PROPOSED RULES 
 
 Before an agency may permanently adopt a new or amended section or repeal an 
existing section, a proposal detailing the action must be published in the  
Texas Register at least 30 days before action is taken. The 30-day time period 
gives interested persons an opportunity to review and make oral or written 
comments on the section. Also, in the case of substantive action, a public 
hearing must be granted if requested by at least 25 persons, a governmental 
subdivision or agency, or an association having at least 25 members. 
  Symbology in proposed amendments. New language added to an existing section is 
indicated by the use of  bold text. [Brackets] indicate deletion of existing 
material within a section. 
 
   
  TITLE 1. ADMINISTRATION 
 Part V. General Services Commission 
  Chapter 113. Central Purchasing Division 
  
  Purchasing 
 
  1 TAC sec.113.2, sec.113.20 
 
  The General Services Commission proposes an amendment to  s113.2, concerning 
definitions, and new sec.113.20, concerning group purchasing programs. The new 
section allows institutions of higher education to purchase through group 
purchasing programs that offer discount prices. The section also establishes 
procedures to be followed so that the commission may determine compliance with 
state laws and commission rules regarding purchasing with historically 
underutilized businesses (HUBs). 
 Pat Martin, director for purchasing, has determined that there will be fiscal 
implications as a result of enforcing or administering the sections. There will 
be no additional costs to state and local governments for the first five-year 
period the amendments are in effect. It is anticipated that costs to state and 
local governments will be reduced as a result of administering the new section; 
however, precise savings cannot be determined at this time. 
 Ms. Martin also has determined that for each year of the first five years the 
amendments are in effect, the public benefit anticipated as a result of 
administering the amendments will be greater flexibility and increased discounts 
for institutions of higher education in the purchase of materials, supplies and 
equipment. There is no anticipated economic cost to persons who are required to 
comply with the sections as proposed. 
 Comments on the proposal may be submitted to Judith M. Porras, General Counsel, 
General Services Commission, P.O. Box 13047, Austin, Texas 78711-3047. Comments 
must be received no later than 30 days from the date of publication of the 
proposal in the Texas Register. 
 The amendment and new section are proposed under Texas Civil Statutes, Article 
601b, sec.3.061, which provide the General Services Commission with the 
authority to promulgate rules necessary to accomplish the purpose of the 
section. 
 
 
  sec.113.2. Definitions.  The following words and terms, when used in this 
title, shall have the following meanings, unless the context clearly indicates 
otherwise. 
   
   Group purchasing programs-A purchasing program that offers discount prices to 
institutions of higher education. 
 
   
  sec.113.20. Group Purchasing Programs. 
 
  (a) An institution of higher education, as defined by the Education Code, 
sec.61.003, may purchase of materials, supplies or equipment through group 
purchasing programs in accordance with this section. 
   
  (b) Before making a particular purchase through a group purchasing program, a 
requesting institution must notify the commission in writing that the purchase 
is being considered. The notification must be signed by the chief purchasing 
officer for the institution. The notification must include a complete 
description of the purchase, the vendor's name, quantity and price information, 
the terms and conditions of the contract, and any other information required by 
the commission. 
   
  (c) If the commission determines that a lower price is available through the 
commission, it will so inform the requesting institution within ten working days 
after receipt of the notification. Upon receipt of information that a lower 
price is available, the institution may utilize established purchasing 
procedures for the purchase. 
   
  (d) An institution that participates in a group purchasing program must 
maintain, and compile monthly, information relating to the institution's use, 
and the use by each operating division of the institution, of historically 
underutilized businesses, including information regarding subcontractors and 
suppliers. Institutions shall require a contractor or supplier to whom the 
institution has awarded a contract to report to the institution the identity and 
the amount paid to each historically underutilized business to whom the 
contractor or supplier has awarded a subcontract for the purchase of supplies, 
materials or equipment. 
   
  (e) An institution that participates in group purchasing programs must submit 
a report to the commission, not later than March 15 of each year regarding the 
previous six-month period and September 15 of each year regarding the preceding 
fiscal year, of purchases from historically underutilized businesses that are 
made through the group purchasing programs. 
   
  (f) An institution participating in group purchasing programs shall adhere to 
the same ethical standards required of commission employees as set forth in 
sec.111.4 of this title (relating to Ethical Standards). 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 22, 1994. 
 TRD-9436647 
  Judith Monaco Porras 
 General Counsel 
 General Services Commission 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 463-3583 
         
             
  Surplus Property Sales 
 
  1 TAC sec.113.73 
 
  The General Services Commission proposes an amendment to  s113.73, concerning 
sale of surplus firearms. This action is proposed to address concerns raised by 
internal audit; namely, to ensure that the sale of surplus firearms is not made 
to persons with criminal backgrounds. 
 Sal Valdez, director, Intergovernmental Programs Division, has determined that 
for the first five-year period the amendment is in effect there will be no 
fiscal implication for state or local government as a result of enforcing or 
administering the section. 
 Mr. Valdez also has determined that for each year of the first five years the 
amendment is in effect the public benefit anticipated as a result of enforcing 
the amendment will be the improvement of safeguards for disposal of surplus 
firearms. 
 Comments on the proposal may be submitted to Judith M. Porras, General Counsel, 
General Services Commission, P.O. Box 13047, Austin, Texas 78711-3047. Comments 
must be received no later than 30 days from the date of publication of the 
proposal in the Texas Register. There is no effect on small businesses. There is 
no anticipated economic cost to persons required to comply with the rule as 
proposed. 
 The amendment is proposed under Texas Civil Statutes, Article 601, sec.9.09, 
which provide the General Services Commission with the authority to promulgate 
rules necessary to accomplish the purpose of Article 9. 
 
 
  sec.113.73. Sale and Disposition of Surplus and Salvage Property. 
 
  (a)-(d) (No change.) 
   
  (e) Methods of disposing of surplus or salvage property. If no entity 
described in section (c) of this section desires to receive any property 
reported as surplus or salvage, the commission may dispose of the property by 
sealed bids or auction, or delegate to the state agency having possession of the 
property the authority to sell the property on a competitive bid basis. The 
commission will maintain a mailing list of companies or individuals who have 
indicated a desire to bid on surplus or salvage property and have made 
application. Names may be deleted from the mailing list for: failure to bid, 
failure to make payment for or remove from state property in a timely manner, 
items on which they were the successful bidder, or failure to renew the mailing 
list application. Once a bidder has been removed, he may not be reinstated to 
the bid list except after presentation of a formal request for reinstatement to 
the Director for Purchasing which results in a favorable recommendation for 
reinstatement. The commission or the agency shall assess and collect from the 
purchaser a 2.5% fee over and above the proceeds from the sale of the property 
to recover the costs associated with the sale of the property. [The purchaser of 
a surplus firearm other than a shotgun or rifle, must not be less than 21 years 
of age.] <nl>The purchaser of a surplus firearm must be a licensed firearms 
dealer. 
 
  (1)-(6) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 22, 1994. 
 TRD-9436646 
  Judith M. Porras 
 General Counsel 
 General Services Commission 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 463-3583 
         
                 Chapter 121. Telecommunications Services Division 
  
  1 TAC sec.121.5, sec.121.9 
 
  The General Services Commission proposes amendments to  s121.5 and sec.121.9, 
concerning the General Services Commission retention of telephone records. These 
amendments are proposed to require the commission to retain long distance 
telephone call detail, and to remove requirements for retaining local call 
detail. 
 John Pouland, executive director, has determined that for the first five-year 
period the amendments are in effect there will be no fiscal implication for 
state or local government as a result of enforcing or administering the 
sections. 
 Mr. Pouland also has determined that for each year of the first five years the 
amendments are in effect, the public benefit anticipated as a result of 
administering the amendments will be a reduction of agencies' record retention 
costs, and clearer rules that define the commission's responsibility to retain 
long distance telephone call detail for all agencies. There will be no effect on 
small businesses. There is no anticipated economic cost to persons required to 
comply with the rules as proposed. 
 Comments on the proposal may be submitted to Judith M. Porras, General Counsel, 
General Services Commission, P.O. Box 13047, Austin, Texas 78711-3047. Comments 
must be received no later than 30 days from the date of publication of the 
proposal in the Texas Register. 
 The amendments are proposed under Texas Civil Statutes, Article 601b, which 
provide the General Services Commission with the authority to promulgate rules 
necessary to accomplish the purpose of the Article. 
 
 
  sec.121.5. TEX-AN Billing Process. 
 
  (a)-(b) (No change.) 
   
  (c) The Telecommunications Services Division will accumulate all charges for 
TEX-AN service and bill the using agencies on a monthly or other regular basis. 
The bill will include the following: 
 
  (1) charges for long distance services based on a proration by each using 
agency of total network costs to provide each service. Prorations shall be based 
on the total usage of each service in minutes and the costs for circuits needed 
to access the services. An agency may install at its own expense automatic 
numbering equipment or similar function equipment to obtain amplified data for 
internal distribution of TEX-AN call usage for select locations. In any case, 
the actual billing for TEX-AN long distance service by the commission and 
payment will be on the basis of usage and other costs which may be attributed to 
the provision of each service. Measures shall also be taken to assure that all 
costs associated with providing service to nonstate entities are recovered from 
each nonstate entity through the monthly billing system. All long distance call 
detail records are maintained by the commission for <nl>all TEX-AN using 
agencies for<ol> a period of <nl>4 years. Agencies should not retain duplicates, 
but may destroy the copy of call detail records provided periodically for 
billing purposes after the agency has verified and paid its bill.<ol> [30 days 
after the date the interagency transaction vouchers are mailed; thereafter, the 
records are destroyed. Agencies who find it necessary to request duplicates of 
bills must therefore send their requests to the Telecommunications Services 
Division prior to expiration of the 30-day retention period;] 
   
  (2)-(5) (No change.) 
     
  (d)-(e) (No change.) 
 
     
  sec.121.9. Centralized Capitol Complex Telephone System. 
 
  (a)-(b) (No change.) 
   
  (c) The Telecommunications Services Division of the Commission will accumulate 
all charges for services and equipment provided on the centralized telephone 
system and bill the using agencies on a monthly basis. An overhead charge for 
the operation of the system by the Commission shall be prorated to the using 
agencies on an actual cost basis. <nl>Local call detail records are not required 
for centralized capitol complex telephone service billing, and no such records 
are maintained by the commission. <ol> [The using agency is the owner and 
custodian of all call detail records accompanying the monthly centralized 
telephone service bill and the Commission shall not release such records for any 
purpose without the written permission of the using agency.] 
   
  (d)-(h) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 22, 1994. 
 TRD-9436648 
  Judith Monaco Porras 
 General Counsel 
 General Services Commission 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 463-3583 
         
                 
  TITLE 7. BANKING AND SECURITIES 
 Part IV. Texas Savings and Loan Department 
  Chapter 63. Fees and Charges 
  
  7 TAC sec.63.14 
 
  The Texas Savings and Loan Department proposes an amendment to sec.63.14, 
concerning the fee for conversion to a Federal charter. The language change has 
been proposed to apply to conversion into a state or national bank, or a federal 
savings association. 
 James L. Pledger, Commissioner, has determined that for the first five-year 
period the rule will be in effect there will be no fiscal implications for state 
or local government as a result of the proposed amendment of the rule. 
 Mr. Pledger also has determined that for each year of the first five years 
there will be no significant public benefit anticipated as a result of amending 
the rule. There will be no effect on small businesses. 
 The anticipated economic cost to persons who are required to comply with the 
rule as amended is zero. James L. Pledger, Commissioner, has determined that the 
proposed amendment of the rule will have no local employment impact. 
 Comments on the proposal may be submitted to James L. Pledger, Commissioner, 
Texas Savings and Loan Department, 2601 North Lamar Boulevard, Suite 201, 
Austin, Texas 78705. 
 The amendment is proposed under Texas Civil Statutes, Article 342-114, which 
provide the Finance Commission of Texas with the authority to promulgate general 
rules and regulations not inconsistent with the constitution and statutes of the 
state and, from time to time, to amend same. 
 
 
  sec.63.14. Fee for Conversion Into Another Financial Institution.  [to Federal 
Charter] The commissioner shall collect a filing fee of $5, 000 for each 
application filed pursuant to Chapter 69 of this title (relating to 
Reorganization, Merger, Consolidation, Acquisitions and Conversions) for 
conversion into a state or national bank, a federal savings and loan 
association, or a federal savings bank [to a federal] charter. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 25, 1994. 
 TRD-9436742 
  James L. Pledger 
 Commissioner 
 Texas Savings and Loan Department 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 475-1350 
         
         
  Part VII. State Securities Board 
 Chapter 109. Transactions Exempt from Registration 
 7 TAC sec.109.13 
 
  The State Securities Board proposes an amendment to sec. 109.13, concerning 
employee plan advertising, to correct an inconsistency in the rule. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefit anticipated as a result of enforcing 
the rule will be the elimination of inconsistent language contained in the rule. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the rule as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendment is proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendment affects Texas Civil Statutes, Article 581-5.I. 
 
 
  sec.109.13. Limited Offering Exemptions. 
 
  (a)-(e) (No change.) 
   
  (f) Employee Plan Advertising. No public solicitation or advertisement under 
sec.5.I occurs by the [sale or] distribution to eligible employees, officers, or 
directors of the employer or its subsidiaries, parents or subsidiaries of such 
parents, of a prospectus filed under the Securities Act of 1933 with the 
Securities and Exchange Commission for the plan or any other material required 
or permitted to be distributed by the Securities Act of 1933 in connection with 
such plan when the securities under the plan are sold or distributed in a 
transaction otherwise meeting the requirements of sec.5.I(b). 
   
  (g)-(l) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436686 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
               
  
  
  7 TAC sec.109.17 
 
  The State Securities Board proposes an amendment to sec.109.17. The amendment 
adds Texas chartered limited banking associations to the list of financial 
institutions recognized in the Securities Act, sec.5.L, predicated on the 
assurance that these entities, organized pursuant to the provisions of House 
Bill 1212, 73rd Legislature, 1993, will be regulated in the same manner as are 
traditional banking entities. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt has also determined that for each year of the first five years 
the rule is in effect the public benefits anticipated as a result of enforcing 
the rule will be the elimination of unnecessary duplicative regulation. There 
will be no effect on small businesses. There is no anticipated economic cost to 
persons who are required to comply with the rule as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendment is proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendment affects Texas Civil Statutes, Article 581-5.L. 
 
 
  sec.109.17. [Savings] Banks under The Securities Act, sec.5L. 
 
  (a) -(b) (No change.) 
   
  <nl>(c) The phrase "any bank organized and subject to regulation ... under the 
laws of any State or territory of the United States" shall include any Texas 
state chartered limited banking association. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436687 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
             Chapter 117. Administrative Guidelines for Registration of Real 
Estate Programs 
  
  7 TAC sec.sec.117.1-117.5 
 
  The State Securities Board proposes amendments to sec. s117.1-117.5, 
concerning administrative guidelines for real estate programs. The amendments 
reflect provisions that were included in the most recent amendments to the North 
American Securities Administrators' Association, Inc. (NASAA) real estate 
guidelines. Other changes have been made to correct typographical errors in the 
existing guidelines. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefits anticipated as a result of enforcing 
the rule will be continued uniformity with other states in applying standards 
for registration of real estate program offerings. The revised suitability 
standards of the proposed amendments will serve to better protect investors in 
real estate programs. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the rule as 
proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendments are proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendments affect Texas Civil Statutes, Article 581-7. 
 
 
  sec.117.1. Introduction. 
 
  (a) (No change.) 
   
  (b)  Definitions. The following words and terms, when used in this chapter, 
shall have the following meanings, unless the context clearly indicates 
otherwise. 
 
  (1)-(13) (No change.) 
   
  (14) Construction fee-A fee or other remuneration for acting as general 
contractor and/or construction manager to construct improvements, supervise, and 
coordinate projects or <nl>to<ol> provide major repairs or rehabilitation on a 
program's property. 
   
  (15)-(19) (No change.) 
   
  (20) Investment in properties-The amount of capital contributions used to make 
or invest in mortgage loans or the amount actually paid or allocated to the 
purchase, development, construction, or improvement of properties acquired by 
the program, <nl>(<ol>including the purchase of properties, working capital 
reserves allocable thereto (except that working capital reserves in excess of 
5.0% shall not be included), and other cash payments such as interest and taxes 
but excluding front-end fees. <nl>) 
   
  (21)-(31) (No change.) 
   
  (32) Prospectus-Shall have the meaning given to that term by the Securities 
Act of 1933, sec.2(10), including a preliminary prospectus <nl>;<ol> [,] 
provided, however, that such term as used herein shall also include an offering 
circular as described in the Securities Act of 1933, Rule 256, or, in the case 
of an intrastate offering, any document by whatever name known, utilized for the 
purpose of offering and selling securities to the public. 
   
  (33)-(37) (No change.) 
 
       
  sec.117.2. Requirements of Sponsors. 
 
  (a)-(e) (No change.) 
   
  (f) Terminated sponsor. 
 
  (1) (No change.) 
   
  (2) The method of payment to the terminated sponsor must be fair <nl>,<ol> [;] 
and must protect the solvency and liquidity of the partnership. Where the 
termination is voluntary, the method of payment will be deemed presumptively 
fair where it provides for a <nl>non-interest <ol> [noninterest] bearing 
unsecured promissory note with principal payable, if at all, from distributions 
which the terminated sponsor otherwise would have received under the partnership 
agreement had the sponsor not terminated. Where the termination is involuntary, 
the method of payment will be deemed presumptively fair where it provides for an 
interest bearing promissory note coming due in no less than 5 years with equal 
installments each year. 
 
       
  sec.117.3. Suitability of <nl>Participants [the Participant]. 
 
  (a) <nl>General Policy.<ol> [Standards to be imposed. Given the limited 
transferability, the relative lack of liquidity, and the degree of risk 
associated with an investment in real estate programs, the sponsor and its 
selling representatives should be cautious concerning the persons to whom such 
securities are marketed. Suitability standards for investors will, therefore, be 
imposed which are reasonable in view of the foregoing and of the type of program 
to be offered. Sponsors will be required to set forth in the prospectus the 
investment objectives of the program, a description of the type of person who 
could benefit from the program, and the suitability standards to be applied in 
marketing it.] 
 
  <nl>(1) The sponsor shall establish minimum income and net worth standards for 
persons who purchase program interests. 
   
  <nl>(2) The <nl>sponsor shall propose minimum income and net worth 
<ol>[suitability] standards <nl>which are reasonable given the type of program 
and the risks associated with the purchase of program interests. Programs with 
greater investor risk shall have minimum standards with a substantial net worth 
requirement. The  <ol>[proposed by the sponsor will be reviewed for fairness by 
the] Securities Commissioner<nl> shall evaluate <ol> [in processing the 
application. In determining how restrictive] the standards  <nl>proposed by the 
sponsor when the program's application for registration is reviewed. In 
evaluating the proposed standards, the Securities Commissioner may consider the 
following: <ol>[must be, special attention will be given to the existence of 
such factors as] 
 
  <nl>(A) the program's use of <ol>[high] leverage <nl>;<ol> [,] 
   
  <nl>(B) tax implications <nl>;<ol> [,] 
   
  <nl>(C) mandatory deferred payments <nl>;<ol> [,] 
   
  <nl>(D)  assessments; 
   
  <nl>(E) balloon payment financing<nl>;<ol> [,] 
   
  <nl>(F) [excessive] investments in unimproved land <nl>; <ol> [, and] 
   
  <nl>(G) potential variances in <ol> [uncertain or no] cash 
<nl>distributions;<ol> [flow from program property. Programs which involve more 
than ordinary investor risk should emphasize suitability standards involving 
substantial net worth of the investor.] 
   
  <nl>(H) potential participants; 
   
  <nl>(I) relationship between potential participants and the sponsor; 
   
  <nl>(J) liquidity of program interests; 
   
  <nl>(K) performance of sponsor's prior programs; 
   
  <nl>(L)  financial condition of the sponsor; 
   
  <nl>(M) potential transactions between the program and the sponsor; and 
   
  <nl>(N) any other relevant factors. 
       
  <nl>(b) Income and Net Worth Standards. 
 
  <nl>(1) For programs other than programs with mandatory deferred payments, 
unless the Securities Commissioner determines that the risks associated with the 
program would require lower or higher standards, each participant shall have: 
 
  <nl>(A) a minimum annual gross income of $45, 000 and a minimum net worth of 
$45,000; or 
   
  <nl>(B) a minimum net worth of $150,000. 
     
