78R8383 CLG-D
By: Ellis S.B. No. 1060
A BILL TO BE ENTITLED
AN ACT
relating to enforcement of conduct and other matters concerning a
security; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subsection A, Section 4, The Securities Act
(Article 581-4, Vernon's Texas Civil Statutes), is amended to read
as follows:
A. The term "security" or "securities" shall include any
limited partner interest in a limited partnership, share, stock,
treasury stock, stock certificate under a voting trust agreement,
collateral trust certificate, equipment trust certificate,
preorganization certificate or receipt, subscription or
reorganization certificate, note, bond, debenture, mortgage
certificate or other evidence of indebtedness, any form of
commercial paper, certificate in or under a profit sharing or
participation agreement, certificate or any instrument
representing any interest in or under an oil, gas or mining lease,
fee or title, or any certificate or instrument representing or
secured by an interest in any or all of the capital, property,
assets, profits or earnings of any company, investment contract, or
any other instrument commonly known as a security, whether similar
to those herein referred to or not. The term applies regardless of
whether the "security" or "securities" are evidenced by a written
instrument. Provided, however, that this definition shall not
apply to any insurance policy, endowment policy, annuity contract,
optional annuity contract, or any contract or agreement in relation
to and in consequence of any such policy or contract, issued by an
insurance company subject to the supervision or control of the
Texas Department of Insurance when the form of such policy or
contract has been duly filed with the Department as now or hereafter
required by law.
SECTION 2. Section 28, The Securities Act (Article 581-28,
Vernon's Texas Civil Statutes), is amended by adding Subsection C
to read as follows:
C. Assistance to Securities Regulator of Another
Jurisdiction. The Commissioner may provide assistance to a
securities regulator of another state or a foreign jurisdiction who
requests assistance in conducting an investigation to determine
whether a person has violated, is violating, or is about to violate
a law or rule of the other state or foreign jurisdiction relating to
a securities matter the securities regulator is authorized to
administer or enforce. The Commissioner may provide assistance by
using the authority to investigate and any other power conferred by
this section as the Commissioner determines is necessary and
appropriate. The assistance may be provided without regard to
whether the conduct described in the request would also constitute
a violation of this Act or another law of this state had the conduct
occurred in this state. In determining whether to provide the
assistance, the Commissioner may consider:
(1) whether the securities regulator is permitted and
has agreed to provide assistance within the regulator's
jurisdiction to the Commissioner reciprocally and at the
Commissioner's request concerning securities matters;
(2) whether compliance with the request for assistance
would violate or otherwise prejudice the public policy of this
state; and
(3) the availability of Board employees and resources
of the Board or Commissioner necessary to carry out the request for
assistance.
SECTION 3. Section 29, The Securities Act (Article 581-29,
Vernon's Texas Civil Statutes), is amended to read as follows:
Sec. 29. PENAL PROVISIONS. Any person who shall:
A. Sell, offer for sale or delivery, solicit
subscriptions or orders for, dispose of, invite offers for, or who
shall deal in any other manner in any security or securities without
being a registered dealer or agent as in this Act provided shall be
deemed guilty of a felony, and upon conviction thereof shall be
sentenced to pay a fine of not more than $5,000 or imprisonment in
the penitentiary for not less than two or more than 10 years, or by
both such fine and imprisonment.
B. Sell, offer for sale or delivery, solicit
subscriptions to and orders for, dispose of, invite orders for, or
who shall deal in any other manner in any security or securities
issued after September 6, 1955, unless said security or securities
have been registered or granted a permit as provided in Section 7 of
this Act, shall be deemed guilty of a felony, and upon conviction
thereof shall be sentenced to pay a fine of not more than $5,000 or
imprisonment in the penitentiary for not less than two or more than
10 years, or by both such fine and imprisonment.
