transfer of securities is
12-1 not made for the purpose of raising capital for the issuer;
12-2 (c) no commission or other form of consideration
12-3 is paid or provided to a third party with respect to the issuance
12-4 or transfer; and
12-5 (d) the issuance or transfer is not directly or
12-6 indirectly for the purpose of providing or furthering a scheme in
12-7 violation of or to evade this Act.
12-8 SECTION 2. This Act takes effect immediately if it receives
12-9 a vote of two-thirds of all the members elected to each house, as
12-10 provided by Section 39, Article III, Texas Constitution. If this
12-11 Act does not receive the vote necessary for immediate effect, this
12-12 Act takes effect September 1, 2001.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3015 was passed by the House on April
27, 2001, by the following vote: Yeas 143, Nays 0, 2 present, not
voting.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 3015 was passed by the Senate on May
17, 2001, by the following vote: Yeas 30, Nays 0, 1 present, not
voting.
_______________________________
Secretary of the Senate
APPROVED: __________________________
Date
__________________________
Governor