  <nl>(2) For programs with mandatory deferred payments, unless the Securities 
Commissioner determines that the risks associated with the program would require 
lower or higher standards, each participant shall have: 
 
  <nl>(A) a minimum annual gross income of $60, 000 and a minimum net worth of 
$60,000; or 
   
  <nl>(B) a minimum net worth of $225,000. 
     
  <nl>(3) Net worth shall be determined exclusive of home, home furnishings, and 
automobiles. 
   
  <nl>(4) In the case of sales to fiduciary accounts, these minimum standards 
shall be met by the beneficiary, the fiduciary account, or by the donor or 
grantor who directly or indirectly supplies the funds to purchase the program 
interests if the donor or grantor is the fiduciary. 
   
  <nl>(5) The sponsor shall set forth in the final prospectus: 
 
  <nl>(A) the investment objectives of the program; 
   
  <nl>(B) a description of the type of person who might benefit from an 
investment in the program; and 
   
  <nl>(C) the minimum standards imposed on each participant in the program. 
       
  <nl>(c)<ol>[(b)]  <nl> Determination that Sale<ol> [Sales] to<nl> Participant 
is Suitable and<ol> Appropriate [Persons]. 
 
  <nl>(1) The sponsor and each person selling program interests on behalf of the 
sponsor or program shall make every reasonable effort to<nl> determine <ol> 
[assure] that<nl> the purchase of<ol> [those persons being offered or sold the] 
program interests <nl> is a<ol> [are] suitable<nl> and<ol> [, considering the 
standards set forth as required in subsection (a) of this section, and the 
program interests are] appropriate [for the customers'] investment<nl> for each 
participant.  <ol>[objectives and financial situation. The sponsor or his 
representatives shall ascertain that the investor can reasonably benefit from 
the program, and the following shall be evidence thereof:] 
   
  [(1) the investor has the capacity to understand the fundamental aspects of 
the program, which capacity may be evidenced by the following: 
 
  [(A) the nature of employment experience; 
   
  [(B) educational level achieved; 
   
  [(C) access to advice from qualified sources, such as attorney, accountant, 
and tax adviser; 
   
  [(D) prior experience with investments of a similar nature.] 
     
  (2)  <nl>In making this determination, <ol>the sponsor or<nl> each person 
selling program interests on behalf of the sponsor or program <ol> [his 
representatives] shall ascertain that the <nl>prospective participant<ol> 
[investor has apparent understanding]: 
 
  <nl>(A) meets the minimum income and net worth standard established for the 
program; 
   
  <nl>(B)  can reasonably benefit from the program based on the prospective 
participant's overall investment objectives and portfolio structure; 
   
  <nl>(C) is able to bear the economic risk of the investment based on the 
prospective participant's overall financial situation; and 
   
  <nl>(D)  has apparent understanding of: 
 
  <nl>(i) [(A) of] the fundamental risks [and possible financial hazards] of the 
investment; 
   
  <nl>(ii) the risk that the participant may lose the entire investment; 
   
  <nl>(iii) [(B) of] the lack of liquidity of <nl>program interests <ol> [this 
investment]; 
   
  <nl>(iv) the restrictions on transferability of program interests; 
   
  <nl>(v)<ol>[(C)]  <nl>the background and qualifications of the sponsor or 
persons responsible for directing and managing the program<ol> [that the 
investment will be directed and managed by the sponsor]; and 
   
  <nl>(vi) [(D) of] the tax consequences of the investment. 
       
  (3) <nl>The sponsor or each person selling program interests on behalf of the 
sponsor or program will make this determination on the basis of information it 
has obtained from a prospective participant. Relevant information for this 
purpose will include at least the age, investment objectives, investment 
experience, income, net worth, financial situation, and other investments of the 
prospective participant, as well as any other pertinent factors.<ol> [the 
participant can reasonably benefit from the program in view of his overall 
investment objectives and portfolio structure.] 
   
  (4) <nl>The sponsor or each person selling program interests on behalf of the 
sponsor or program shall maintain records of the information used to determine 
that an investment in program interests is suitable and appropriate for each 
participant. The sponsor or each person selling program interests on behalf of 
the sponsor or program shall maintain these records for at least 6 years. <ol> 
[the participant is able to bear the economic risk of the investment. For 
purposes of determining the ability to bear the economic risk, unless the 
Securities Commissioner approves a lower suitability standard, participants 
shall have a minimum annual gross income of $45,000 and a net worth of $45,000, 
or in the alternative, a net worth of $150, 000. As provided in subsection (a) 
of this section higher suitability standards may be required. In the case of 
sales to fiduciary accounts, the suitability standards shall be met by the 
fiduciary, or by the fiduciary account, or by a donor who directly or indirectly 
supplies the funds to purchase the program interests. Net worth shall be 
determined exclusive of home, home furnishings, and automobiles.] 
   
  <nl>(5) The sponsor shall disclose in the final prospectus the responsibility 
of the sponsor and each person selling program interests on behalf of the 
sponsor or program to make every reasonable effort to determine that the 
purchase of program interests is a suitable and appropriate investment for each 
participant, based on information provided by the participant regarding the 
participant's financial situation and investment objectives. 
   
  [(c) Maintenance of Records. The sponsor shall maintain a record of the 
information obtained to indicate that a participant meets the suitability 
standards employed in connection with the offer and sale of its interests and a 
representation of the participant that he is purchasing for his own account or, 
in lieu of such representation, information indicating that the participants for 
whose account the purchase is made meet such suitability standards. Such 
information may be obtained from the participant through the use of a form which 
sets forth the prescribed suitability standards in full and which includes a 
statement to be signed by the participant in which he represents that he meets 
such suitability standards and is purchasing for his own account. However, where 
the offering is underwritten or sold by a broker-dealer, the sponsor shall 
obtain a commitment from the broker-dealer to maintain the same record of 
information required of the sponsor.] 
     
  <nl>(d) Subscription Agreements. 
 
  <nl>(1) The Securities Commissioner may require that each participant complete 
and sign a written subscription agreement. 
   
  <nl>(2) The sponsor may require that each participant make certain factual 
representations in the subscription agreement, including the following: 
 
  <nl>(A) The participant meets the minimum income and net worth standards 
established for the program. 
   
  <nl>(B)  The participant is purchasing the program interests for his or her 
own account. 
   
  <nl>(C) The participant has received a copy of the prospectus. 
   
  <nl>(D) The participant acknowledges that the investment is not liquid. 
     
  <nl>(3) The participant must separately sign or initial each representation 
made in the subscription agreement. Except in the case of fiduciary accounts, 
the participant may not grant any person a power of attorney to make such 
representations on his or her behalf. 
   
  <nl>(4)  The sponsor and each person selling program interests on behalf of 
the sponsor or program shall not require a participant to make representations 
in the subscription agreement which are subjective or unreasonable and which: 
 
  <nl>(A) might cause the participant to believe that he or she has surrendered 
rights to which he or she is entitled under federal or state law; or 
   
  <nl>(B) would have the effect of shifting the duties regarding suitability, 
imposed by law on broker-dealers, to the participant. 
     
  <nl>(5) Prohibited representations include, but are not limited to the 
following: 
 
  <nl>(A) The participant understands or comprehends the risks associated with 
an investment in the program. 
   
  <nl>(B) The investment is a suitable one for the participant. 
   
  <nl>(C) The participant has read the prospectus. 
   
  <nl>(D) In deciding to invest in the program, the participant has relied 
solely on the prospectus, and not on any other information or representations 
from other persons or sources. 
     
  <nl>(6) The sponsor may place the content of the prohibited representations in 
the subscription agreement in the form of disclosures to the participant. The 
sponsor may not place these disclosures in the participant representation 
section of the subscription agreement. 
     
  <nl>(e) Completion of Sale. 
 
  <nl>(1) The sponsor or any person selling program interests on behalf of the 
sponsor or program may not complete a sale of program interests to a participant 
until at least five business days after the date the participant receives a 
final prospectus. 
   
  <nl>(2) The sponsor or the person designated by the sponsor shall send each 
participant a confirmation of his or her purchase. 
     
  <nl>(f)  Minimum Investment. The Securities Commissioner may require a minimum 
initial and subsequent cash investment amount. 
 
     
  sec.117.4. Fees-Compensation -Expenses. 
 
  (a)-(b) (No change. ) 
   
  (c) Investment in properties. 
 
  (1)-(3) (No change.) 
   
  (4) For programs whose total capital contributions do not exceed $2 million, 
the Securities Commissioner may reduce the required amount of investment in 
properties to that permitted by paragraph (2)(B) of this subsection, 
notwithstanding the level of indebtedness encumbering the program's properties. 
To calculate the percent of financing of program properties in paragraph (2) of 
this subsection, divide the amount of financing by the purchase price of <nl>the 
<ol>property, excluding front-end fees. The quotient is multiplied by .1625% to 
determine the percentage to be deducted from 80%. The following are examples of 
application of the formula using capital contributions of $1 million in each 
case: 
 
  (A)-(C) (No change.) 
     
  (5) Notwithstanding the language in paragraph (4) of this subsection, the $2 
million limitation is intended to be a benchmark figure and may be adjusted 
upward or downward by the Securities Commissioner based on the marketplace in 
his  <nl>or her<ol> jurisdiction. 
     
  (d)-(j) (No change.) 
 
     
  sec.117.5. Conflicts of Interest and Investment Restrictions. 
 
  (a)-(m) (No change.) 
   
  (n) Program indebtedness. 
 
  (1)  (No change.) 
   
  (2) For programs which own properties financed by [: 
 
  [(A)] loans insured or guaranteed by the full faith and credit of the United 
States government, or of a state or local government, or by an agency or 
instrumentality of any of them, and/or 
   
  [(B)] loans received from any of the foregoing entities, <nl> the following 
requisites apply. Following<ol> [following] the termination of the offering the 
total amount of indebtedness incurred by the program shall at no time exceed the 
sum of 100% of the aggregate purchase price of all properties which have not 
been refinanced, and 100% of the aggregate fair market value of all refinanced 
properties as determined by the lender as of the date of refinancing. 
     
  (3)-(4) (No change.) 
     
  (o) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436688 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
             Chapter 121. Administrative Guidelines for Registration of Oil and 
Gas Programs. 
  
  7 TAC sec.sec.121.3, 121.4, 121.10 
 
  The State Securities Board proposes amendments to sec. s121.3, 121.4, and 
121.10, concerning administrative guidelines for oil and gas programs. The 
amendments reflect provisions that were included in the most recent amendments 
to the North American Securities Administrators' Association, Inc. (NASAA) oil 
and gas guidelines. Other changes have been made to correct minor typographical 
errors in the existing guidelines. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rules are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rules. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rules are in effect the public benefits anticipated as a result of enforcing 
the rules will be continued uniformity with other states in applying standards 
for registration of oil and gas program offerings. The revised suitability 
standards of the proposed amendments will serve to better protect investors in 
oil and gas programs. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the rules 
as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendments are proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendments affect Texas Civil Statutes, Article 581-7. 
 
 
  sec.121.3. Selling of Units and Sales Material. 
 
  (a) (No change.) 
   
  (b) Sales material. 
 
  (1) (No change.) 
   
  (2)  Sales literature. Sales literature, including without limitation, books, 
pamphlets, movies, slides, article reprints, and television and radio 
commercials, sales presentations (including prepared presentations to 
prospective participants at group meetings) and all other advertising used in 
the offer or sale of units shall conform in all applicable aspects to filing, 
disclosure and adequacy requirements currently imposed on the sale of corporate 
securities under applicable regulations. When periodic or other reports, except 
those required by and filed with the Securities and Exchange Commission, 
furnished to participants in prior programs are furnished to prospective 
participants in a program not yet sold, such reports will be treated as sales 
literature subject to the preceding requirements. Statements made in sales 
literature may not conflict with, or significantly modify, risk factors or other 
statements made in the prospectus. Sales literature shall not be so excessive in 
size or amount as to detract from the prospectus, nor shall any sales literature 
be used by securities broker-dealers or agents unless such literature has been 
approved by the sponsor in writing and incorporates, if the Securities 
Commissioner so requests, disclosure of the participant suitability standards 
imposed by sec.121.4 of this title (relating to Suitability of 
<nl>Participants<ol> [the Participant]). 
   
  (3)-(4) (No change.) 
 
       
  sec.121.4. Suitability of <nl>Participants [the Participant]. 
 
  (a) General <nl>Policy<ol> [Standards]. 
 
  (1) <nl>The sponsor shall establish minimum income and net worth standards for 
persons who purchase program interests.<ol> [In view of the limited 
transferability, the relative lack of liquidity, the high risk of loss, and the 
specific tax orientation of many oil and gas programs, suitability standards, 
which are reasonably related to the risks to be undertaken, will be required for 
the participants, and they must be set forth both in the prospectus and in a 
written instrument to be executed by each participant.] 
   
  (2) <nl>The sponsor shall propose minimum income and net worth standards which 
are reasonable given the type of program and the risks associated with the 
purchase of program interests. Programs with greater investor risk shall have 
minimum standards with a substantial net worth requirement. The Securities 
Commissioner shall evaluate the standards proposed by the sponsor when the 
program's application for registration is reviewed. In evaluating the proposed 
standards, the Securities Commissioner may consider the following:<ol> [The 
sponsor and each person selling program interests on behalf of the sponsor or 
program shall make every reasonable effort to assure that those persons being 
offered or sold the program interests are appropriate in light of the 
suitability standards set forth as follows and the investment is consistent with 
the customers' investment objectives and financial situations. In the case of 
sales to fiduciary accounts, the suitability standards may be met by the account 
or by each beneficiary of the account. Where the fiduciary is the donor of the 
funds for investment in the program, the suitability standards may be met by the 
fiduciary.] 
 
  <nl>(A) the program's use of leverage; 
   
  <nl>(B) tax implications; 
   
  <nl>(C) mandatory deferred payments; 
   
  <nl>(D) assessments; 
   
  <nl>(E) potential variances in cash distributions; 
   
  <nl>(F) potential participants; 
   
  <nl>(G) relationship between potential participants and the sponsor; 
   
  <nl>(H) liquidity of program interests; 
   
  <nl>(I) performance of sponsor's prior programs; 
   
  <nl>(J) financial condition of the sponsor; 
   
  <nl>(K) potential transactions between the program and the sponsor; and 
   
  <nl>(L) any other relevant factors. 
     
  [(3) Persons selling program units shall make every reasonable effort to 
assure that the participants specifically understand the following (when 
applicable): 
 
  [(A) the risks involved in the offering, including the speculative nature of 
the investment; 
   
  [(B) the financial hazards involved in the offering, including the risk of 
losing their entire investment; 
   
  [(C)  the lack of liquidity of program units; 
   
  [(D) the restrictions on transferability of program units; 
   
  [(E) the background and qualifications of the sponsor and/or the manager or 
persons responsible for the offering; 
   
  [(F) the tax consequences of the investment; and 
   
  [(G) the unlimited liability associated with working interests or general 
partnership offerings.] 
       
  (b) <nl>Income and Net Worth Standards<ol> [Suitability Standards for Drilling 
Programs]. 
 
  (1) For <nl>income programs or programs that utilize at least 90% of capital 
contributions and funds borrowed (excluding organization and offering expenses) 
in providing completion financing, debt financing, or making other types of oil 
and gas investments, unless<ol> [purposes of determining the participant's 
ability to bear the various risks associated with a limited partnership 
investment, unless the circumstances warrant and] the Securities Commissioner  
<nl>determines that the risks associated with the program would require lower or 
higher standards, each<ol> [establishes another standard, the] participant shall 
have: 
 
  (A) a <nl>minimum annual gross income of $45,000 and a minimum<ol> net worth 
of <nl>$45,000<ol> [$225,000 or more (exclusive of home, furnishings, and 
automobiles)]; or 
   
  (B) a <nl>minimum<ol> net worth of <nl>$150,000<ol> [$60,000 or more 
(exclusive of home, furnishings, and automobiles) and shall have had during the 
last tax year, or estimates that he or she shall have during the current tax 
year, "taxable income" as defined in the Internal Revenue Code of 1986, sec.63, 
as amended, of $60,000 or more, without regard to the investment in the 
program]. 
     
  <nl>(2) For drilling programs which provide the participant with statutory 
protection against unlimited liability, unless the Securities Commissioner 
determines that the risks associated with the program would require lower or 
higher standards, each participant shall have: 
 
  <nl>(A) a minimum annual gross income of $60,000 and a minimum net worth of 
$60,000; or 
   
  <nl>(B)   a minimum net worth of $225,000. 
     
  <nl>(3)<ol>[(2)] For  <nl>drilling programs<ol> [purposes of determining the 
participant's ability to bear the various risks associated with an investment in 
a general partnership or other offering in] which <nl>do not provide<ol> the 
participant <nl>with<ol> [is not provided] statutory protection against 
unlimited liability,  <nl>unless<ol> the Securities Commissioner <nl>determines 
that the risks associated with the program would<ol> [may] require [a] <nl>lower 
or<ol> higher <nl>standards, each participant shall have <ol> [suitability 
standard. The following higher standard will be considered presumptively 
reasonable]: 
 
  (A) <nl>a minimum<ol> [an individual or joint] net worth [with his or her 
spouse] of $225,000 [or more], without regard to the investment in the program, 
<nl>and a minimum annual gross income of $100,000 for the current year and for 
the two previous years; or<ol> [(exclusive of home, home furnishings, and 
automobiles) and a combined "taxable income" as defined in the Internal Revenue 
Code of 1986, sec.63, as amended, of $100,000 or more for the current year and 
for the two previous years;] 
   
  (B) <nl>a minimum<ol> [an individual or joint] net worth [with his or her 
spouse] in excess of $1 million, inclusive of home, home furnishings, and 
automobiles; <nl>or 
   
  (C) <nl>a minimum<ol> [an individual or joint] net worth [with his or her 
spouse in excess] of $500,000 [, exclusive of home, home furnishings, and 
automobiles] ; or 
   
  (D) a <nl>minimum annual gross income<ol> [combined "gross income" as defined 
in the Internal Revenue Code of 1986, sec.61, as amended, in excess] of $200,000 
in the current year and the two previous years. 
     
  <nl>(4) Unless otherwise specified, net worth shall be determined exclusive of 
home, home furnishings, and automobiles. 
   
  <nl>(5) In the case of sales to fiduciary accounts, these minimum standards 
shall be met by the beneficiary, the fiduciary account, or by the donor or 
grantor who directly or indirectly supplies the funds to purchase the program 
interests if the donor or grantor is the fiduciary. 
   
  <nl>(6) The sponsor shall set forth in the final prospectus: 
 
  <nl>(A) the investment objectives of the program; 
   
  <nl>(B) a description of the type of person who might benefit from an 
investment in the program; and 
   
  <nl>(C) the minimum standards imposed on each participant in the program. 
       
  (c) <nl>Determination that Sale to Participant is Suitable and 
Appropriate.<ol> [Suitability Standards for Other Types of Programs. In the case 
of income programs or programs that utilize at least 90% of capital 
contributions and funds borrowed (excluding organization and offering expenses) 
in providing completion financing, debt financing, or making other types of oil 
and gas investments, unless circumstances warrant and the Securities 
Commissioner establishes another standard, the participant shall have:] 
 
  (1) <nl>The sponsor and each person selling program interests on behalf of the 
sponsor or program shall make every reasonable effort to determine that the 
purchase of program interests is a suitable and appropriate investment for each 
participant.<ol> [a net worth of $150,000 or more (exclusive of home, 
furnishings, and automobiles); or] 
   
  (2) <nl>In making this determination, the sponsor or each person selling 
program interests on behalf of the sponsor or program shall ascertain that the 
prospective participant:<ol> [a net worth of $45,000 (exclusive of home, 
furnishings, and automobiles) and a taxable income in the current year of 
$45,000 or more.] 
 
  <nl>(A) meets the minimum income and net worth standard established for the 
program; 
   
  <nl>(B) can reasonably benefit from the program based on the prospective 
participant's overall investment objectives and portfolio structure; 
   
  <nl>(C) is able to bear the economic risk of the investment based on the 
prospective participant's overall financial situation; and 
   
  <nl>(D) has apparent understanding of: 
 
  <nl>(i)<nl> the fundamental risks of the investment; 
   
  <nl>(ii)<nl> the risk that the participant may lose the entire investment; 
   
  <nl>(iii)<nl> the lack of liquidity of program interests; 
   
  <nl>(iv)<nl> the restrictions on transferability of program interests; 
   
  <nl>(v)<nl> the background and qualifications of the sponsor or the person 
responsible for directing and managing the program; 
   
  <nl>(vi)<nl> the tax consequences of the investment; and 
   
  <nl>(vii)<nl> the unlimited liability associated with working interest or 
general partnership offerings. 
       
