By: Watson S.B. No. 1281
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to certain violations of and offenses under The Securities
  Act; providing penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subsections A and B, Section 23-1, The
  Securities Act (Article 581-23-1, Vernon's Texas Civil Statutes),
  are amended to read as follows:
         A.  After giving notice and opportunity for a hearing, the
  Commissioner may, in addition to any other remedies, issue an order
  which assesses an administrative fine against any person or company
  found to have:
               (1)  engaged in fraud or a fraudulent practice in
  connection with:
                     (A)  the offer for sale or sale of a security; or
                     (B)  the rendering of services as an investment
  adviser or investment adviser representative;
               (2)  made an offer containing a statement that is
  materially misleading or is otherwise likely to deceive the public;
  [or]
               (3)  engaged in an act or practice that violates this
  Act or a Board rule or order; or
               (4)  with intent to deceive or defraud or with reckless
  disregard for the truth or the law, materially aided any person in
  engaging in an act or practice described by Subdivision (1), (2), or
  (3) of this subsection.
         B.  Any administrative fine assessed under this Section,
  together with the amount of any civil penalty already awarded under
  Subsection C of Section 32, must be in an amount not to exceed:
               (1)  the greater of:
                     (A)  $20,000 per violation; or
                     (B)  the gross amount of any economic benefit
  gained by the person or company as a result of the act or practice
  for which the fine was assessed; and
               (2)  if the act or practice was committed against a
  person 65 years of age or older, an additional amount of not more
  than $250,000 [that does not exceed $10,000 for a single violation
  or $100,000 for multiple violations in a single proceeding or a
  series of related proceedings].
         SECTION 2.  Section 29, The Securities Act (Article 581-29,
  Vernon's Texas Civil Statutes), is amended to read as follows:
         Art. 581-29.  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 of the third degree[, 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 of the third degree[, 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,
  or in connection with the rendering of services as an investment
  adviser or an investment adviser representative, 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)  guilty of a felony of the third degree
  [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)  guilty of a felony of the second degree
  [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)  guilty of a felony of the first degree
  [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 of the third degree[,
  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 of the third
  degree[, 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 or exemption claimed under the
  provisions of this Act shall be deemed guilty of a state jail
  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 state jail
  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 state jail
  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 as an investment adviser or an investment
  adviser representative without being registered as required by this
  Act shall be deemed guilty of a felony of the third degree [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].
         J.  A conviction of an offense under this section may be
  enhanced as provided by Section 12.42, Penal Code.
         SECTION 3.  Section 32, The Securities Act (Article 581-32,
  Vernon's Texas Civil Statutes), is amended to read as follows:
         Art. 581-32.  INJUNCTIONS, [AND] RESTITUTION, AND CIVIL
  PENALTIES. A.  Whenever it shall appear to the Commissioner either
  upon complaint or otherwise, that any person has engaged, is
  engaging, or is about to engage in fraud or a fraudulent practice in
  connection with the sale of a security, has engaged, is engaging, or
  is about to engage in fraud or a fraudulent practice in the
  rendering of services as an investment adviser or investment
  adviser representative, has made an offer containing a statement
  that is materially misleading or is otherwise likely to deceive the
  public, or has engaged, is engaging, or is about to engage in an act
  or practice that violates this Act or a Board rule or order, the
  Attorney General may, on request by the Commissioner, and in
  addition to any other remedies, bring action in the name and on
  behalf of the State of Texas against such person or company and any
  person who, with intent to deceive or defraud or with reckless
  disregard for the truth or the law, has materially aided, is
  materially aiding, or is about to materially aid such person and any
  other person or persons heretofore concerned in or in any way
  participating in or about to participate in such acts or practices,
  to enjoin such person or company and such other person or persons
  from continuing such acts or practices or doing any act or acts in
  furtherance thereof. The Commissioner shall verify, on information
  and belief, the facts contained in an application for injunction
  under this section.  In any such court proceedings, the Attorney
  General may apply for and on due showing be entitled to have issued
  the court's subpoena requiring the forthwith appearance of any
  defendant and the defendant's employees or agents and the
  production of documents, books and records as may appear necessary
  for the hearing of such petition, to testify and give evidence
  concerning the acts or conduct or things complained of in such
  application for injunction. The District Court of any county,
  wherein it is shown that the acts complained of have been or are
  about to be committed, or a district court in Travis County shall
  have jurisdiction of any action brought under this section, and
  this provision shall be superior to any provision fixing the
  jurisdiction or venue with regard to suits for injunction. No bond
  for injunction shall be required of the Commissioner or Attorney
  General in any such proceeding.
         B.  In addition to any other remedies, the [The] Attorney
  General may, on the request of the Commissioner, either 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 and may seek the disgorgement of any
  economic benefit gained by a defendant through an act or practice
  that violates this Act or for which this Act provides the
  Commissioner or the Attorney General with a remedy. The court may
  grant any equitable relief that the court considers appropriate and
  may order the defendant to deliver to each victim of any act or
  practice that violates this Act or for which this Act provides the
  Commissioner or the Attorney General with a remedy [the person
  defrauded] the amount of money or the property that the defendant
  obtained from the victim, including any bonus, fee, commission,
  option, proceeds, or profit from or loss avoided through the sale of
  the security or through the rendering of services as an investment
  adviser or investment adviser representative, or any other tangible
  benefit [person by the fraudulent practices].
         C.  In addition to any other remedies, the Attorney General
  may, on the request of the Commissioner, either in an action under
  Subsection A of this section or in a separate action in District
  Court, seek a civil penalty to be paid to the State in an amount,
  together with the amount of any administrative fine already
  assessed under Subsection B of Section 23-1, not to exceed:
               (1)  the greater of:
                     (A)  $20,000 per violation; or
                     (B)  the gross amount of any economic benefit
  gained by the person or company as a result of the commission of the
  act or practice; and
               (2)  if the act or practice was committed against a
  person 65 years of age or older, an additional amount of not more
  than $250,000.
         D.  In an action brought under this section, the [for fraud
  or a fraudulent practice in connection with the sale of a security,
  the Attorney General may seek, for an aggrieved person, 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. The] Attorney General may
  recover [from an order of disgorgement obtained under this
  subsection] reasonable costs and expenses incurred by the Attorney
  General in bringing the action.
         SECTION 4.  (a)  The changes in law made by this Act apply
  only to a violation that occurs or an offense committed on or after
  the effective date of this Act. A violation that occurs or an
  offense committed before the effective date of this Act is governed
  by the law in effect on the date the violation occurred or the
  offense was committed, and the former law is continued in effect for
  that purpose.
         (b)  For purposes of Subsection (a) of this section, a
  violation occurred or an offense was committed before the effective
  date of this Act if any element of the violation or offense occurred
  before that date.
         SECTION 5.  This Act takes effect September 1, 2011.