C. In connection with the sale, offering for sale or
delivery of, the purchase, offer to purchase, invitation of offers
to purchase, invitations of offers to sell, or dealing in any other
manner in any security or securities, whether or not the
transaction or security is exempt under Section 5 or 6 of this Act,
directly or indirectly:
(1) engage in any fraud or fraudulent practice;
(2) employ any device, scheme, or artifice to
defraud;
(3) knowingly make any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements made, in the light of the circumstances under
which they are made, not misleading; or
(4) engage in any act, practice or course of
business which operates or will operate as a fraud or deceit upon
any person, is guilty of a felony and upon conviction shall be:
(a) imprisoned for not less than 2 or more
than 10 years and fined not more than $10,000, if the amount
involved in the offense is less than $10,000;
(b) imprisoned for not less than 2 or more
than 20 years and fined not more than $10,000, if the amount
involved in the offense is $10,000 or more but less than $100,000;
or
(c) imprisoned for life or for not less than
5 or more than 99 years and fined not more than $10,000, if the
amount involved is $100,000 or more.
D. Knowingly violate a cease and desist order issued
by the commissioner under the authority of Section 23A, 23B, or 23-2
of this Act shall be deemed guilty of a felony, and upon conviction
thereof shall be sentenced to pay a fine of not more than $5,000 or
imprisonment in the penitentiary for not more than two years, or by
both such fine and imprisonment.
E. Knowingly make or cause to be made, in any document
filed with the commissioner or in any proceeding under this Act,
whether or not such document or proceeding relates to a transaction
or security exempt under the provisions of Sections 5 or 6 of this
Act, any statement which is, at the time and in the light of the
circumstances under which it is made, false or misleading in any
material respect shall be deemed guilty of a felony, and upon
conviction thereof shall be sentenced to pay a fine of not more than
$5,000 or imprisonment in the penitentiary for not less than two or
more than 10 years, or by both such fine and imprisonment.
F. Knowingly make any false statement or
representation concerning any registration made under the
provisions of this Act shall be deemed guilty of a felony, and upon
conviction thereof shall be sentenced to pay a fine of not more than
$5,000 or imprisonment in the penitentiary for not more than two
years, or by both such fine and imprisonment.
G. Make an offer of any security within this State that
is not in compliance with the requirements governing offers set
forth in Section 22 of this Act shall be deemed guilty of a felony,
and upon conviction thereof, shall be sentenced to pay a fine of not
more than $5,000 or imprisonment in the penitentiary for not more
than two years, or by both such fine and imprisonment.
H. Knowingly make an offer of any security within this
State prohibited by a cease publication order issued by the
Commissioner under Section 23C of this Act shall be deemed guilty of
a felony, and upon conviction thereof, shall be sentenced to pay a
fine of not more than $5,000 or imprisonment in the penitentiary for
not more than two years, or by both such fine and imprisonment.
I. Render services, directly or through an investment
adviser representative, as an investment adviser without being a
registered investment adviser as required by this Act or without
submitting a notice filing as required by Section 12-1 of this Act
shall be considered guilty of a felony and on conviction of the
felony shall be sentenced to pay a fine of not more than $5,000 or
imprisonment in the penitentiary for not less than two or more than
10 years, or by both the fine and imprisonment.
SECTION 4. Section 32, The Securities Act (Article 581-32,
Vernon's Texas Civil Statutes), is amended by amending Subsection B
and adding Subsection C to read as follows:
B. The Attorney General may, in an action under Subsection A
of this section or in a separate action in District Court, seek
equitable relief, including restitution, for a victim of fraudulent
practices. The court may grant any equitable relief that the court
considers appropriate and may order the defendant to deliver to the
person defrauded the amount of money or the property that the
defendant obtained from the person by the fraudulent practices.
C. In an action brought under this section for fraud or a
fraudulent practice in connection with the sale of a security, the
Attorney General may seek the disgorgement of any economic benefit
gained by the defendant through the violation, including a bonus,
fee, commission, option, proceeds, profit from or loss avoided
through the sale of the security, or any other tangible benefit.
SECTION 5. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2003.