  <nl>(3)<ol>[(d)]  <nl>The sponsor or each person selling program interests on 
behalf of the sponsor or program will make this determination on the basis of 
information it has obtained from a prospective participant. Relevant information 
for this purpose will include at least the age, investment objectives, 
investment experience, income, net worth, financial situation, and other 
investments of the prospective participant, as well as any other pertinent 
factors. <ol> [Mitigating factors with respect to suitability standards. In the 
presence of mitigating factors, the Securities Commissioner may approve any 
offering with participant suitability standards different from those contained 
in subsections (b) and (c) of this section. The Securities Commissioner may take 
into consideration the identity of the participants, an alternative type of 
suitability standard to be employed, the relationship of the participants to the 
sponsor, the knowledgeability of the participants, the legal, business, 
technical and accounting advice available to and utilized by the participants, 
the marketability of the program units, the prior performance of the sponsor, 
the additional obligations and financial condition of the sponsor, and any other 
factors deemed relevant.] 
   
  <nl>(4) The sponsor or each person selling program interests on behalf of the 
sponsor or program shall maintain records of the information used to determine 
that an investment in program interests is suitable and appropriate for each 
participant. The sponsor or each person selling program interests on behalf of 
the sponsor or program shall maintain these records for at least six years. 
   
  <nl>(5) The sponsor shall disclose in the final prospectus the responsibility 
of the sponsor and each person selling program interests on behalf of the 
sponsor or program to make every reasonable effort to determine that the 
purchase of program interests is a suitable and appropriate investment for each 
participant, based on information provided by the participant regarding the 
participant's financial situation and investment objectives. 
     
  <nl>(d)  Subscription Agreements. 
 
  <nl>(1) The Securities Commissioner may require that each participant complete 
and sign a written subscription agreement. 
   
  <nl>(2) The sponsor may require that each participant make certain factual 
representations in the subscription agreement, including the following: 
 
  <nl>(A) The participant meets the minimum income and net worth standards 
established for the program. 
   
  <nl>(B) The participant is purchasing the program interests for his or her own 
account. 
   
  <nl>(C) The participant has received a copy of the prospectus. 
   
  <nl>(D) The participant acknowledges that the investment is not liquid. 
     
  <nl>(3) A participant must separately sign or initial each representation made 
in the subscription agreement. Except in the case of fiduciary accounts, the 
participant may not grant any person a power of attorney to make such 
representations on his or her behalf. 
   
  <nl>(4)  The sponsor and each person selling program interests on behalf of 
the sponsor or program shall not require a participant to make representations 
in the subscription agreement which are subjective or unreasonable and which: 
 
  <nl>(A) might cause the participant to believe that he or she has surrendered 
rights to which he or she is entitled under federal or state law; or 
   
  <nl>(B) would have the effect of shifting the duties regarding suitability, 
imposed by law on broker-dealers, to the participant. 
     
  <nl>(5) Prohibited representations include, but are not limited to, the 
following: 
 
  <nl>(A) The participant understands or comprehends the risks associated with 
an investment in the program. 
   
  <nl>(B) The investment is a suitable one for the participant. 
   
  <nl>(C) The participant has read the prospectus. 
   
  <nl>(D) In deciding to invest in the program, the participant has relied 
solely on the prospectus, and not on any other information or representations 
from other persons or sources. 
     
  <nl>(6) The sponsor may place the content of the prohibited representations in 
the subscription agreement in the form of disclosures to the participant. The 
sponsor may not place these disclosures in the participant representation 
section of the subscription agreement. 
     
  <nl>(e) Completion of Sale. 
 
  <nl>(1) The sponsor or any person selling program interests on behalf of the 
sponsor or program may not complete a sale of program interests to a participant 
until at least five business days after the date the participant receives a 
final prospectus. 
   
  <nl>(2) The sponsor or the person designated by the sponsor shall send each 
participant a confirmation of his or her purchase. 
     
  <nl>(f) <ol>[(e)] Minimum Investment. <nl>The Securities Commissioner may 
require a minimum initial and subsequent cash investment amount.<ol> [For a 
drilling program, the minimum purchase shall not be less than $5,000, and in the 
event deferred payments are allowed, the initial payment by a participant shall 
not be less than $5,000. For an income or production purchase program, the 
minimum purchase shall not be less than $2,000 and in the event deferred 
payments are allowed, the initial payment by a participant shall not be less 
than $2,000.] 
   
  [(f)  Maintenance of suitability records. The sponsor shall maintain for a 
period of at least six years a record of the information obtained as evidence 
that a participant meets the suitability standards established in connection 
with the offer and sale of the program units. In addition, the sponsor must 
obtain a representation from each participant that he or she has purchased units 
for his, her or their own account or, in lieu of such representation, 
information indicating that the participants for whose account the purchase was 
made met such suitability standards. Such information may be obtained from the 
participant through inclusion of the statement in the written instrument 
described in subsection (a) of this section.] 
 
     
  sec.121.10. Prospectus Disclosure. 
 
  (a) (No change.) 
   
  (b)  Offerings not registered with the Securities and Exchange Commission. 
 
  (1) (No change.) 
   
  (2) At the minimum and in addition to the specific disclosures required by 
sec.sec.121.2-121.8 of this title (relating to Requirements of Sponsor; Selling 
of Units and Sales Material; Suitability of <nl>Participants<ol> [the 
Participant]; Fees, Compensation, and Expenses; Property Transactions with 
Affiliates and Other Restricted Activities; Farmouts, Special Disclosure 
Requirements; and Rights and Obligations of Participants), the following topics 
shall be thoroughly covered in the prospectus: 
 
  (A)-(O) (No change.) 
     
  (3) (No change.) 
     
  (c)  (No change.) 
   
  (d) Demonstration of Guideline Compliance in Program Agreement. The 
requirements and/or provisions of appropriate portions of the following sections 
shall be included in the program agreement: sec.121.1(b) of this title (relating 
to Definitions), sec.121.2(d), (f), (h), (i), and (j) of this title (relating to 
Requirements of Sponsor), sec.121.4(f) of this title (relating to Suitability of 
<nl>Participants<ol> [the Participant]), sec.121. 5(a)-(c) of this title 
(relating to Fees, Compensation, and Expenses), sec.121. 6(a)-(c) of this title 
(relating to Property Transactions with Affiliates and Other Restricted 
Activities), sec.121.8(a)-(g) of this title (relating to Rights and Obligations 
of Participants), and sec.121.9(b)-(g) of this title (relating to Miscellaneous 
Provisions). 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436689 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
             Chapter 123. Administrative Guidelines for Registration of Open-End 
Investment Companies. 
  
  7 TAC sec.123.3 
 
  The State Securities Board proposes an amendment to sec.123.3, to eliminate 
subsection (j) concerning the effective date of the conditional exemption for 
money market funds. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefits anticipated as a result of enforcing 
the rule will be the elimination of obsolete language. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendment is proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendment implements Texas Civil Statutes, Article 581-7. 
 
 
  sec.123.3. Conditional Exemption for Money Market Funds. 
 
  (a)-(i)  (No change.) 
   
  [(j) This Rule takes effect on September 1, 1979. This Rule applies only to 
fees received by the State Securities Board on and after September 1, 1979; fees 
received before that date must be applied for registration of securities under 
sec.35.E without regard to this Rule.] 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436690 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
             Chapter 133. Forms 
  
  7 TAC sec.133.31 
 
  (Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the State Securities 
Board or in the Texas Register office, Room 245, James Earl Rudder Building, 
1019 Brazos Street, Austin.) 
   
  The State Securities Board proposes the repeal of form  s133.31, concerning 
the real estate guidelines cross-reference sheet. Repeal of the current form 
will allow for the simultaneous adoption of the newly revised real estate 
guideline cross-reference sheet adopted by the North American Securities 
Administrators' Association, Inc. (NASAA). 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the repeal is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the repeal. 
 Mr. Northcutt also has determined that for each year of the first five years 
the repeal is in effect the public benefits anticipated as a result of enforcing 
the repeal will be the elimination of a form that is no longer consistent with 
the real estate program guidelines. There will be no effect on small businesses. 
There is no anticipated economic cost to persons who are required to comply with 
the repeal as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The repeal is proposed under Texas Civil Statutes, Article 581, sec. 28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed repeal affects Texas Civil Statutes, Article 581-7. 
 
 
  sec.133.1. Real Estate Guidelines Cross Reference Sheet. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436691 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
       
  The State Securities Board proposes new sec.133.31, concerning the real estate 
guidelines cross-reference sheet. The new form reflects the current real estate 
cross-reference sheet adopted by the North American Securities Administrators' 
Association, Inc. (NASAA). 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefits anticipated as a result of enforcing 
the rule will be that the form will enable securities analysts to more 
efficiently review and process applications for registration of real estate 
programs. There will be no effect on small businesses. There is no anticipated 
economic cost to persons who are required to comply with the rule as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The new rule is proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The new rule affects Texas Civil Statutes, Article 581-7. 
 
 
  sec.133.31. Real Estate Guidelines Cross Reference Sheet. <ol> The State 
Securities Board adopts by reference the real estate guidelines cross-reference 
sheet. This form is available from the State Securities Board, P.O. Box 13167, 
Austin, Texas 78711. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436692 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
         
  7 TAC sec.133.32 
 
  The State Securities Board proposes new sec.133.32, concerning REIT guidelines 
cross-reference sheet. The new form reflects the current REIT guidelines cross-
reference sheet adopted by the North American Securities Administrators' 
Association, Inc. (NASAA). 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefits anticipated as a result of enforcing 
the rule will be that the form will enable securities analysts to more 
efficiently review and process applications for registration of REIT offerings. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the rule as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The new rule is proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The new rule affects Texas Civil Statutes, Article 581-7. 
 
 
  sec.133.32. REIT Guidelines Cross Reference Sheet.  The State Securities Board 
adopts by reference the REIT guidelines cross-reference sheet form. The form is 
available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436693 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
           Chapter 137.  Administrative Guidelines for Regulation of Offers 
  
  7 TAC sec.137.3 
 
  The State Securities Board proposes an amendment to sec.137.3, concerning 
language approved for use on a preliminary prospectus to coordinate disclosures 
required at the state and federal level. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefit anticipated as a result of enforcing 
the rule will be that disclosures required at the state level will be 
coordinated with disclosures required at the federal level. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the rule as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendment is proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendment affects Texas Civil Statutes, Article 581-22. 
 
 
  sec.137.3. Preliminary Prospectus. <ol> The language adopted by [Rule 433 of] 
the Securities and Exchange Commission  <nl>in paragraph (c)(8) of Rule 501 (17 
Code of Federal Regulations sec.229.501) meets the requirements of the Act, 
sec.22.A(4)(b), and <ol>is approved for use on preliminary prospectuses in Texas 
[pursuant to the Act sec.22.A(4)]. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436694 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
           Chapter 139. Exemptions by Rule or Order 
  
  7 TAC sec.139.14 
 
  The State Securities Board proposes an amendment to sec.139.14, concerning 
non-issuer sales. The proposed amendments would correct a cross-reference to 
sec.109.3 and remove a reference to former sec.139.4, concerning private resales 
under Securities and Exchange Commission Rule 144A. The proposed amendments 
would also simplify existing language. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefits anticipated as a result of enforcing 
the rule will be simplification of language, correction of cross-references and 
removal of obsolete references. There will be no effect on small businesses. 
There is no anticipated economic cost to persons who are required to comply with 
the rule as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendments are proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendment affects Texas Civil Statutes, Articles 581-5.T and 581-
7. 
 
 
  sec.139.14. Non-Issuer Sales. <ol> The State Securities Board, pursuant to the 
Securities Act, sec.5.T, exempts from the securities registration requirements 
of the Securities Act, sec.7, the offer and sale of any securities, provided the 
following conditions are met: 
 
  (1)-(3)  (No change.) 
   
  (4) Number of sales. 
 
  (A) <nl>Except as the allowable number of sales may be increased as provided 
in subparagraph (B) of this paragraph, the<ol> [The] owner, together with any 
persons acting in concert with the owner, may make no more than 15 sales in any 
12-month period under and in reliance on this section, exclusive of sales made : 
 
  <nl>(i) to the issuer <nl>;<ol> [, or] 
   
  <nl>(ii)  in compliance with the Act, sec.sec.5.O, 6.F, or 5.H; <nl>or 
   
  <nl>(iii) in compliance with the following: 
 
  <nl>(I) section 109.3 of this title (relating to Sales to Financial<ol> 
Institutions<nl> and Certain Institutional Investors<ol> Under the Securities 
Act, sec.5.H); [sec.139.4 of this title (relating to Private Resales Under SEC 
Rule 144A);] 
   
  <nl>(II) section 139.7 of this title (relating to Sales of Securities to Non-
Residents); or 
   
  <nl>(III) section 139.13 of this title (relating to Resales under SEC Rule 144 
and Rule 145(d)). <ol> [, except as the allowable number of sales may be 
increased as provided in subparagraph (B) of this paragraph.] 
       
  (B) -(C) (No change.) 
     
  (5) (No change.) 
   
  (6) Anti-fraud provisions. Nothing in this section  <nl>relieves<ol> [is 
intended to or should be construed as in any way relieving] owners or persons 
acting on behalf of owners from <nl>the<ol> [an existing] duty to disclose to 
prospective investors information adequate to satisfy the anti-fraud provisions 
of the Act. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas on February 24, 1994. 
 TRD-9436695 
  Denise Voigt Crawford 
 Securities Commissioners 
 State Board of Securities 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
             Chapter 141. Administrative Guidelines for Registration of 
Equipment Programs 
  
  7 TAC sec.141.3 
 
  The State Securities Board proposes amendments to sec.141.3, concerning 
administrative guidelines for equipment programs. The amendments reflect 
provisions that were included in the most recent amendments to the North 
American Securities Administrators' Association, Inc. (NASAA) equipment program 
guidelines. 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rule is in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the rule. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rule is in effect the public benefits anticipated as a result of enforcing 
the rule will be continued uniformity with other states in applying standards 
for registration of equipment program offerings. The revised suitability 
standards of the proposed amendments will serve to better protect investors in 
equipment programs. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the rule as 
proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The amendments are proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed amendments affect Texas Civil Statutes, Article 581-7. 
 
 
  sec.141.3. Suitability of <nl>Participants<ol> [the Participant]. 
 
  (a) <nl>General Policy.  <ol>[Standards to be imposed. Given the limited 
transferability, the relative lack of liquidity, and the degree of risk 
associated with an investment in programs, the sponsor and its selling 
representatives should be cautious concerning the persons to whom such 
securities are marketed. Suitability standards for participants will, therefore, 
be imposed which are reasonable in view of the foregoing and of the type of 
programs to be offered. Sponsors will be required to set forth in the prospectus 
the investment objectives of a program, a description of the type of person who 
could benefit from the program, and suitability standards to be applied in 
marketing it.] 
 
  <nl>(1) The sponsor shall establish minimum income and net worth standards for 
persons who purchase program interests. 
   
  <nl>(2) The sponsor shall propose minimum income and net worth<ol> [The 
suitability] standards <nl>which are reasonable given the type of program and 
the risks associated with the purchase of program interests. Programs with 
greater investor risk shall have minimum standards with a substantial net worth 
requirement. The  <ol>[proposed by the sponsor will be reviewed by the] 
Securities Commissioner <nl>shall evaluate<ol> [in processing the application. 
In determining how restrictive] the standards <nl> proposed by the sponsor when 
the program's application for registration is reviewed. In evaluating the 
proposed standards, the Securities Commissioner may consider the following: 
<ol>[must be, special attention will be given to the existence of such factors 
as] 
 
  <nl>(A) the program's use of <ol>[high] leverage <nl> ; <ol>[,] 
   
  <nl>(B) tax implications <nl>; <ol>[,] 
   
  <nl>(C) mandatory deferred payments; 
   
  <nl>(D) assessments; 
   
  <nl>(E) balloon payment financing<nl>;<ol> [, and] 
   
  <nl>(F) potential variances in <ol> [the uncertainty or lack of] cash 
<nl>distributions; <ol>[flow from program equipment. Programs which involve more 
than ordinary investor risk should emphasize suitability standards involving 
substantial net worth of the participants.] 
   
  <nl>(G) potential participants; 
   
  <nl>(H)  relationship between potential participants and the sponsor; 
   
  <nl>(I)  liquidity of program interests; 
   
  <nl>(J) performance of the sponsor's prior programs; 
   
  <nl>(K) financial condition of the sponsor; 
   
  <nl>(L) potential transactions between the program and the sponsor; and 
   
  <nl>(M) any other relevant factors. 
       
  (b) Income and Net Worth Standards. 
 
  <nl>(1) Unless the Securities Commissioner determines that the risks 
associated with the program would require lower or higher standards, each 
participant shall have: 
 
  <nl>(A) a minimum annual gross income of $45,000 and a minimum net worth of 
$45,000; or 
   
  <nl>(B) a minimum net worth of $150,000. 
     
  <nl>(2) Net worth shall be determined exclusive of home, home furnishings, and 
automobiles. 
   
  <nl>(3) In the case of sales to fiduciary accounts, these minimum standards 
shall be met by the beneficiary, the fiduciary account, or by the donor or 
grantor who directly or indirectly supplies the funds to purchase the program 
interests if the donor or grantor is the fiduciary. 
   
  <nl>(4)  The sponsor shall set forth in the final prospectus: 
 
  <nl>(A) the investment objectives of the program; 
   
  <nl>(B) a description of the type of person who might benefit from an 
investment in the program; and 
   
  <nl>(C) the minimum standards imposed on each participant in the program. 
       
  <nl>(c)<ol>[(b)] <nl>Determination that Sale<ol> [Sales] to<nl> Participant is 
Suitable and <ol>Appropriate [Persons]. 
 
  (1)  The sponsor and each person selling program interests on behalf of the 
sponsor or program shall make every reasonable effort to <nl>determine 
<ol>[assure] that<nl> the purchase of<ol> [those persons being offered or sold 
the] program interests  <nl>is a<ol> [are] suitable <nl> and<ol> [, in light of 
the standards set forth in subsection (a) of this section, and that the program 
interests are] appropriate [for the investors'] investment  <nl>for each 
participant.<ol> [objectives and financial situations. Reasonable effort shall 
include receipt of the executed subscription agreement referred to in subsection 
(d) of this section prior to the sale of program interests to the investor. The 
sponsor or his representative shall have reasonable grounds to believe, prior to 
the sale of program interests, that the investor will benefit from the program 
in view of the investors' overall investment objectives and portfolio 
structure.] 
   
  [(1) The investor shall have the capacity to understand the fundamental 
aspects of the program. That capacity may be evidenced by the following: 
 
  [(A) the nature of employment experience; 
   
  [(B) educational level achieved; 
   
  [(C) access to advice from qualified sources, such as attorney, accountant, 
and tax adviser; and 
   
  [(D) prior experience with investments of a similar nature.] 
     
  (2) <nl>In making this determination, the sponsor or each person selling 
program interests on behalf of the sponsor or program shall ascertain that the 
prospective participant: <ol>[The sponsor or his representatives shall ascertain 
that the investor] 
 
  <nl>(A) meets the minimum income and net worth standards established for the 
program; 
   
  <nl>(B) can reasonably benefit from the program based on the prospective 
participant's overall investment objectives and portfolio structure; 
   
  <nl>(C) is able to bear the economic risk of the investment based on the 
prospective participant's overall financial situation; and 
   
  <nl>(D) has apparent understanding<nl> of<ol>: 
 
  <nl>(i)<ol>[(A)] [of] the fundamental risks [and possible financial hazards] 
of the investment; 
   
  <nl>(ii) the risk that the participant may lose the entire investment; 
   
  <nl>(iii)<ol>[(B)] [of] the lack of liquidity of<nl> program interests<ol> 
[the investment]; 
   
  <nl>(iv) the restrictions on transferability of program interests; 
   
  <nl>(v)<ol>[(C)] the background and qualifications of the sponsor or persons 
responsible for directing and managing the program [that the investment will be 
directed and managed by the sponsor]; and 
   
  <nl>(vi) <ol>[(D)] [of] the tax consequences of the investment. 
       
  <nl>(3)  The sponsor or each person selling program interests on behalf of the 
sponsor or program will make this determination on the basis of information it 
has obtained from a prospective participant. Relevant information for this 
purpose will include at least the age, investment objectives, investment 
experience, income, net worth, financial situation, and other investments of the 
prospective participant, as well as any other pertinent factors. 
   
  <nl>(4) The sponsor or each person selling program interests on behalf of the 
sponsor or program shall maintain records of the information used to determine 
that an investment in program interests is suitable and appropriate for each 
participant. The sponsor or each person selling program interests on behalf of 
the sponsor or program shall maintain these records for at least 6 years. 
   
  <nl>(5) The sponsor shall disclose in the final prospectus the responsibility 
of the sponsor and each person selling program interests on behalf of the 
sponsor or program to make every reasonable effort to determine that the 
purchase of program interests is a suitable and appropriate investment for each 
participant, based on information provided by the participant regarding the 
participant's financial situation and investment objectives. 
     
  [(c) The participant must be able to bear the economic risk of the investment. 
For purposes of determining the ability to bear the economic risk, unless the 
Securities Commissioner approves a lower suitability standard, participants 
shall have a minimum annual gross income of $45,000 and a net worth of $45,000 
or, in the alternative, a net worth of $150, 000. As provided in subsection (a) 
of this section, higher suitability standards may be required. In the case of 
sales to fiduciary accounts, the participant shall mean the fiduciary account 
and/or the donor who directly or indirectly supplies the funds to purchase the 
program interests. Net worth shall be determined exclusive of home, home 
furnishings, and automobiles.] 
   
  (d) <nl>Subscription Agreements. <ol> [Maintenance of records. The sponsor 
shall maintain a record of the information obtained to indicate that a 
participant meets the suitability standards employed in connection with the 
offer and sale of program interests and a representation by the participant that 
the participant is purchasing for its own account or, in lieu of such 
representation, information indicating that the participants for whose account 
the purchase is made meet such suitability standards. Such information shall be 
obtained from the participant through the use of the subscription agreement 
signed by the participant which sets forth the prescribed suitability standards 
in full and in which the participant represents that the participant meets such 
suitability standards and is purchasing for its own account. However, where the 
offering is underwritten or sold by a broker-dealer, the sponsor shall obtain a 
commitment from the broker-dealer to maintain the same record of information 
required of the sponsor.] 
 
  <nl>(1) The Securities Commissioner may require that each participant complete 
and sign a written subscription agreement. 
   
  <nl>(2) The sponsor may require that each participant make certain factual 
representations in the subscription agreement, including the following: 
 
  <nl>(A) The participant meets the minimum income and net worth standards 
established for the program. 
   
  <nl>(B) The participant is purchasing the program interests for his or her own 
account. 
   
  <nl>(C) The participant has received a copy of the prospectus. 
   
  <nl>(D) The participant acknowledges that the investment is not liquid. 
     
  <nl>(3) The participant must separately sign or initial each representation 
made in the subscription agreement. Except in the case of fiduciary accounts, 
the participant may not grant any person a power of attorney to make such 
representations on his or her behalf. 
   
  <nl>(4) The sponsor and each person selling program interests on behalf of the 
sponsor or program shall not require a participant to make representations in 
the subscription agreement which are subjective or unreasonable and which: 
 
  <nl>(A) might cause the participant to believe that he or she has surrendered 
rights to which he or she is entitled under federal or state law; or 
   
  <nl>(B) would have the effect of shifting the duties regarding suitability, 
imposed by law on broker-dealers, to the participant. 
     
  <nl>(5) Prohibited representations include, but are not limited to the 
following: 
 
  <nl>(A) The participant understands or comprehends the risks associated with 
an investment in the program. 
   
  <nl>(B) The investment is a suitable one for the participant. 
   
  <nl>(C) The participant has read the prospectus. 
   
  <nl>(D) In deciding to invest in the program, the participant has relied 
solely on the prospectus, and not on any other information or representations 
from other persons or sources. 
     
  <nl>(6) The sponsor may place the content of the prohibited representations in 
the subscription agreement in the form of disclosures to the participant. The 
sponsor may not place these disclosures in the participant representation 
section of the subscription agreement. 
     
  <nl>(e) Completion of Sale. <ol> [Minimum Investment. The Securities 
Commissioner may require a minimum initial cash purchase. Subsequent transfers 
of program interests shall be limited to not less than such initial minimum cash 
purchase, except for transfers by gifts, inheritance, intra-family transfers, 
family dissolutions, and transfers to affiliates.] 
 
  <nl>(1) The sponsor or any person selling program interests on behalf of the 
sponsor or program may not complete a sale of program interests to a participant 
until at least five business days after the date the participant receives a 
final prospectus. 
   
  <nl>(2) The sponsor or the person designated by the sponsor shall send each 
participant a confirmation of his or her purchase. 
     
  <nl>(f) Minimum Investment. The Securities Commissioner may require a minimum 
initial and subsequent cash investment amount. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436696 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
             Chapter 143. Administrative Guidelines for Registration of Real 
Estate Investment Trusts 
  
  7 TAC sec.sec.143.1-143.23 
 
  (Editor's note: The text of the following sections proposed for repeal will 
not be published. The sections may be examined in the offices of the State 
Securities Board or in the Texas Register office, Room 245, James Earl Rudder 
Building, 1019 Brazos Street, Austin.) 
   
  The State Securities Board proposes the repeal of sec. s143.1-143.23, 
concerning administrative guidelines for registration of real estate investment 
trusts. Repeal of the current guidelines will allow for the simultaneous 
adoption of the newly revised real estate investment trust guidelines adopted by 
the North American Securities Administrators' Association, Inc. (NASAA). 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the repeals are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the repeals. 
 Mr. Northcutt also has determined that for each year of the first five years 
the repeals are in effect the public benefit anticipated as a result of 
enforcing the repeals will be continued uniformity with other states in applying 
standards for the registration of real estate investment trusts. There will be 
no effect on small businesses. There is no anticipated economic cost to persons 
who are required to comply with the repeals as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The repeal is proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The proposed repeal affects Texas Civil Statutes, Article 581-7. 
 
 
  sec.143.1. Introduction. 
 
   
  sec.143.2. Fairness of REIT Offerings. 
 
   
  sec.143.3. Trustees. 
 
   
  sec.143.4. Investment Policy. 
 
   
  sec.143.5. Liability of Shareholders. 
 
   
  sec.143.6. Reports and Meetings. 
 
   
  sec.143.7. Special Meetings. 
 
   
  sec.143.8. Access to Records. 
 
   
  sec.143.9. Distributions. 
 
   
  sec.143.10. Change in Declaration of Trust. 
 
   
  sec.143.11. Termination of REIT. 
 
   
  sec.143.12. Voting of Adviser and Trustee Shares. 
 
   
  sec.143.13. Advisory Contract. 
 
   
  sec.143.14. Adviser Compensation. 
 
   
  sec.143.15. Total Expenses. 
 
   
  sec.143.16. Leverage. 
 
   
  sec.143.17. Minimum Capital. 
 
   
  sec.143.18. Appraisal. 
 
   
  sec.143.19. Indemnification. 
 
   
  sec.143.20. Distribution Reinvestment Plans. 
 
   
  sec.143.21. Other Limitations. 
 
   
  sec.143.22. Appraisal and Compensation. 
 
   
  sec.143.23. Use of Forecasts. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436697 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
         
  7 TAC sec.sec.143.1-143.8 
 
  The State Securities Board proposes new sec.sec.143.1-143.8, concerning 
administrative guidelines for registration of real estate investment trusts. 
These sections reflect the current real estate investment trust guidelines 
adopted by the North American Securities Administrators' Association, Inc. 
(NASAA). 
 Micheal Northcutt, director, Securities Registration Division, has determined 
that for the first five-year period the rules are effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the rules. 
 Mr. Northcutt also has determined that for each year of the first five years 
the rules are in effect the public benefit anticipated as a result of enforcing 
the rules will be continued uniformity with other states in applying standards 
for the registration of real estate investment trusts. The standards of the 
proposed rules will serve to better protect investors in real estate investment 
trust programs. There will be no effect on small businesses. There is no 
anticipated economic cost to persons who are required to comply with the rules 
as proposed. 
 Comments on the proposal may be submitted to Rada Lynn Potts, State Securities 
Board, P.O. Box 13167, Austin, Texas 78711-3167. 
 The new rules are proposed under Texas Civil Statutes, Article 581, sec.28-1. 
Section 28-1 provides the Board with the authority to adopt rules and 
regulations necessary to carry out and implement the provisions of the 
Securities Act, including rules and regulations governing registration 
statements and applications; defining terms; classifying securities, persons, 
and matters within its jurisdiction; and prescribing different requirements for 
different classes. 
 The new rules affect Texas Civil Statutes, Article 581-7. 
 
 
  sec.143.1. Introduction. 
 
  (a) Application. 
 
  (1) These guidelines apply to qualifications and registrations of Real Estate 
Investment Trusts (REITs). 
   
  (2) While applications not conforming to the standards contained herein shall 
be looked upon with disfavor, where good cause is shown, certain guidelines may 
be modified or waived by the Securities Commissioner. 
     
  (b) Definitions. The following words and terms, when used in this chapter, 
shall have the following meanings, unless the context clearly indicates 
otherwise: 
 
  (1) Acquisition expenses-Expenses including but not limited to legal fees and 
expenses, travel and communications expenses, costs of appraisals, nonrefundable 
option payments on property not acquired, accounting fees and expenses, title 
insurance, and miscellaneous expenses related to selection and acquisition of 
properties, whether or not acquired. 
   
  (2) Acquisition fee-The total of all fees and commissions paid by any party to 
any party in connection with making or investing in mortgage loans or the 
purchase, development or construction of property by a REIT. Included in the 
computation of such fees or commissions shall be any real estate commission, 
selection fee, development fee, construction fee, nonrecurring management fee, 
loan fees or points or any fee of a similar nature, however designated. Excluded 
shall be development fees and construction fees paid to persons not affiliated 
with the sponsor in connection with the actual development and construction of a 
project. 
   
  (3)  Administrator-Referred to as "Securities Commissioner" throughout these 
guidelines. 
   
  (4) Adviser-The person responsible for directing or performing the day-to-day 
business affairs of a REIT, including a person to which an adviser subcontracts 
substantially all such functions. To the extent the provisions of these 
guidelines are germane they shall apply to self-administered REITs. 
   
  (5) Affiliate-An affiliate of another person includes any of the following: 
 
  (A) any person directly or indirectly owning, controlling, or holding, with 
power to vote, 10% or more of the outstanding voting securities of such other 
person. 
   
  (B) any person 10% or more of whose outstanding voting securities are directly 
or indirectly owned, controlled, or held, with power to vote, by such other 
person. 
   
  (C) any person directly or indirectly controlling, controlled by, or under 
common control with such other person. 
   
  (D) any executive officer, director, trustee, or general partner of such other 
person. 
   
  (E)  any legal entity for which such person acts as an executive officer, 
director, trustee, or general partner. 
     
  (6) Average invested assets-For any period, the average of the aggregate book 
value of the assets of the trust invested, directly or indirectly, in equity 
interests in, and loans secured by, real estate, before reserves for 
depreciation or bad debts or other similar non-cash reserves computed by taking 
the average of such values at the end of each month during such period. 
   
  (7) Competitive real estate commission-Real estate or brokerage commission 
paid for the purchase or sale of a property which is reasonable, customary, and 
competitive in light of the size, type, and location of such property. 
   
  (8)  Construction fee-A fee or other remuneration for acting as general 
contractor and/or construction manager to construct improvements, supervise, and 
coordinate projects or to provide major repairs or rehabilitation on a REIT's 
property. 
   
  (9) Contract price for the property-The amount actually paid or allocated to 
the purchase, development, construction, or improvement of a property exclusive 
of acquisition fees and acquisition expenses. 
   
  (10) Cross reference sheet-A compilation of the guideline sections, referenced 
to the page of the prospectus and declaration of trust, or other exhibits, and 
justification for any deviation from the guidelines. Such compilation shall 
comply with the provisions set forth on the cross reference sheet. 
   
  (11) Declaration of trust-The declaration of trust, by-laws, certificate, 
articles of incorporation or other governing instrument pursuant to which a REIT 
is organized. 
   
  (12) Development fee-A fee for the packaging of a REIT's property, including 
negotiating and approving plans, and undertaking to assist in obtaining zoning 
and necessary variances and necessary financing for the specific property, 
either initially or at a later date. 
   
  (13) Independent expert-A person with no material current or prior business or 
personal relationship with the adviser or trustees who is engaged to a 
substantial extent in the business of rendering opinions regarding the value of 
assets of the type held by the REIT. 
   
  (14)  Independent trustee(s)-The trustee(s) of a REIT who are not associated 
and have not been associated within the last two years, directly or indirectly, 
with the sponsor or adviser of the REIT. 
 
  (A) A trustee shall be deemed to be associated with the sponsor or adviser if 
he or she: 
 
  (i)  owns an interest in the sponsor, adviser, or any of their affiliates; or 
   
  (ii) is employed by the sponsor, adviser, or any of their affiliates; or 
   
  (iii) is an officer or director of the sponsor, adviser, or any of their 
affiliates; or 
   
  (iv) performs services, other than as a trustee, for the REIT; or 
   
  (v) is a trustee for more than three REITs organized by the sponsor or advised 
the adviser; or 
   
  (vi) has any material business or professional relationship with the sponsor, 
adviser, or any of their affiliates. 
     
  (B) For purposes of determining whether or not the business or professional 
relationship is material, the gross revenue derived by the prospective 
independent trustee from the sponsor and adviser and affiliates shall be deemed 
material per se if it exceeds 5% of the prospective independent trustee's: 
 
  (i)  annual gross revenue, derived from all sources, during either of the last 
two years; or 
   
  (ii) net worth, on a fair market value basis. 
     
  (C) An indirect relationship shall include circumstances in which a trustee's 
spouse, parents, children, siblings, mothers- or fathers-in-law, sons- or 
daughters-in-law, or brothers- or sisters-in-law is or has been associated with 
the sponsor, adviser, any of their affiliates, or the REIT. 
     
  (15) Initial investment-That portion of the initial capitalization of the REIT 
contributed by the sponsor or its affiliates pursuant to sec.143. 2(a) of this 
title (relating to Requirements of Sponsor, Adviser, Trustees, and any 
Affiliate). 
   
  (16) Leverage-The aggregate amount of indebtedness of a REIT for money 
borrowed (including purchase money mortgage loans) outstanding at any time, both 
secured and unsecured. 
   
  (17) Net assets-The total assets (other than intangibles) at cost before 
deducting depreciation or other non-cash reserves less total liabilities, 
calculated at least quarterly on a basis consistently applied. 
   
  (18) Net income-For any period total revenues applicable to such period, less 
the expenses applicable to such period other than additions to reserves for 
depreciation or bad debts or other similar non-cash reserves. If the adviser 
receives an incentive fee, net income, for purposes of calculating total 
operating expenses in sec.143.4(d) of this title (relating to Fees, 
Compensation, and Expenses), shall exclude the gain from the sale of the REIT's 
assets. 
   
  (19) Organization and offering expenses-All expenses incurred by and to be 
paid from the assets of the REIT in connection with and in preparing a REIT for 
registration and subsequently offering and distributing it to the public, 
including, but not limited to, total underwriting and brokerage discounts and 
commissions (including fees of the underwriters' attorneys), expenses for 
printing, engraving, mailing, salaries of employees while engaged in sales 
activity, charges of transfer agents, registrars, trustees, escrow holders, 
depositaries, experts, expenses of qualification of the sale of the securities 
under federal and state laws, including taxes and fees, accountants' and 
attorneys' fees. 
   
  (20) Person-Any natural persons, partnership, corporation, association, trust, 
limited liability company, or other legal entity. 
   
  (21) Prospectus-Shall have the meaning given to that term by the Securities 
Act of 1933, sec.2(10), including a preliminary prospectus; provided, however, 
that such term as used herein shall also include an offering circular as 
described in Rule 256 of the General Rules and Regulations under the Securities 
Act of 1933 or, in the case of an intrastate offering, any document by whatever 
name known, utilized for the purpose of offering and selling securities to the 
public. 
   
  (22) Real estate investment trust ("REIT")-A corporation, trust, association, 
or other legal entity (other than a real estate syndication) which is engaged 
primarily in investing in equity interests in real estate (including fee 
ownership and leasehold interests) or in loans secured by real estate or both. 
   
  (23) Roll-up-A transaction involving the acquisition, merger, conversion, or 
consolidation either directly or indirectly of the REIT and the issuance of 
securities of a roll-up entity. Such term does not include: 
 
  (A) a transaction involving securities of the REIT that have been for at least 
12 months listed on a national securities exchange or traded through the 
National Association of Securities Dealers Automated Quotation National Market 
System; or 
   
  (B) a transaction involving the conversion to corporate, trust, or association 
form of only the REIT if, as a consequence of the transaction there will be no 
significant adverse change in any of the following: 
 
  (i) shareholders' voting rights; 
   
  (ii) the term of existence of the REIT; 
   
  (iii) sponsor or adviser compensation; 
   
  (iv) the REIT's investment objectives. 
       
  (24) Roll-up entity-A partnership, real estate investment trust, corporation, 
trust, or other entity that would be created or would survive after the 
successful completion of a proposed roll-up transaction. 
   
  (25) Shareholders-The registered holders of a REIT's shares. 
   
  (26) Shares-Shares of beneficial interest or of common stock of a REIT of the 
class that has the right to elect the trustees of such REIT. 
   
  (27) Specified asset REIT-A program where, at the time a securities 
registration is ordered effective, at least 75% of the net proceeds from the 
sale of shares are allocable to the purchase, construction, renovation, or 
improvement of individually identified assets. Reserves shall not be included in 
the 75%. 
   
  (28) Sponsor-Any person directly or indirectly instrumental in organizing, 
wholly or in part, a REIT or any person who will control, manage or participate 
in the management of a REIT, and any affiliate of such person. Not included is 
any person whose only relationship with the REIT is as that of an independent 
property manager of REIT assets, and whose only compensation is as such. Sponsor 
does not include wholly independent third parties such as attorneys, 
accountants, and underwriters whose only compensation is for professional 
services. A person may also be deemed a sponsor of the REIT by: 
 
  (A) taking the initiative, directly or indirectly, in founding or organizing 
the business or enterprise of the REIT; either alone or in conjunction with one 
or more other persons; 
   
  (B) receiving a material participation in the REIT in connection with the 
founding or organizing of the business of the REIT, in consideration of services 
or property, or both services and property; 
   
  (C) having a substantial number of relationships and contacts with the REIT; 
   
  (D) possessing significant rights to control REIT properties; 
   
  (E) receiving fees for providing services to the REIT which are paid on a 
basis that is not customary in the industry; or 
   
  (F) providing goods or services to the REIT on a basis which was not 
negotiated at arms length with the REIT. 
     
  (29) Total operating expenses-Aggregate expenses of every character paid or 
incurred by the REIT as determined under generally accepted accounting 
principles, including advisers' fees, but excluding: 
 
  (A) the expenses of raising capital such as organization and offering 
expenses, legal, audit, accounting, underwriting, brokerage, listing, 
registration and other fees, printing and other such expenses, and tax incurred 
in connection with the issuance, distribution, transfer, registration, and stock 
exchange listing of the REIT's shares; 
   
  (B) interest payments; 
   
  (C) taxes; 
   
  (D) non-cash expenditures such as depreciation, amortization, and bad debt 
reserves; 
   
  (E) incentive fees paid in compliance with sec. 143.4(f) of this title 
(relating to Fees, Compensation and Expenses); 
   
  (F)  Acquisition fees, acquisition expenses, real estate commissions on resale 
of property and other expenses connected with the acquisition, disposition, and 
ownership of real estate interests, mortgage loans, or other property, (such as 
the costs of foreclosure, insurance premiums, legal services, maintenance, 
repair, and improvement of property). 
     
  (30) Trustee(s)-The member(s) of the board of trustees or directors or other 
body which manages the REIT. 
   
  (31) Unimproved real property-The real property of a REIT which has the 
following three characteristics: 
 
  (A) an equity interest in real property which was not acquired for the purpose 
of producing rental or other operating income; 
   
  (B) has no development or construction in process on such land; and 
   
  (C) no development or construction on such land is planned in good faith to 
commence on such land within one year. 
 
         
  sec.143.2. Requirements of Sponsor, Adviser, Trustees and any Affiliate. 
 
  (a) Minimum Capital. 
 
  (1) Prior to the initial public offering, the sponsor, or any affiliate, shall 
contribute to the REIT an amount not less than the lesser of: 
 
  (A) 10% of the total net assets upon completion of the offering; or 
   
  (B) $200,000 as an initial investment. 
     
  (2) The sponsor or any affiliate may not sell this initial investment while 
the sponsor remains a sponsor but may transfer the shares to other affiliates. 
     
  (b) Number and Election of Trustees. 
 
  (1) The REIT shall have a minimum of three trustees, each of whom (other than 
a trustee elected to fill the unexpired term of another trustee) is elected by 
the shareholders of the REIT and who shall serve for a term of one year. 
   
  (2) Nothing in this section shall prohibit a trustee from being reelected by 
the shareholders. 
   
  (3) A majority of the trustees shall be independent trustees. 
   
  (4) Independent trustees shall nominate replacements for vacancies amongst the 
independent trustees' positions. 
   
  (5) The trustees may establish such committees they deem appropriate (provided 
the majority of the members of each committee are independent trustees). 
     
  (c) Duties of Trustees. 
 
  (1) At or before the first meeting of the trustees, the declaration of trust 
shall be reviewed and ratified by a majority vote of the trustees and of the 
independent trustees. The prospectus shall disclose that such ratification is 
required. 
   
  (2) The trustees shall establish written policies on investments and borrowing 
and shall monitor the administrative procedures, investment operations and 
performance of the REIT and the adviser to assure that such policies are carried 
out. 
   
  (3) A majority of the independent trustees must approve matters to which this 
section and subsections (a), (f) and (g) of this section, sec.143.4(a)-(g) of 
this title (relating to Fees, Compensation, and Expenses), sec.143.5(e), (h), 
and (j) of this title (relating to Conflicts of Interest and Investment 
Restrictions), and sec.143.6(a), (b)(4), and (g) of this title (relating to 
Rights and Obligations of Shareholders), of these guidelines apply. 
     
  (d) Experience of Trustees. A trustee shall have had a least three years of 
relevant experience demonstrating the knowledge and experience required to 
successfully acquire and manage the type of assets being acquired by the REIT. 
At least one of the independent trustees shall have three years of relevant real 
estate experience. 
   
  (e)  Fiduciary Duty. The trustees and adviser of the REIT shall be deemed to 
be in a fiduciary relationship to the REIT and the shareholders. The trustees of 
the REIT shall also have a fiduciary duty to the shareholders to supervise the 
relationship of the REIT with the adviser. 
   
  (f) Advisory Contract. 
 
  (1) It shall be the duty of the trustees to evaluate the performance of the 
adviser before entering into or renewing an advisory contract. The criteria used 
in such evaluation shall be reflected in the minutes of such meeting. 
   
  (2) Each contract for the services of an adviser entered into by the trustees 
shall have a term of no more than one year. 
   
  (3)  Each advisory contract shall be terminable by a majority of the 
independent trustees, or the adviser on 60 days written notice without cause or 
penalty. In the event of the termination of such contract, the adviser will 
cooperate with the REIT and take all reasonable steps requested to assist the 
trustees in making an orderly transition of the advisory function. 
   
  (4)  The qualifications of the adviser shall be set forth in the prospectus 
relating to the initial public offering of the shares of the REIT and the 
trustees shall determine that any successor adviser possesses sufficient 
qualifications to: 
 
  (A) perform the advisory function for the REIT; and 
   
  (B) justify the compensation provided for in its contract with the REIT. 
       
  (g) Liability and Indemnification. 
 
  (1) The REIT shall not provide for indemnification of the trustees, advisers, 
or affiliates for any liability or loss suffered by the trustees, advisers, or 
affiliates, nor shall it provide that the trustees, advisers, or affiliates be 
held harmless for any loss or liability suffered by the REIT, unless all of the 
following conditions are met: 
 
  (A) The trustees, advisers, or affiliates have determined, in good faith, that 
the course of conduct which caused the loss or liability was in the best 
interests of the REIT. 
   
  (B)  The trustees, advisers, or affiliates were acting on behalf of or 
performing services for the REIT. 
   
  (C) Such liability or loss was not the result of: 
 
  (i) negligence or misconduct by the trustees, excluding the independent 
trustees, advisers, or affiliates; or 
   
  (ii)  gross negligence or willful misconduct by the independent trustees. 
     
  (D) Such indemnification or agreement to hold harmless is recoverable only out 
of REIT net assets and not from shareholders. 
     
  (2)  Notwithstanding anything to the contrary contained in paragraph (1) of 
this subsection, the trustees, advisers, or affiliates and any persons acting as 
a broker-dealer shall not be indemnified by the REIT for any losses, 
liabilities, or expenses arising from or out of an alleged violation of federal 
or state securities laws by such party unless one or more of the following 
conditions are met: 
 
  (A) There has been a successful adjudication on the merits of each count 
involving alleged securities law violations as to the particular indemnitee. 
   
  (B) Such claims have been dismissed with prejudice on the merits by a court of 
competent jurisdiction as to the particular indemnitee. 
   
  (C) A court of competent jurisdiction approves a settlement of the claims 
against a particular indemnitee and finds that indemnification of the settlement 
and the related costs should be made, and the court considering the request for 
indemnification has been advised of the position of the Securities and Exchange 
Commission and of the published position of any state securities regulatory 
authority in which securities of the REIT were offered or sold as to 
indemnification for violations of securities laws. 
     
  (3) The advancement of REIT funds to the trustees, advisers, or affiliates for 
legal expenses and other costs incurred as a result of any legal action for 
which indemnification is being sought is permissible only if all of the 
following conditions are satisfied: 
 
  (A)  The legal action relates to acts or omissions with respect to the 
performance of duties or services on behalf of the REIT. 
   
  (B) The legal action is initiated by a third party who is not a shareholder or 
the legal action is initiated by a shareholder acting in his or her capacity as 
such and a court of competent jurisdiction specifically approves such 
advancement. 
   
  (C) The trustees, advisers, or affiliates undertake to repay the advanced 
funds to the REIT, together with the applicable legal rate of interest thereon, 
in cases in which such trustees, advisers, or affiliates are found not to be 
entitled to indemnification. 
       
  (h) Arbitration Provisions. The declaration of trust may contain provisions 
relating to the use of arbitration as a means of dispute resolution; provided, 
however, it may not require arbitration for allegations involving breach of 
contract, negligence, violations of state or federal securities laws, breach of 
fiduciary duty or other misconduct by the trustees or adviser, nor shall it 
provide for mandatory venue. A declaration of trust which contains arbitration 
provisions shall prominently disclose such fact on the cover page of the 
declaration of trust. Allocation of the cost of arbitration may be made a matter 
for determination in the proceedings. This subsection is not intended to 
prohibit arbitration agreements entered into as a condition for opening or 
maintaining an account with a broker-dealer, who may also be a sponsor. In 
addition, this subsection should not be interpreted to prohibit separate 
arbitration agreements between sponsors and shareholders if the agreements are 
not a condition of making an investment in the REIT. 
 
     
  sec.143.3. Suitability of Shareholders. 
 
  (a) General Policy. 
 
  (1) The sponsor shall establish minimum income and net worth standards for 
persons who purchase shares in a REIT for which there is not likely to be a 
substantial and active secondary market. 
   
  (2) The sponsor shall propose minimum income and net worth standards which are 
reasonable given the type of REIT and the risks associated with the purchase of 
shares. REITs with greater investor risk shall have minimum standards with a 
substantial net worth requirement. The Securities Commissioner shall evaluate 
the standards proposed by the sponsor when the REIT's application for 
registration is reviewed. In evaluating the proposed standards, the Securities 
Commissioner may consider the following: 
 
  (A) the REIT's use of leverage; 
   
  (B)  tax implications; 
   
  (C) balloon payment financing; 
   
  (D)  potential variances in cash distributions; 
   
  (E) potential shareholders; 
   
  (F) relationship among potential shareholders, the sponsor and adviser; 
   
  (G) liquidity of REIT shares; 
   
  (H) prior performance of sponsor and adviser; 
   
  (I) financial condition of the sponsor; 
   
  (J) potential transactions between the REIT and the sponsor and adviser; and 
   
  (K) any other relevant factors. 
       
  (b) Income and Net Worth Standards. 
 
  (1) Unless the Securities Commissioner determines that the risks associated 
with the REIT would require lower or higher standards, shareholders shall have: 
 
  (A) a minimum annual gross income of $45,000 and a minimum net worth of 
$45,000; or 
   
  (B) a minimum net worth of $150,000. 
     
  (2) Net worth shall be determined exclusive of home, home furnishings, and 
automobiles. 
   
  (3) In the case of sales to fiduciary accounts, these minimum standards shall 
be met by the beneficiary, the fiduciary account, or by the donor or grantor who 
directly or indirectly supplies the funds to purchase the shares if the donor or 
grantor is the fiduciary. 
   
  (4) The sponsor shall set forth in the final prospectus: 
 
  (A) the investment objectives of the REIT; 
   
  (B) a description of the type of person who might benefit from an investment 
in the REIT; and 
   
  (C) the minimum standards imposed on each shareholder in the REIT. 
       
  (c) Determination that Sale to Shareholder is Suitable and Appropriate. 
 
  (1) The sponsor and each person selling shares on behalf of the sponsor or 
REIT shall make every reasonable effort to determine that the purchase of shares 
is a suitable and appropriate investment for each shareholder. 
   
  (2) In making this determination, the sponsor or each person selling shares on 
behalf of the sponsor or REIT shall ascertain that the prospective shareholder: 
 
  (A) meets the minimum income and net worth standards established for the REIT; 
   
  (B) can reasonably benefit from the REIT based on the prospective 
shareholder's overall investment objectives and portfolio structure; 
   
  (C) is able to bear the economic risk of the investment based on the 
prospective shareholder's overall financial situation; and 
   
  (D) has apparent understanding of: 
 
  (i)  the fundamental risks of the investment; 
   
  (ii) the risk that the shareholder may lose the entire investment; 
   
  (iii) the lack of liquidity of REIT shares; 
   
  (iv) the restrictions on transferability of REIT shares; 
   
  (v) the background and qualifications of the sponsor or the adviser; and 
   
  (vi) the tax consequences of the investment. 
       
  (3) The sponsor or each person selling shares on behalf of the sponsor or REIT 
will make this determination on the basis of information it has obtained from a 
prospective shareholder. Relevant information for this purpose will include at 
least the age, investment objectives, investment experience, income, net worth, 
financial situation, and other investments of the prospective shareholder, as 
well as any other pertinent factors. 
   
  (4) The sponsor or each person selling shares on behalf of the sponsor or REIT 
shall maintain records of the information used to determine that an investment 
in shares is suitable and appropriate for a shareholder. The sponsor or each 
person selling shares on behalf of the sponsor or REIT shall maintain these 
records for at least six years. 
   
  (5) The sponsor shall disclose in the final prospectus the responsibility of 
the sponsor and each person selling shares on behalf of the sponsor or REIT to 
make every reasonable effort to determine that the purchase of shares is a 
suitable and appropriate investment for each shareholder, based on information 
provided by the shareholder regarding the shareholder's financial situation and 
investment objectives. 
     
  (d) Subscription Agreements. 
 
  (1) The Securities Commissioner may require that each shareholder complete and 
sign a written subscription agreement. 
   
  (2)  The sponsor may require that each shareholder make certain factual 
representations in the subscription agreement, including the following: 
 
  (A) The shareholder meets the minimum income and net worth standards 
established for the REIT. 
   
  (B) The shareholder is purchasing the shares for his or her own account. 
   
  (C) The shareholder has received a copy of the prospectus. 
   
  (D) The shareholder acknowledges that the shares are not liquid. 
     
  (3) The shareholder must separately sign or initial each representation made 
in the subscription agreement. Except in the case of fiduciary accounts, the 
shareholder may not grant any person a power of attorney to make such 
representations on his or her behalf. 
   
  (4)  The sponsor and each person selling shares on behalf of the sponsor or 
REIT shall not require shareholders to make representations in the subscription 
agreement which are subjective or unreasonable and which: 
 
  (A) might cause the shareholder to believe that he or she has surrendered 
rights to which he or she is entitled under federal or state law; or 
   
  (B) would have the effect of shifting the duties regarding suitability, 
imposed by law on broker-dealers, to the shareholders. 
     
  (5)  Prohibited representations include, but are not limited to the following: 
 
  (A) The shareholder understands or comprehends the risks associated with an 
investment in the REIT. 
   
  (B) The investment is a suitable one for the shareholder. 
   
  (C) The shareholder has read the prospectus. 
   
  (D) In deciding to invest in the REIT, the shareholder has relied solely on 
the prospectus, and not on any other information or representations from other 
persons or sources. 
     
  (6) The sponsor may place the content of the prohibited representations in the 
subscription agreement in the form of disclosures to shareholders. The sponsor 
may not place these disclosures in the shareholder representation section of the 
subscription agreement. 
     
  (e)  Completion of Sale. 
 
  (1) The sponsor or any person selling shares on behalf of the sponsor or REIT 
may not complete a sale of shares to a shareholder until at least five business 
days after the date the shareholder receives a final prospectus. 
   
  (2) The sponsor or the person designated by the sponsor shall send each 
shareholder a confirmation of his or her purchase. 
     
  (f) Minimum Investment. The Securities Commissioner may require minimum 
initial and subsequent cash investment amounts. 
 
     
  sec.143.4. Fees, Compensation, and Expenses. 
 
  (a) Introduction. 
 
  (1) The prospectus must fully disclose and itemize all consideration which may 
be received in connection with REIT activities, directly or indirectly, by the 
sponsor, trustees, adviser, and underwriters, what the consideration is for and 
how and when it will be paid. This shall be set forth in one location in tabular 
form. 
   
  (2) The independent trustees will determine, from time to time but at least 
annually, that the total fees and expenses of the REIT are reasonable in light 
of the investment performance of the REIT, its net assets, its net income, and 
the fees and expenses of other comparable unaffiliated REITs. Each such 
determination shall be reflected in the minutes of the meeting of the trustees. 
     
  (b) Organization and Offering Expenses. The organization and offering expenses 
paid in connection with the REIT's formation or the syndication of its shares 
shall be reasonable and shall in no event exceed an amount equal to 15% of the 
proceeds raised in an offering. 
   
  (c) Acquisition Fees and Acquisition Expenses. 
 
  (1)  The total of all acquisition fees and acquisition expenses shall be 
reasonable, and shall not exceed an amount equal to 6.0% of the contract price 
of a property, or in the case of a mortgage loan, 6.0% of the funds advanced. 
   
  (2) Notwithstanding the above, a majority of the trustees (including a 
majority of the independent trustees) not otherwise interested in the 
transaction may approve fees in excess of these limits if they determine the 
transaction to be commercially competitive, fair and reasonable to the REIT. 
     
  (d) Total Operating Expenses. 
 
  (1) The total operating expenses of the REIT shall (in the absence of a 
satisfactory showing to the contrary) be deemed to be excessive if they exceed 
in any fiscal year the greater of 2.0% of its average invested assets or 25% of 
its net income for such year. The independent trustees shall have the fiduciary 
responsibility of limiting such expenses to amounts that do not exceed such 
limitations unless such independent trustees shall have made a finding that, 
based on such unusual and non-recurring factors which they deem sufficient, a 
higher level of expenses is justified for such year. Any such finding and the 
reasons in support thereof shall be reflected in the minutes of the meeting of 
the trustees. 
   
  (2) Within 60 days after the end of any fiscal quarter of the REIT for which 
total operating expenses (for the 12 months then ended) exceeded 2% of average 
invested assets or 25% of net income, whichever is greater, there shall be sent 
to the shareholders of the REIT a written disclosure of such fact, together with 
an explanation of the factors the independent trustees considered in arriving at 
the conclusion that such higher operating expenses were justified. 
   
  (3) In the event the independent trustees do not determine such excess 
expenses are justified, the adviser shall reimburse the REIT at the end of the 
twelve month period the amount by which the aggregate annual expenses paid or 
incurred by the REIT exceed the limitations herein provided. 
     
  (e) Real Estate Commissions on Resale of Property. If an adviser, trustee, 
sponsor, or any affiliate provides a substantial amount of the services in the 
effort to sell the property of the REIT, then that person may receive up to one-
half of the brokerage commission paid but in no event to exceed an amount equal 
to 3% of the contracted for sales price. In addition, the amount paid when added 
to the sums paid to unaffiliated parties in such a capacity shall not exceed the 
lesser of the competitive real estate commission or an amount equal to 6.0% of 
the contracted-for sales price. 
   
  (f) Incentive Fees. 
 
  (1) An interest in the gain from the sale of assets of the REIT, for which 
full consideration is not paid in cash or property of equivalent value, shall be 
allowed provided the amount or percentage of such interest is reasonable. Such 
an interest in gain from the sale of REIT assets shall be considered 
presumptively reasonable if it does not exceed 15% of the balance of such net 
proceeds remaining after payment to shareholders, in the aggregate, of an amount 
equal to 100% of the original issue price of REIT shares, plus an amount equal 
to 6% of the original issue price of the REIT shares per annum cumulative. For 
purposes of this subsection, the original issue price of the REIT shares may be 
reduced by prior cash distributions to shareholders of net proceeds from the 
sale of REIT assets. 
   
  (2) In the case of multiple advisers, advisers, and any affiliate shall be 
allowed incentive fees provided such fees are distributed by a proportional 
method reasonably designed to reflect the value added to REIT assets by each 
respective adviser or any affiliate. 
     
  (g) Adviser Compensation. The independent trustees shall determine from time 
to time and at least annually that the compensation which the REIT contracts to 
pay to the adviser is reasonable in relation to the nature and quality of 
services performed and that such compensation is within the limits prescribed by 
these guidelines. The independent trustees shall also supervise the performance 
of the adviser and the compensation paid to it by the REIT to determine that the 
provisions of such contract are being carried out. Each such determination shall 
be based on the factors set forth below and all other factors such independent 
trustees may deem relevant and the findings of such trustees on each of such 
factors shall be recorded in the minutes of the trustees: 
 
  (1) The size of the advisory fee in relation to the size, composition, and 
profitability of the portfolio of the REIT. 
   
  (2)  The success of the adviser in generating opportunities that meet the 
investment objectives of the REIT. 
   
  (3) The rates charged to other REITs and to investors other than REITs by 
advisers performing similar services. 
   
  (4) Additional revenues realized by the adviser and any affiliate through 
their relationship with the REIT, including loan administration, underwriting or 
broker commissions, servicing, engineering, inspection and other fees, whether 
paid by the REIT or by others with whom the REIT does business. 
   
  (5) The quality and extent of service and advice furnished by the adviser. 
   
  (6) The performance of the investment portfolio of the REIT, including income, 
conservation or appreciation of capital, frequency of problem investments and 
competence in dealing with distress situations. 
   
  (7) The quality of the portfolio of the REIT in relationship to the 
investments generated by the adviser for its own account. 
 
       
  sec.143.5. Conflicts of Interest and Investment Restrictions. 
 
  (a) Sales and Leases to REIT. The REIT shall not purchase property from the 
sponsor, adviser, trustee, or any affiliate thereof, unless a majority of 
trustees (including a majority of independent trustees) not otherwise interested 
in such transaction approve the transaction as being fair and reasonable to the 
REIT and at a price to the REIT no greater than the cost of the asset to such 
sponsor, adviser, trustee, or any affiliate thereof, or if the price to the REIT 
is in excess of such cost, that substantial justification for such excess exists 
and such excess is reasonable. In no event shall the cost of such asset to the 
REIT exceed its current appraised value. 
   
  (b) Sales and Leases to Sponsor, Adviser, Trustees, or any Affiliate. 
 
  (1) A sponsor, adviser, trustee, or any affiliate thereof shall not acquire 
assets from the REIT unless approved by a majority of trustees (including a 
majority of independent trustees), not otherwise interested in such transaction, 
as being fair and reasonable to the REIT. 
   
  (2) A REIT may lease assets to a sponsor, adviser, trustee, or any affiliate 
thereof only if approved by a majority of trustees (including a majority of 
independent trustees), not otherwise interested in such transaction, as being 
fair and reasonable to the REIT. 
     
  (c) Loans. 
 
  (1) No loans may be made by the REIT to the sponsor, adviser, trustee, or any 
affiliate thereof except as provided under paragraph (k)(3) of this section or 
to wholly owned subsidiaries of the REIT. 
   
  (2) The REIT may not borrow money from the sponsor, adviser, trustee, or any 
affiliate thereof, unless a majority of trustees (including a majority of 
independent trustees) not otherwise interested in such transaction approve the 
transaction as being fair, competitive, and commercially reasonable and no less 
favorable to the REIT than loans between unaffiliated parties under the same 
circumstances. 
     
  (d) Investments. 
 
  (1) The REIT shall not invest in joint ventures with the sponsor, adviser, 
trustee, or any affiliate thereof, unless a majority of trustees (including a 
majority of independent trustees) not otherwise interested in such transactions, 
approve the transaction as being fair and reasonable to the REIT and on 
substantially the same terms and conditions as those received by the other joint 
venturers. 
   
  (2) The REIT shall not invest in equity securities unless a majority of 
trustees (including a majority of independent trustees) not otherwise interested 
in such transaction approve the transaction as being fair, competitive, and 
commercially reasonable. 
     
  (e) Statement of Objectives. 
 
  (1)  The prospectus must state specific investment objectives of the REIT. It 
should indicate whether the primary objective is to obtain current income, tax 
benefits, or capital appreciation for its shareholders. 
   
  (2) The independent trustees shall review the investment policies of the REIT 
with sufficient frequency and at least annually to determine that the policies 
being followed by the REIT at any time are in the best interests of its 
shareholders. Each such determination and the basis therefor shall be set forth 
in the minutes of the trustees. 
     
  (f) Multiple Programs. The method for the allocation of the acquisition of 
properties by two or more programs of the same sponsor or adviser seeking to 
acquire similar types of assets shall be reasonable. The method shall be 
described in the prospectus. It shall be the duty of the trustees (including the 
independent trustees) to insure such method is applied fairly to the REIT. 
   
  (g) Other Transactions. All other transactions between the REIT and the 
sponsor, adviser, trustee, or any affiliate thereof, shall require approval by a 
majority of the trustees (including a majority of independent trustees) not 
otherwise interested in such transactions as being fair and reasonable to the 
REIT and on terms and conditions not less favorable to the REIT than those 
available from unaffiliated third parties. 
   
  (h) Appraisal of Real Property. The consideration paid for real property 
acquired by the REIT shall ordinarily be based on the fair market value of the 
property as determined by a majority of the trustees. In cases in which a 
majority of the independent trustees so determine, and in all cases in which 
assets are acquired from the advisers, trustees, sponsors or affiliates thereof, 
such fair market value shall be as determined by an independent expert selected 
by the independent trustees. 
   
  (i) Roll-Up Transaction. 
 
  (1) In connection with a proposed roll-up, an appraisal of all REIT assets 
shall be obtained from a competent, independent expert. If the appraisal will be 
included in a prospectus used to offer the securities of a roll-up entity, the 
appraisal shall be filed with the Securities and Exchange Commission and the 
Securities Commissioner as an exhibit to the registration statement for the 
offering. Accordingly, an issuer using the appraisal shall be subject to 
liability for violation of the Securities Act of 1933, sec.11, and comparable 
provisions under Texas law for any material misrepresentations or material 
omissions in the appraisal. REIT assets shall be appraised on a consistent 
basis. The appraisal shall be based on an evaluation of all relevant 
information, and shall indicate the value of the REIT's assets as of a date 
immediately prior to the announcement of the proposed roll-up transaction. The 
appraisal shall assume an orderly liquidation of REIT assets over a 12-month 
period. The terms of the engagement of the independent expert shall clearly 
state that the engagement is for the benefit of the REIT and its investors. A 
summary of the independent appraisal, indicating all material assumptions 
underlying the appraisal, shall be included in a report to the investors in 
connection with a proposed roll-up. 
   
  (2) In connection with a proposed roll-up, the person sponsoring the roll-up 
shall offer to shareholders who vote "no" on the proposal the choice of: 
 
  (A) accepting the securities of the roll-up entity offered in the proposed 
roll-up; or 
   
  (B) one of the following: 
 
  (i)  remaining as shareholders of the REIT and preserving their interests 
therein on the same terms and conditions as existed previously; or 
   
  (ii)  receiving cash in an amount equal to the shareholders' pro-rata share of 
the appraised value of the net assets of the REIT. 
       
  (3) The REIT shall not participate in any proposed roll-up which would result 
in shareholders having democracy rights in the roll-up entity that are less than 
those provided for under sec.143.6(a)-(e) of this title (relating to Rights and 
Obligations of Shareholders). 
   
  (4) The REIT shall not participate in any proposed roll-up which includes 
provisions which would operate to materially impede or frustrate the 
accumulation of shares by any purchaser of the securities of the roll-up entity 
(except to the minimum extent necessary to preserve the tax status of the roll-
up entity). The REIT shall not participate in any proposed roll-up which would 
limit the ability of an investor to exercise the voting rights of its securities 
of the roll-up entity on the basis of the number of REIT shares held by that 
investor. 
   
  (5)  The REIT shall not participate in any proposed roll-up in which 
investors' rights of access to the records of the roll-up entity will be less 
than those provided for under sec.143.6(e) of this title (relating to Rights and 
Obligations of Shareholders). 
   
  (6) The REIT shall not participate in any proposed roll-up in which any of the 
costs of the transaction would be borne by the REIT if the roll-up is not 
approved by the shareholders. 
     
  (j) Leverage. The prospectus shall include an explanation of the borrowing 
policies of the REIT. The aggregate borrowings of the REIT, secured and 
unsecured, shall be reasonable in relation to the net assets of the REIT and 
shall be reviewed by the trustees at least quarterly. The maximum amount of such 
borrowings in relation to the net assets shall, in the absence of a satisfactory 
showing that higher level of borrowing is appropriate, not exceed 300%. Any 
excess in borrowing over such 300% level shall be approved by a majority of the 
independent trustees and disclosed to shareholders in the next quarterly report 
of the REIT, along with justification for such excess. 
   
  (k) Other Limitations. The REIT may not: 
 
  (1) invest more than 10% of its total assets in unimproved real property or 
mortgage loans on unimproved real property; 
   
  (2) invest in commodities or commodity future contracts. Such limitation is 
not intended to apply to future contracts, when used solely for hedging purposes 
in connection with the REIT's ordinary business of investing in real estate 
assets and mortgages; 
   
  (3) invest in or make mortgage loans unless an appraisal is obtained 
concerning the underlying property except for those loans insured or guaranteed 
by a government or government agency. In cases in which a majority of the 
independent trustees so determine, and in all cases in which the transaction is 
with the adviser, trustees, sponsor, or affiliates thereof, such an appraisal 
must be obtained from an independent expert concerning the underlying property. 
This appraisal shall be maintained in the REIT's records for at least five 
years, and shall be available for inspection and duplication by any shareholder. 
In addition to the appraisal, a mortgagee's or owner's title insurance policy or 
commitment as to the priority of the mortgage or the condition of the title must 
be obtained. Further, the adviser and trustees shall observe the following 
policies in connection with investing in or making mortgage loans: 
 
  (A) The REIT shall not invest in real estate contracts of sale, otherwise 
known as land sale contracts, unless such contracts of sale are in recordable 
form and appropriately recorded in the chain of title. 
   
  (B) The REIT shall not make or invest in mortgage loans, including 
construction loans, on any one property if the aggregate amount of all mortgage 
loans outstanding on the property, including the loans of the REIT, would exceed 
an amount equal to 85% of the appraised value of the property as determined by 
appraisal unless substantial justification exists because of the presence of 
other underwriting criteria. For purposes of this paragraph, the "aggregate 
amount of all mortgage loans outstanding on the property, including the loans of 
the REIT," shall include all interest (excluding contingent participation in 
income and/or appreciation in value of the mortgaged property), the current 
payment of which may be deferred pursuant to the terms of such loans, to the 
extent that deferred interest on each loan exceeds 5% per annum of the principal 
balance of the loan. 
   
  (C) The REIT shall not make or invest in any mortgage loans that are 
subordinate to any mortgage or equity interest of the adviser, trustees, 
sponsors or any affiliate of the REIT. 
     
  (4) issue redeemable equity securities; 
   
  (5) issue debt securities unless the historical debt service coverage (in the 
most recently completed fiscal year) as adjusted for known changes is sufficient 
to properly service that higher level of debt; 
   
  (6) issue options or warrants to purchase its shares to the adviser, trustees, 
sponsors, or any affiliate thereof except on the same terms as such options or 
warrants are sold to the general public. The REIT may issue options or warrants 
to persons not so connected with the REIT but not at exercise prices less than 
the fair market value of such securities on the date of grant and for 
consideration (which may include services) that in the judgement of the 
independent trustees, has a market value less than the value of such option on 
the date of grant. Options or warrants issuable to the adviser, trustees, 
sponsors, or any affiliate thereof shall not exceed an amount equal to 10% of 
the outstanding shares of the REIT on the date of grant of any options or 
warrants; or 
   
  (7) issue its shares on a deferred payment basis or other similar arrangement. 
 
       
  sec.143.6. Rights and Obligations of Shareholders. 
 
  (a)  Meetings. 
 
  (1) There shall be an annual meeting of the shareholders of the REIT upon 
reasonable notice and within a reasonable period (not less than 30 days) 
following delivery of the annual report. The trustees, including the independent 
trustees, shall be required to take reasonable steps to insure that this 
requirement is met. 
   
  (2) Special meetings of the shareholders may be called by the chief executive 
officer, by a majority of the trustees, or by a majority of the independent 
trustees, and shall be called by an officer of the REIT upon written request of 
shareholders holding in the aggregate not less than 10% of the outstanding 
shares of the REIT entitled to vote at such meeting. Upon receipt of a written 
request, either in person or by mail, stating the purpose(s) of the meeting, the 
sponsor shall provide all shareholders within 10 days after receipt of said 
request, written notice, either in person or by mail, of a meeting and the 
purpose of such meeting to be held on a date not less than 15 nor more than 60 
days after the distribution of such notice, at a time and place specified in the 
request, or if none is specified, at a time and place convenient to 
shareholders. 
     
  (b)  Voting Rights of Shareholders 
 
  (1) A public offering of equity securities of a REIT other than voting shares 
will be looked upon with disfavor. 
   
  (2) The voting rights per share of equity securities of the REIT (other than 
the publicly held equity securities of the REIT) sold in a private offering 
shall not exceed voting rights which bear the same relationship to the voting 
rights of the publicly held shares of the REIT as the consideration paid to the 
REIT for each privately offered REIT share bears to the book value of each 
outstanding publicly held share. 
   
  (3) The declaration of trust must provide that a majority of the then-
outstanding shares may, without the necessity for concurrence by the trustees, 
vote to: 
 
  (A) amend the declaration of trust; 
   
  (B) terminate the REIT; and 
   
  (C) remove the trustees. 
     
  (4) The declaration of trust must provide that a majority of shareholders 
present in person or by proxy at an annual meeting at which a quorum is present, 
may, without the necessity for concurrence by the trustees, vote to elect the 
trustees. A quorum shall be 50% of the then-outstanding shares. 
   
  (5) Without concurrence of a majority of the outstanding shares, the trustees 
may not: 
 
  (A) amend the declaration of trust, except for amendments which do not 
adversely affect the rights, preferences and privileges of shareholders 
including amendments to provisions relating to trustee qualifications, fiduciary 
duty, liability and indemnification, conflicts of interest, investment policies 
or investment restrictions; 
   
  (B) sell all or substantially all of the REIT's assets other than in the 
ordinary course of the REIT's business or in connection with liquidation and 
dissolution; 
   
  (C) cause the merger or other reorganization of the REIT; or 
   
  (D) dissolve or liquidate the REIT, other than before the initial investment 
in property. 
     
  (6) With respect to shares owned by the adviser, the trustees, or any 
affiliate, neither the adviser, nor the trustees, nor any affiliate may vote or 
consent on matters submitted to the shareholders regarding the removal of the 
adviser, trustees, or any affiliate or any transaction between the REIT and any 
of them. In determining the requisite percentage in interest of shares necessary 
to approve a matter on which the adviser, trustees, and any affiliate may not 
vote or consent, any shares owned by any of them shall not be included. 
     
  (c) Liability of Shareholders. The declaration of trust shall provide that: 
 
  (1) The shares of the REIT shall be non-assessable by the REIT whether a 
trust, corporation, or other entity. 
   
  (2) The shareholders of the REIT which is not a corporation shall not be 
personally liable on account of any of the contractual obligations undertaken by 
the REIT. 
   
  (3)  All written contracts to which the REIT, which is not a corporation, is a 
party shall include a provision that the shareholder shall not be personally 
liable thereon. 
     
  (d) Reports. 
 
  (1) The declaration of trust shall provide that the REIT shall cause to be 
prepared and mailed or delivered to each shareholder as of a record date after 
the end of the fiscal year and each holder of other publicly held securities of 
the REIT within 120 days after the end of the fiscal year to which it relates an 
annual report for each fiscal year ending after the initial public offering of 
its securities which shall include: 
 
  (A) financial statements prepared in accordance with generally accepted 
accounting principles which are audited and reported on by independent certified 
public accountants; 
   
  (B) the ratio of the costs of raising capital during the period to the capital 
raised; 
   
  (C) the aggregate amount of advisory fees and the aggregate amount of other 
fees paid to the adviser and any affiliate of the adviser by the REIT and 
including fees or charges paid to the adviser and any affiliate of the adviser 
by third parties doing business with the REIT; 
   
  (D) the total operating expenses of the REIT, stated as a percentage of 
average invested assets and as a percentage of its net income; 
   
  (E) a report from the independent trustees that the policies being followed by 
the REIT are in the best interests of its shareholders and the basis for such 
determination; and 
   
  (F) separately stated, full disclosure of all material terms, factors, and 
circumstances surrounding any and all transactions involving the REIT, trustees, 
advisers, sponsors, and any affiliate thereof occurring in the year for which 
the annual report is made. Independent trustees shall be specifically charged 
with a duty to examine and comment in the report on the fairness of such 
transactions. 
     
  (2) The trustees, including the independent trustees, shall be required to 
take reasonable steps to insure that the above requirements are met. 
     
  (e) Access to Records. Any shareholder and any designated representative 
thereof shall be permitted access to all records of the REIT at all reasonable 
times, and may inspect and copy any of them. Inspection of the REIT books and 
records by the Securities Commissioner shall be provided upon reasonable notice 
and during normal business hours. The declaration of trust shall include the 
following provisions regarding access to the list of shareholders: 
 
  (1) An alphabetical list of the names, addresses, and telephone numbers of the 
shareholders of the REIT along with the number of shares held by each of them 
(the "shareholder list") shall be maintained as part of the books and records of 
the REIT and shall be available for inspection by any shareholder or the 
shareholder's designated agent at the home office of the REIT upon the request 
of the shareholder. 
   
  (2) The shareholder list shall be updated at least quarterly to reflect 
changes in the information contained therein. 
   
  (3) A copy of the shareholder list shall be mailed to any shareholder 
requesting the shareholder list within 10 days of the request. The copy of the 
shareholder list shall be printed in alphabetical order, on white paper, and in 
a readily readable type size (in no event smaller than 10-point type). A 
reasonable charge for copy work may be charged by the REIT. 
   
  (4) The purposes for which a shareholder may request a copy of the shareholder 
list include, without limitation, matters relating to shareholders' voting 
rights under the REIT agreement, and the exercise of shareholders' rights under 
federal proxy laws. 
   
  (5) If the adviser or trustees of the REIT neglects or refuses to exhibit, 
produce, or mail a copy of the shareholder list as requested, the adviser, and 
the trustees shall be liable to any shareholder requesting the list for the 
costs, including attorneys' fees, incurred by that shareholder for compelling 
the production of the shareholder list, and for actual damages suffered by any 
shareholder by reason of such refusal or neglect. It shall be a defense that the 
actual purpose and reason for the requests for inspection or for a copy of the 
shareholder list is to secure such list of shareholders or other information for 
the purpose of selling such list or copies thereof, or of using the same for a 
commercial purpose other than in the interest of the applicant as a shareholder 
relative to the affairs of the REIT. The REIT may require the shareholder 
requesting the shareholder list to represent that the list is not requested for 
a commercial purpose unrelated to the shareholder's interest in the REIT. The 
remedies provided hereunder to shareholders requesting copies of the shareholder 
list are in addition to, and shall not in any way limit, other remedies 
available to shareholders under federal law, or the laws of any state. 
     
  (f) Repurchase of Shares. Ordinarily, the REIT is not obligated to repurchase 
any of the shares. However, the REIT is not precluded from voluntarily 
repurchasing the shares if such repurchase does not impair the capital or 
operations of the REIT. The REIT may have excess share provisions that provide 
for mandatory redemption. The sponsor, adviser, trustees, or affiliates are 
prohibited from receiving a fee on the repurchase of the shares by the REIT. 
   
  (g) Distribution Reinvestment Plans. All distribution reinvestment plans 
shall, at the minimum, provide for the following: 
 
  (1)  All material information regarding the distribution to the shareholder 
and the effect of reinvesting such distribution, including the tax consequences 
thereof, shall be provided to the shareholder at least annually. 
   
  (2)  Each shareholder participating in the plan shall have a reasonable 
opportunity to withdraw from the plan at least annually after receipt of the 
information required in paragraph (1) of this subsection. 
     
  (h)  Distributions. The declaration of trust shall state the manner in which 
distributions to shareholders are to be determined. 
   
  (i) Distributions in Kind. Distributions in kind shall not be permitted, 
except for: 
 
  (1)  distributions of readily marketable securities; 
   
  (2) distributions of beneficial interests in a liquidating trust established 
for the dissolution of the REIT and the liquidation of its assets in accordance 
with the terms of the declaration of trust; or 
   
  (3) distributions of in-kind property which meet all of the following 
conditions: 
 
  (A) The trustees advise each shareholder of the risks associated with direct 
ownership of the property. 
   
  (B) The trustees offer each shareholder the election of receiving in-kind 
property distributions. 
   
  (C) The trustees distribute in-kind property only to those shareholders who 
accept the trustee's offer. 
 
         
  sec.143.7. Disclosure and Marketing. 
 
  (a) Sales Material. Sales material, including without limitation, books, 
pamphlets, movies, slides, article reprints, television and radio commercials, 
materials prepared for broker/dealer use only, sales presentations (including 
prepared presentations to prospective shareholders at group meetings) and all 
other advertising used in the offer or sale of units shall conform to filing, 
disclosure, and adequacy requirements under any applicable state regulations. 
Statements made in sales material communicated directly or indirectly to the 
public may not conflict with, or modify risk factors or other statements made in 
the prospectus. 
   
  (b) Prospectus and its Contents. 
 
  (1) Prospectus. A prospectus which is not part of a registration statement 
declared effective by the Securities and Exchange Commission pursuant to the 
Securities Act of 1933 shall generally conform to the disclosure requirements 
which would apply if the offering were so registered. The format and information 
requirements of applicable Guide(s) promulgated by the Securities and Exchange 
Commission shall be followed, with appropriate adjustments made for the 
different business of the REIT. 
   
  (2) Prohibited Representations. 
 
  (A) In connection with the offering and sale of shares in a REIT, neither the 
sponsor(s) nor the underwriter(s) may, in writing or otherwise, directly or 
indirectly, represent or imply that the Securities Commissioner has approved the 
merits of the investment or any aspects thereof. 
   
  (B) Any reference to the REIT's compliance with these guidelines or any 
provisions herein which connotes or implies compliance shall not be allowed. 
     
  (3)  Forecasts and Projections. 
 
  (A) Neither the prospectus nor any sales material communicated directly or 
indirectly to the public shall contain a quantitative estimate of a REIT's 
anticipated economic performance or anticipated return to participants, in the 
form of investment objectives, cash distributions, tax benefits or otherwise, 
except as permitted by this paragraph of these guidelines. 
   
  (B) The presentation of predicted future results of operations of programs 
shall be permitted but not required for specified asset REITs and shall be 
prohibited for all other REITs. The cover of the prospectus must contain in bold 
face language one of the following statements: 
 
  (i) for specified asset REITs with forecasts: "Forecasts are contained in this 
prospectus. Any representation to the contrary and any predictions, written or 
oral, which do not conform to that contained in the prospectus shall not be 
permitted"; or 
   
  (ii)  for all other REITs: "The use of forecasts in this offering is 
prohibited. Any representations to the contrary and any predictions, written or 
oral, as to the amount or certainty of any present or future cash benefit or tax 
consequence which may flow from an investment in this program is not permitted." 
     
  (C) Content of Forecasts. Forecasts for specified asset REITs may be included 
in the prospectus and sales material of the REIT only if they comply with all of 
the following requirements: 
 
  (i) Generally, forecasts shall be realistic in their predictions and shall 
clearly identify the assumptions made with respect to all material features of 
presentation. Forecasts should be examined by an independent certified public 
accountant in accordance with the Guide for Prospective Financial Statements and 
the Statement on Standards for Accountant's Services on Prospective Financial 
Information as promulgated by the American Institute of Certified Public 
Accountants. The report of the independent certified public accountant must be 
included in the prospectus. 
   
  (ii) If any part of the forecast appears in the sales material, the entire 
forecast must be presented. 
   
  (iii) Forecasts shall generally be for a period equivalent to the anticipated 
holding period for REIT assets. Forecasts which do not extend through the 
expected term of the REIT's life must show the effects of a hypothetical 
liquidation of program assets under good and bad conditions. Yield information 
may not be presented for forecasts which do not extend through the expected term 
of the REIT's life. 
   
  (iv) Forecasts shall disclose possible undesirable tax consequences of an 
early sale of program assets, such as depreciation recapture, the loss of prior 
year tax credits, or the possible failure to generate sufficient cash from the 
disposition to pay the associated tax liabilities. 
   
  (v) In computing any rate of return or yield to investors, no unrealized gains 
or value shall be included. 
         
  (c) The Securities Commissioner may require that the declaration of trust be 
given to prospective shareholders. 
 
     
  sec.143.8. Miscellaneous. 
 
  (a) Provisions of the Declaration of Trust. The requirements and/or provisions 
of appropriate portions of the following sections shall be included in the 
declaration of trust: sec.143.1(b) of this title (relating to Definitions); 
sec.143.2(a)-(h) of this title (relating to Requirements of Sponsor, Adviser, 
Trustees, and any Affiliate); sec.143.3(b), (c) and (f) of this title (relating 
to Suitability of Shareholders); sec.143.4(a)(2) and (c)-(g) of this title 
(relating to Fees, Compensation, and Expenses); sec.143.5(a)-(d), (e)(2) and 
(g)-(k) of this title (relating to Conflicts of Interest and Investment 
Restrictions); and sec.143. 6(a)-(i) of this title (relating to Rights and 
Obligations of Shareholders). 
   
  (b) Amendments and Supplements. A marked copy of all amendments and 
supplements to an application shall be filed with the Securities Commissioner as 
soon as the amendment or supplement is available. 
   
  (c)  Cross-Reference Sheet Requirement. The cross-reference sheet shall be 
included with the application for registration. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436698 
  Denise Voigt Crawford 
 Securities Commissioner 
 State Securities Board 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 305-8300 
         
                 
  TITLE 10. COMMUNITY DEVELOPMENT 
 Part V. Texas Department of Commerce 
  Chapter 190. Procedures of the Board 
  
  10 TAC sec.190.3, sec.190.8 
 
  The Texas Department of Commerce proposes an amendment to sec.190.3 which 
requires the policy board to adopt rules to administer department programs, by 
adding new language to existing sec.190.3(d) concerning the making of the policy 
board agenda and new sec.190.8 concerning petitioning for rule procedure. 
 Proposed new sec.190.8 describes how the public may petition the department for 
rules as authorized by Texas Government Code, sec.2001.21. The proposed new 
section requires the department to provide written notice to the petitioner of 
its decision to either initiate or deny a rulemaking proceeding. 
 Proposed new language in sec.190.3(d) clarifies that policy board members may 
submit items for inclusion in the policy board's meeting agenda. 
 Sedora Jefferson, general counsel, Texas Department of Commerce, has determined 
that for the first five-year period the sections are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the sections. 
 Ms. Jefferson also has determined that for each year of the first five years 
the sections are in effect the public benefit anticipated as a result of 
enforcing the sections will be the facilitation of the development and 
implementation of effective state and local systems for managing job training, 
employment and related programs in this state. 
 There is no anticipated economic cost to persons or entities who are required 
to comply with the sections as proposed. 
 Comments on the proposal may be submitted, in duplicate, to Sedora Jefferson, 
General Counsel, Texas Department of Commerce, P.O. Box 12728, Austin, Texas 
78711, within 30 days of the publication of the proposed rules. 
 The amendment and new rule are proposed under the Texas Government Code, 
sec.481.0044(a), which authorizes the policy board to adopt rules necessary for 
the administration of department programs; and, Texas Civil Statutes, Article 
4413(52), sec.5A, (as amended by Senate Bill 405, sec.29, 73rd Legislature), 
which provide the policy board of the Texas Department of Commerce with the 
authority to adopt necessary rules for the implementation and management of the 
job training program. The rules are also proposed under the authority of the 
Administrative Procedure Act (Texas Government Code, Chapter 2001), which 
mandates the rulemaking procedures for state agencies. 
 The following statutes are affected by the proposed amendment to sec.190.3: 
Texas Labor Code, sec.301.001, et seq; Texas Civil Statutes, Article 4413(52), 
sec.5A (Acts 1993, 73rd Legislature, Chapter 986, sec.29, effective September 1, 
1993). 
 
 
  sec.190.3. Public Meetings. 
 
  (a)-(c) (No change.) 
   
  (d) Agenda. The agenda shall consist of agenda items prepared by department 
staff and approved by the chairman prior to the policy board meeting<nl>, and 
agenda items submitted by policy board members<ol>. Notice of all items to be 
considered shall be filed with the Secretary of State's Office as required by 
statute. 
   
  (e)-(i) (No change.) 
 
     
  sec.190.8. Petition for Rulemaking Procedure. 
 
  (a) An interested person may request the department to adopt a rule by 
submitting a written petition to the executive director. Such petitions will be 
deemed sufficient if they contain: 
 
  (1) the exact wording of the new, changed or amended rule being proposed, with 
new language underlined, and deleted language bracketed; 
   
  (2) specific reference to the existing rule which is proposed to be changed, 
amended or repealed; and 
   
  (3) justification for the proposed action with sufficient detail to inform the 
policy board and any other interested person of the reasons and arguments on 
which the petitioner is relying. 
     
  (b) The department shall send written notification to the petitioning party of 
its decision to: 
 
  (1) deny the petition, stating the department's reasons for such denial; or 
   
  (2) initiate a rulemaking proceeding before the policy board, indicating the 
date, time and place of such proceeding. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436721 
  Deborah C. Kastrin 
 Acting Executive Director 
 Texas Department of Commerce 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 320-9401 
         
                   
  TITLE 22. EXAMINING BOARDS 
 Part VI. Texas State Board of Registration for Professional Engineers 
  Chapter 131. Practice and Procedure 
  
  Education 
 
  22 TAC sec.131.92 
 
  The Texas State Board of Registration for Professional Engineers proposes an 
amendment to sec.131.92, concerning foreign degrees. The section is amended to 
permit applicants who qualify for registration under subsection (a)(1) to 
request an exemption from the evaluation requirement of a foreign degree(s) by a 
commercial evaluation service if the applicant submits substantiating evidence 
and documentary proof that the degree(s) meets the requirements of 
sec.131.91(a)(3) which is satisfactory to the executive director. 
 Charles E. Nemir, P.E., executive director, has determined that for the first 
five-year period the section is in effect there will be no fiscal implications 
for state or local government as a result of enforcing or administering the 
section. 
 Mr. Nemir also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the establishment of a more sound basis for evaluating 
educational qualifications for professional registration. There will be no 
effect on small businesses. There is no anticipated economic cost to persons who 
are required to comply with the section as proposed. 
 Comments on the proposal may be submitted to Charles E. Nemir, P.E., Executive 
Director, Texas State Board of Registration for Professional Engineers, P.O. 
Drawer 18329, Austin, Texas 78760. 
 The amendment is proposed under Texas Civil Statutes, Article 3271a, sec.8(a) , 
which provide the board with the authority to make and enforce all rules and 
regulations necessary for the performance of its duties. 
 
 
  sec.131.92. Foreign Degrees. 
 
  (a) An individual who has completed his undergraduate engineering education 
and received the equivalent of a baccalaureate degree from an institution other 
than one located in the United States and its possessions must apply under the 
Texas Engineering Practice Act (the Act), sec.12(a)(2), except as follows. 
 
  (1)-(3) (No change.) 
     
  (b) Applicants having foreign degree(s), with the exception of those covered 
by subsection (a)(2) of this section, must furnish at their own expense an 
evaluation of their foreign degree(s) from a commercial evaluation service 
selected by the board. The degree evaluation must be sent directly to the board 
by the evaluation service. Applicants must submit with their applications 
complete certified copies or documented proof of all engineering degrees, 
diplomas, certificates, etc., showing the type of engineering degree awarded 
(B.S., M.S., Ph.D.), date awarded, branch of engineering, dates attended, and 
scores, grades, or honors awarded. Documents written in languages other than 
English shall be accompanied by a certified English translation. <nl>Applicants 
covered by subsection (a)(1) of this section may request exemption from the 
requirement for evaluation of the foreign degree(s) from a commercial evaluation 
service by submitting other substantiating evidence and documentary proof that 
the degree(s) meets the requirements of sec.131.91(a)(3) of this title (relating 
to Educational Requirements for Registration) which is satisfactory to the 
executive director. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436680 
  Charles E. Nemir, P.E. 
 Executive Director 
 Texas State Board of Registration for Professional Engineers 
    Proposed date of adoption: April 20, 1994 
 For further information, please call: (512) 440-7723 
         
                 Part XXIV. Texas Board of Veterinary Medical Examiners 
  Chapter 571. Licensing 
  
  Examinations 
 
  22 TAC sec.571.18 
 
  The Texas Board of Veterinary Medical Examiners proposes an amendment to 
sec.571.18, concerning Provisional Licensure. The amendment prohibits 
individuals failing the State Board Examination from being eligible for a 
provisional license. The amendment also requires that the sponsor for a 
candidate be the licensee under whose supervision the candidate will work. 
 Ron Allen, executive director, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section. 
 Mr. Allen also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be to allow successful provisional licensee candidates to practice 
prior to taking the full range of examinations. The Board has no data on which 
to base any cost to be assumed by the small business. There will be no effect on 
small businesses. There is no anticipated economic cost to persons who are 
required to comply with the section as proposed. 
 Comments on the proposal may be submitted to the Texas Board of Veterinary 
Medical Examiners, 1946 South IH-35, Suite 306, Austin, Texas 78704. 
 The amendment is proposed under Texas Civil Statutes, Article 8890, sec.7(a), 
which provide the Texas Board of Veterinary Medical Examiners with the authority 
to make, alter, or amend such rules and regulations as may be necessary or 
desirable to carry into effect the provisions of this Act. 
 
 
  sec.571.18. Provisional Licensure. 
 
  (a) <nl>A provisional license is not available to individuals who have failed 
the Texas State Board Examination prior to making application for the 
provisional license.<ol> The Board will grant a provisional license to a person 
who provides: 
 
  (1)-(2) (No change.) 
   
  (3) proof of being sponsored by a person licensed by the Board under the 
Veterinary Licensing Act <nl>under whose supervision [with whom] <ol> the 
provisional licensee may practice under this section. If an applicant submits 
that obtaining a sponsor is a hardship, the applicant must appear before the 
Board at a regularly scheduled meeting to justify why a provisional license 
should be issued without a sponsor; 
   
  (4) proof of having taken and passed the Texas jurisprudence examination; 
[and] 
   
  (5) payment of the required application fee; <nl>and <ol> [.] 
     
  (b)-(c) (No change.) 
   
  (d) [EXAMINATION.] The provisional licensure jurisprudence examination will be 
conducted on an as-needed-basis. A 14-day processing period will begin the date 
of receipt of an application for provisional licensure. 
   
  (e)-(g) (No change.) 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 17, 1994. 
 TRD-9436781 
  Ron Allen 
 Executive Director 
 Texas Board of Veterinary Medical Examiners 
    Proposed date of adoption: June 10, 1994 
 For further information, please call: (512) 447-1183 
         
               Chapter 573. Rules of Professional Conduct 
  
  Supervision of Personnel 
 
  22 TAC sec.573.10 
 
  The Texas Board of Veterinary Medical Examiners proposes an amendment to 
sec.573.10, concerning Direct Supervision of Lay Personnel. The amendment brings 
the rule into compliance with the definition of direct and general supervision, 
and removes the directive that Rabies Certificates be personally signed by the 
veterinarian. 
 Ron Allen, executive director, has determined that for the first five-year 
period the section is in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the section. 
 Mr. Allen also has determined that for each year of the first five years the 
section has determined that for the first five-year period the section is in 
effect there will be no fiscal implications for state or local government as a 
result of enforcing or administering the section will be to allow for treatment 
of pets in emergency situations with the DVM providing direction over the phone. 
There will be no effect on small businesses. There is no anticipated economic 
cost to persons who are required to comply with the section as proposed. 
 Comments on the proposal may be submitted to the Texas Board of Veterinary 
Medical Examiners, 1946 South IH-35, Suite 306, Austin, Texas 78704. 
 The amendment is proposed under Texas Civil Statutes, Article 8890, sec.7(a), 
which provide the Texas Board of Veterinary Medical Examiners with the authority 
to make, alter, or amend such rules and regulations as may be necessary or 
desirable to carry into effect the provisions of this Act. 
 
 
  sec.573.10. Direct Supervision of Lay Personnel. 
 
  (a) Official Health Documents. A licensee must personally sign any official 
health documents, <nl>other than Rabies Certificates,<ol> issued by said 
licensee. The issuance of any pre-signed official health documents by a licensee 
is a violation of this rule. 
   
  (b)-(d) (No change.) 
   
  (e) Director Supervision. Direct Supervision, as defined by the Board, 
requires the presence of the licensee on the premise and <nl>his/her<ol> [his] 
availability for prompt consultation and treatment; provided however, that in 
cases involving emergency treatment; provided however, that in cases involving 
emergency treatment under subsection (c) of this section, <nl>general 
supervision as defined by the Act<ol> [direct supervision] may be effected 
through radio or telephone communication. It is further provided [;], however, 
that once a veterinarian has established a veterinarian/client/patient 
relationship, and the veterinarian has determined the care necessary for 
hospitalized animals, an unlicensed <nl>employee<ol> [person] may provide 
routine treatment that has been ordered by the veterinarian. The veterinarian is 
the sole judge of the  <nl>employee's<ol> [employee] qualifications necessary 
for the performance of routine treatment. Consequently, the licensee will be 
held accountable before the Board for the actions and misdeeds of employees 
acting at his/her direction. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 17, 1994. 
 TRD-9436780 
  Ron Allen 
 Executive Director 
 Texas Board of Veterinary Medical Examiners 
    Proposed date of adoption: June 10, 1994 
 For further information, please call: (512) 447-1183 
         
                   
  TITLE 30. ENVIRONMENTAL QUALITY 
 Part I. Texas Natural Resource Conservation Commission 
  Chapter 334. Underground and Aboveground Storage Tanks 
  
  Subchapter A. General Provisions 
 
  30 TAC sec.334.14 
 
  The Texas Natural Resource Conservation Commission (TNRCC) proposes new 
sec.334.14, concerning the adoption of a memorandum of understanding (MOU) 
between the Attorney General of Texas and the Texas Natural Resource 
Conservation Commission. The MOU complies with the Environmental Protection 
Agency's (EPA's) requirements as delineated in 40 Code of Federal Regulations, 
sec.281.42. This federal rule on state program approval requires states to 
provide for public intervention in the state civil enforcement process. 
 Section 334.14 (relating to Memorandum of Understanding Between the Attorney 
General of Texas and the Texas Natural Resource Conservation Commission) which 
is referred to by this proposed rule contains the TNRCC's and Office of the 
Attorney General's policies in regard to public intervention in the civil 
enforcement process. 
 Stephen Minick, division of budget and planning, has determined that for the 
first five-year period the section is in effect there will be no fiscal 
implications for state or local government as a result of enforcing or 
administering the section. 
 Mr. Minick also has determined that for each year of the first five years the 
section is in effect the public benefit anticipated as a result of enforcing the 
section will be the continued approval and federal cost sharing of the state's 
leaking underground storage tank programs and the assurance of opportunities for 
public involvement in agency enforcement proceedings. There will be no effect on 
small businesses. There are no costs anticipated for any person required to 
comply with this section as proposed. 
 Comments on the proposed rule may be submitted to David Duncan, senior 
attorney, Legal Services Division, Texas Natural Resource Conservation 
Commission, P.O. Box 13087, Austin, Texas 78711-3087, (512) 239-0600. Comments 
will be accepted until 5:00 p.m., 30 days following publication of this 
proposal. 
 The new section is proposed under the Texas Water Code,  s5.103 (Vernon 1988), 
which provides the TNRCC with the authority to adopt any rules necessary to 
carry out the powers and duties under the Texas Water Code and other laws of 
this state. 
 The section is also proposed under the Texas Water Code,  s5.104 (Vernon 1988), 
which provides the requirements for a memorandum of understanding between state 
agencies when the responsibilities addressed are not otherwise specified in the 
Texas Water Code. 
 
 
  sec.334.14. Memorandum of Understanding Between the Attorney General of Texas 
and the Texas Natural Resource Conservation Commission. 
 
  (a)  Applicability. This MOU applies to civil enforcement proceedings and 
complaints filed on storage tanks subject to this chapter. Pursuant to the Texas 
Water Code, sec.5.104, the Texas Natural Resource Conservation Commission adopts 
a MOU between the Texas Natural Resource Conservation Commission (TNRCC) and the 
Attorney General of Texas. The MOU contains the TNRCC's and the Attorney 
General's interpretation concerning intervention in the civil enforcement 
process under the Texas Water Code. This section applies as follows. 
 
  (1) The Texas Water Commission (now the Texas Natural Resource Conservation 
Commission, TNRCC) was designated as the state agency for the regulation of 
underground storage tanks by enactment of Senate Bill 779 of the 70th Texas 
Legislature, 1987. 
   
  (2) The Texas Water Code authorizes the Texas Natural Resource Conservation 
Commission to have instituted civil suits for injunctive relief and the 
assessment and recovery of a civil penalty, whenever it appears that a person 
has violated, or is violating or threatening to violate, any provision of the 
Texas Water Code, or of any rule, permit, or other order of the Texas Natural 
Resource Conservation Commission. 
   
  (3) The Texas Water Code provides that at the request of the executive 
director of the Texas Natural Resource Conservation Commission, the Attorney 
General of Texas shall institute and conduct a suit in the name of the State of 
Texas for injunctive relief or to recover a civil penalty, or for both 
injunctive relief and penalty. 
   
  (4) Federal regulations promulgated by the United States Environmental 
Protection Agency pursuant to the Solid Waste Disposal Act as amended by the 
Resource Conservation and Recovery Act of 1976, Subtitle I, require that any 
state agency administering the Underground Storage Tank Program authorized under 
that act provide for public participation in the state enforcement process. 
   
  (5) That all citizen complaints filed, either orally or in writing, that 
relate to underground storage tanks will be investigated timely and thoroughly 
by the Texas Natural Resource Conservation Commission. Citizen complaint 
responses will be first initiated by attempting to establish telephone contact 
with the complainant within 48 hours of receipt of the complaint, and 
concurrently beginning whatever records review is necessary. Upon completion of 
the investigation, the complainant will be informed in writing of the results. 
In addition, the complainant will be apprised of the ultimate resolution of the 
problem. The executive director of the Texas Natural Resource Conservation 
Commission shall keep a complaint file in accordance with  s337.4 of this title 
(relating to Enforcement). 
   
  (6) That notice of proposed settlements of civil enforcement actions that 
relate to underground storage tanks will be published by the Attorney General of 
Texas in the Texas Register<ol> (except where immediate action is necessary to 
adequately protect human health and the environment) and that opportunity will 
be provided for the public to comment on such proposed settlements. 
   
  (7) That nothing in this agreement shall be construed to limit or impair the 
Attorney General's right to control and direct litigation on behalf of the 
state. 
   
  (8)  That the Attorney General will not oppose intervention where permissive 
intervention may be authorized by statute, rule, or regulation into any civil 
suit involving the State of Texas relating to violations of the Underground 
Storage Tank Program by any citizen having an interest which is or may be 
adversely affected. 
   
  (9) That the Attorney General, on behalf of the State of Texas, will consent 
to a proposed judgment in an action to enjoin violations of the Underground 
Storage Tank Program only after the publication of notice which provides at 
least 30 days for public comment on the proposed judgment prior to its entry by 
the court, provided that the Attorney General may permit an exception to the 30-
day comment period if a settlement or judgment is required to avoid delays that 
would adversely affect public health or the environment. 
     
  (b) Execution by all signatories. After execution by all signatories, this 
agreement shall remain in effect until rescinded by formal action of either 
agency. 
   
  (c) Effective date. The effective date of the memorandum of understanding is 
the effective date of this rule adoption. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 28, 1994. 
 TRD-9436782 
  Mary Ruth Holder 
 Director, Legal Division 
 Texas Natural Resource Conservation Commission 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 239-6087 
         
                   
  TITLE 37. PUBLIC SAFETY AND CORRECTIONS 
 Part IX. Texas Commission on Jail Standards 
  Chapter 259. New Construction Rules 
  
  Temporary Emergency Housing-Buildings 
 
  37 TAC sec.sec.259.401-259.422 
 
  (Editor's note: The text of the following sections proposed for repeal will 
not be published. The sections may be examined in the offices of the Texas 
Commission on Jail Standards or in the Texas Register office, Room 245, James 
Earl Rudder Building, 1019 Brazos Street, Austin.) 
   
  The Commission on Jail Standards proposes repeal of sec. s259.401-259.422, 
concerning New Construction Rules to allow for revisions to temporary housing 
standards. 
 Jack E. Crump, executive director, has determined that for the first five-year 
period the repeals are in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the repeals. 
 Mr. Crump also has determined that for each year of the first five years the 
repeals are in effect the public benefit anticipated as a result of enforcing 
the repeals will be to allow construction of temporary buildings and tents at a 
reduced cost to counties. 
 There will be no effect on small businesses. 
 There will be no anticipated economic cost to persons who are required to 
comply with the rule as proposed. 
 Comments on the proposal may be submitted to Rhonda C. Long, P.O. Box 12985, 
Austin, Texas 78711, (512) 463-5505. 
 The repeals are proposed under Government Code, Chapter 511, which provides the 
Texas Commission on Jail Standards with the authority to adopt reasonable rules 
and procedures establishing minimum standards for the construction, equipment, 
maintenance and operation of county jails. 
 The repeals implement Government Code, sec.351.002 and  s351.015. 
 
 
  sec.259.401. Qualifications for Use. 
 
   
  sec.259.402. Time Period. 
 
   
  sec.259.403. Construction Approval. 
 
   
  sec.259.404. Site Requirements. 
 
   
  sec.259.405. Security Requirements. 
 
   
  sec.259.406. Classification and Separation. 
 
   
  sec.259.407. Support Areas. 
 
   
  sec.259.408. Capacity. 
 
   
  sec.259.409. Supervision. 
 
   
  sec.259.410. Construction Materials and Methods. 
 
   
  sec.259.411. Electrical Power. 
 
   
  sec.259.412. Life Safety Equipment. 
 
   
  sec.259.413. Lighting. 
 
   
  sec.259.414. Temperature Control. 
 
   
  sec.259.415. Audible Communication. 
 
   
  sec.259.416. Sanitary Facilities. 
 
   
  sec.259.417. Sleeping Areas. 
 
   
  sec.259.418. Day Rooms. 
 
   
  sec.259.419. Openings. 
 
   
  sec.259.420. Emergency First Aid Equipment. 
 
   
  sec.259.421. Furnishings. 
 
   
  sec.259.422. Storage. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 24, 1994. 
 TRD-9436622 
  Jack E. Crump 
 Executive Director 
 Texas Commission on Jail Standards 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 463-5505 
         
           
  Temporary Emergency Housing 
 
  37 TAC sec.sec.259.500-259.522, 259.600-259.622 
 commission on Jail Standards proposes new sec.sec.259.500-259.522 and 259. 600-
259.622, concerning New Construction Rules to revise requirements for temporary 
tents and buildings to allow counties to build the structures at a reduced cost. 
 E. Crump, executive director, has determined that for the first five-year 
period the sections are in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the sections. 
 Crump also has determined that for each year of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be to allow construction of temporary tents and buildings at a 
reduced cost to counties. 
 will be no effect on small businesses. 
 will be no anticipated economic cost to persons who are required to comply with 
the rule as proposed. 
 on the proposal may be submitted to Rhonda C. Long, P.O. Box 12985, Austin, 
Texas 78711, (512) 463-5505. 
 new rules are proposed under Government Code, Chapter 511, which provides the 
Texas Commission on Jail Standards with the authority to adopt reasonable rules 
and procedures establishing minimum standards for the construction, equipment, 
maintenance and operation of county jails. 
 new sections implement Government Code, sec.351.002 and  s351.015. 
 
 
  sec.259.500. Qualifications for Use. 
 
  (a) The commission may approve the use of tents for the temporary housing of 
inmates when a need is clearly identified by the sheriff and commissioners 
court. The county shall submit a plan to the commission for approval indicating 
long-range solutions with timeframes for implementation. 
   
  (b) The commission may approve the use of tents for temporary housing of 
inmates in connection with specific correctional programs which include work 
camps, wilderness camps, forestry camps or boot camps. The county shall submit a 
plan outlining the specific correctional program and intended length of stay of 
inmates. 
 
     
  sec.259.501. Time Period. <ol> Tents used under authority of sec.259. 500(a) 
of this title (relating to Qualifications for Use) shall not be used in excess 
of three years without review and approval by the commission. 
 
   
  sec.259.502. Classification. <ol> Inmates housed in tents shall be classified 
as low-risk as required by Chapter 271 of this title (relating to Classification 
and Separation of Inmates) or assigned to the specific correctional programs. 
 
   
  sec.259.503. Compound Security. <ol> A security perimeter should be provided 
around the tent compound area to deter inmate escapes and the introduction of 
contraband. Secure storage space shall be provided for disposition of weapons. 
 
   
  sec.259.504. Construction Approval. <ol> The county shall submit, for approval 
by the commission, drawings and specifications of the proposed tents in 
sufficient detail to demonstrate that the completed construction meets the 
requirements of sec.sec.259.500-259.522 of this title (relating to Temporary 
Housing). 
 
   
  sec.259.505. Site Requirements. <ol> The site shall be of sufficient size to 
provide for adequate spacing of tents and support structures to facilitate 
access of emergency and service vehicles and equipment. Site shall provide 
adequate drainage to maintain sanitary and safe conditions. 
 
   
  sec.259.506. Construction Materials. <ol> Tent fabric shall be of durable, 
waterproof and fire-resistant material and shall be maintained in good 
condition. Tent supports shall be structurally sound and fire-resistant. Tent 
floors shall be constructed of fire-resistant solid material. Tent floors shall 
be raised or constructed to prevent site runoff water from entering tents. Tent 
construction shall incorporate measures which protect against the entrance and 
infestation of vermin. 
 
   
  sec.259.507. Sleeping Areas. <ol> Tents used for inmate sleeping areas shall 
provide a minimum of 40 square feet of clear floor-space for the first bunk plus 
18 square feet of clear floor-space for each additional bunk. 
 
   
  sec.259.508. Day Rooms. <ol> All inmate living areas shall include or be 
provided with access to day rooms. Day rooms shall provide 40 square feet of 
clear floor-space for one inmate plus 18 square feet of clear floor-space for 
each additional inmate. 
 
   
  sec.259.509. Dimensions.  Minimum ridge height shall be 7'-0" above the floor. 
Distance between furnishings shall be 3'-0" when used for exit path. Distance 
between tents shall be 16'-0", exclusive of any obstruction. 
 
   
  sec.259.510. Capacity.  Maximum capacity of a tent shall not exceed 24 inmates 
unless operated as a direct supervision unit. Tents for direct supervision units 
shall not exceed a capacity of 48 inmates. 
 
   
  sec.259.511. Tent Openings. <ol> Entrances to tents shall be of adequate size 
to allow for passage of emergency medical equipment. Openings shall be capable 
of being fastened and provided with insect screens. Maximum distance from any 
point in a tent to an exit shall not exceed 50'-0". 
 
   
  sec.259.512. Furnishings.  A fire-resistive bunk and mattress or cot not less 
than 2'-3" wide and 6'-3" long shall be provided for each inmate confined. 
Additional furnishings may be provided. Drinking water shall be provided in all 
inmate sleeping and day room areas. Day rooms shall be provided with fire-
resistive table and seating to accommodate the number of inmates confined. 
 
   
  sec.259.513. Storage.  Provisions shall be made for the storage of inmate 
property, uniforms, towels, bedding, linens and janitorial supplies. 
 
   
  sec.259.514. Guard Stations. <ol> Guard stations shall be provided within 
sufficient proximity to inmate living and day room areas. 
 
   
  sec.259.515. Support Areas. <ol> Provisions shall be made for inmate services 
and privileges to include: 
 
  (1) food service; 
   
  (2)  laundry; 
   
  (3) medical examination and treatment; 
   
  (4)  recreation and exercise; 
   
  (5) public and attorney visitation; 
   
  (6) inmate programs, activities, counseling and interviews; 
   
  (7)  telephone; 
   
  (8) commissary; 
   
  (9) correspondence; 
   
  (10)  religious services; 
   
  (11) education; and 
   
  (12) library. 
 
     
  sec.259.516. Sanitary Facilities. <ol> A shower, toilet and lavatory, which 
are accessible at all times, shall be provided for each group or increment of 12 
inmates. Warm water shall be provided at all lavatories and showers. Warm water 
temperature shall be between 100 and 120 degrees Fahrenheit. Sanitary facilities 
should be within the inmate living and day room areas. Sanitary facilities shall 
be within reasonable proximity to inmate living and day room areas and 
accessible by walkways which are protected from inclement weather, or accessible 
by other means which will protect inmates from inclement weather. A separate 
toilet should be available for staff. 
 
   
  sec.259.517. Temperature Control. <ol> Reasonable temperature levels shall be 
maintained. Heating equipment, if provided, shall be approved in writing by 
local or state fire officials. 
 
   
  sec.259.518. Medical Space and Equipment. Adequate space for first aid 
equipment shall be provided. Space and equipment for medical examination, 
treatment and convalescent care shall be provided or a written program shall be 
established and implemented for medical care. Adequate secure storage for 
medical supplies and drugs shall be provided. 
 
   
  sec.259.519. Life Safety Equipment. 
 
  (a) Self-alarming smoke detectors shall be provided for each inmate living and 
day room. 
   
  (b) Plans and drills for emergencies shall be provided as required by 
sec.sec.263.40-263.44 of this title (relating to Life Safety). 
   
  (c) Fire extinguishers of adequate number and type to meet NFPA 10 shall be 
provided at appropriate locations. Fire department connections in proximity to 
the tent as approved in writing by local fire official shall be provided. 
 
     
  sec.259.520. Audible Communication. <ol> Two-way voice communication shall be 
available at all times between inmates and corrections officers. 
 
   
  sec.259.521. Lighting.  Normal lighting sufficient for reading, writing and 
other activities shall be provided in all inmate occupied areas. Night lights 
and emergency illumination shall be provided. Adequate exterior lighting shall 
be provided. 
 
   
  sec.259.522. Electrical Wiring. <ol> All electrical wiring shall be in 
suitable conduit and comply with local electrical codes or the National Electric 
Code. 
 
   
  sec.259.600. Qualifications for Use. The commission may approve the use of 
buildings for the temporary housing of inmates when a need is clearly identified 
by the sheriff and commissioners court. The county shall submit a plan to the 
commission for approval indicating long-range solutions with timeframes for 
implementation. 
 
   
  sec.259.601. Time Period. <ol> Buildings shall not be used in excess of three 
years without review and approval by the commission. 
 
   
  sec.259.602. Classification and Separation. Facilities shall have cells and 
day rooms of capacities which provide separation of different classifications of 
inmates as required by Chapter 271 of this title (relating to Classification and 
Separation of Inmates). Temporary buildings may house high, medium and low-risk 
inmates. 
 
   
  sec.259.603. Security Requirements. 
 
  (a) Buildings should protect inmates from one another, protect custodial 
personnel from inmates, and deter or prevent escapes. Separate secure storage 
space shall be provided for disposition of weapons. 
   
  (b) A low-risk facility need not be designed and maintained as a special 
security unit. It does not require a security perimeter. When built in 
conjunction with other jail or lockup functions, the integrity of the security 
perimeter of the higher security facility shall not be compromised. 
   
  (c) A security perimeter to restrict the movement of inmates and unauthorized 
persons and to prevent the introduction of contraband into the facility shall be 
maintained in medium and high-risk facilities. Safety vestibules shall be 
provided for each inmate living area and day room used for confinement of three 
or more inmates within a medium or high-risk facility. 
 
     
  sec.259.604. Construction Approval. <ol> The county shall submit, for approval 
by the commission, drawings and specifications of the proposed building 
construction in sufficient detail to demonstrate that the completed building 
construction meets the requirements of sec.sec.259.600-259.622 of this title 
(relating to Temporary Housing). 
 
   
  sec.259.605. Site Requirements. <ol> The site shall be of sufficient size for 
the buildings and to facilitate access of emergency and service vehicles and 
equipment. Site shall provide adequate drainage to maintain sanitary and safe 
conditions. 
 
   
  sec.259.606. Construction Materials and Methods. Buildings shall be designed, 
constructed, and maintained in a manner to provide a safe, sanitary, secure and 
structurally sound environment. Class A finishes are required on exterior and 
interior surfaces. Floor drains should be provided at wet areas. Building 
construction shall incorporate measures which protect against the entrance and 
infestation of vermin. 
 
  (1) Inmate housing areas and day rooms in low-risk facilities may be 
constructed of conventional construction materials. Plywood floors with a fire-
retardant vinyl covering may be used for the building floor. 
   
  (2) Inmate housing areas and day rooms in medium-risk facilities may be 
constructed of conventional construction materials which are comparable to 
metal, masonry, or concrete. The purpose of a particular wall or partition and 
the type of security sought to be achieved shall determine the selection of 
appropriate materials. 
 
     
  sec.259.607. Sleeping Areas. <ol> Inmate sleeping areas shall provide a 
minimum of 40 square feet of clear floor-space for the first bunk, plus 18 
square feet of clear floor-space for each additional bunk. 
 
   
  sec.259.608. Day Rooms. <ol> All inmate living areas shall be provided with or 
allowed access to day rooms. Day rooms shall provide 40 square feet of clear 
floor-space for one inmate plus 18 square feet of clear floor-space for each 
additional inmate. Day rooms may be contiguous with inmate sleeping areas. 
 
   
  sec.259.609. Dimensions.  All cells and day rooms shall be not less than 8'-0" 
from finished floor to ceiling and 5'-6" from wall to wall. 
 
   
  sec.259.610. Capacity.  Maximum capacity of any living area shall not exceed 
24 inmates unless operated as a direct supervision unit. A living area operated 
as a direct supervision unit shall not exceed a capacity of 48 inmates. 
 
   
  sec.259.611. Openings.  All doors shall have commercial grade or detention 
hardware to provide the level of security sought to be achieved. All exit doors 
shall have a minimum width of 36". Key override feature shall be available on 
all electric or mechanical locks. Maximum distance from any point in the 
building to an exit shall not exceed 150'. All swinging doors shall be installed 
to swing in the direction of exit traffic. Where provided, operable windows 
shall be equipped with insect screens. Adequate mechanical ventilation shall be 
provided when operable windows are not provided. 
 
   
  sec.259.612. Furnishings.  A fire-resistive bunk not less than 2'-3" wide and 
6'-3" long with a fire-resistive mattress shall be provided for each inmate 
confined. Additional furnishings may be provided. Drinking water shall be 
provided in all inmate sleeping and day room areas. Day rooms shall be provided 
with fire-resistive table and seating to accommodate the number of inmates 
confined. Furnishings shall be securely anchored in all areas that house inmates 
other than low-risk. 
 
   
  sec.259.613. Storage.  Provisions shall be made for the storage of inmate 
property, uniforms, towels, bedding, linens and janitorial supplies. 
 
   
  sec.259.614. Guard Stations. <ol> Guard stations shall be provided within 
sufficient proximity to inmate living and day room areas. They should be so 
arranged that visibility into the housing areas is provided. 
 
   
  sec.259.615. Support Areas. <ol> Provisions shall be made for inmate services 
and privileges to include: 
 
  (1) food service; 
   
  (2)  laundry; 
   
  (3) medical examination and treatment; 
   
  (4)  recreation and exercise; 
   
  (5) public and attorney visitation; 
   
  (6) inmate programs, activities, counseling and interviews; 
   
  (7)  telephone; 
   
  (8) commissary; 
   
  (9) correspondence; 
   
  (10)  religious services; 
   
  (11) education; and 
   
  (12) library. 
 
     
  sec.259.616. Sanitary Facilities. <ol> A shower, toilet and lavatory, which 
are accessible at all times, shall be provided for each group or increment of 12 
inmates. Warm water shall be provided at all lavatories and showers. Warm water 
temperature shall be between 100 and 120 degrees Fahrenheit. Sanitary facilities 
should be within the inmate living and day room areas. Sanitary facilities shall 
be within reasonable proximity to inmate living and day room areas and 
accessible by walkways which are covered or other means provided which will 
protect inmates from inclement weather. A separate toilet should be available 
for staff. 
 
   
  sec.259.617. Temperature Control. <ol> Temperature level shall be reasonably 
maintained between 65 degrees Fahrenheit and 85 degrees Fahrenheit in all 
occupied areas. 
 
   
  sec.259.618. Medical Space and Equipment. Adequate space for first aid 
equipment shall be provided. Space and equipment for medical examination, 
treatment and convalescent care shall be provided or a written program shall be 
established and implemented for medical care. Adequate secure storage for 
medical supplies and drugs shall be provided. 
 
   
  sec.259.619. Life Safety. 
 
  (a) Provisions shall be made for the rapid removal of occupants by such 
reliable means as the remote control of doors or by keying all locks to keys 
readily available to jail staff who are continually on duty and have undergone 
emergency drills. There shall be not less than 2 exits on each floor as remote 
as practicable from one another. Travel distance between any point on the floor 
of the facility to an exit shall not exceed 150'-0". Travel distance between any 
room door and an exit may be increased by 50'-0" in fully-sprinklered facilities 
not to exceed 200 feet of total travel distance. 
   
  (b) Access to exits shall be marked by readily visible signs at all locations 
where the exit is not readily visible from outer cell doors. 
   
  (c) Interior stairways serving as emergency exits for new facilities and new 
additions shall be separated by a 2-hour fire-rated enclosure and self-closing 
fire doors. 
   
  (d) Hazardous area protection shall be provided as required by sec.263. 21 of 
this title (relating to Life Safety). 
   
  (e) Self-alarming smoke detectors or smoke detectors which are part of an 
automatic fire detection and alarm system shall be provided for each inmate 
living and day room area in sufficient numbers to provide prompt warning to 
occupants and staff. The alarm systems should be tested in accordance with the 
manufacturer's recommendation, but shall be tested at least on calendar 
quarterly intervals and test results made a matter of record to include date and 
results of test, and signature of the person testing the equipment. 
   
  (f) Plans and drills for emergencies shall be provided as required by 
sec.sec.263.40-263.44 of this title (relating to Life Safety). 
   
  (g) A manually operated or automatic smoke removal system shall be provided. 
(Exception: Single-story low-risk facility buildings which provide direct 
exiting to the exterior of the building from the inmate living and day room 
areas and whose exit doors are incapable of being locked are not required to 
provide a smoke removal system.) 
   
  (h) Fire extinguishers of adequate number and type to meet NFPA 10 shall be 
provided at appropriate locations. Fire department connections in proximity to 
the building as approved in writing by local fire official shall be provided. A 
standpipe and hose system with a 1" non-collapsible or 1-1/2" collapsible hose 
utilizing a minimum of 2" domestic water system shall be provided. 
   
  (i) All life safety equipment shall be out of reach of inmates, or otherwise 
secured from unauthorized tampering. At least one self-contained breathing 
apparatus shall be available and maintained in or near each facility control 
station. All jail staff shall be trained and quarterly drills conducted in the 
use of this equipment. A minimum of one unit shall be provided for each building 
or a multi-building facility. All life safety equipment shall be inspected, 
maintained and tested by persons qualified to do so (whether under vendor 
contract, by state or private agency or otherwise) in order that such equipment 
shall be safe, secure and fully operative at all times. 
   
  (j) Records and reports shall be maintained as required by sec.263.70 and 
sec.263.71 of this title (relating to Life Safety). 
 
     
  sec.259.620. Audible Communication. <ol> Two-way voice communication shall be 
available at all times between inmates and corrections officers. 
 
   
  sec.259.621. Lighting.  Normal lighting sufficient for reading, writing and 
other activities shall be provided in all inmate occupied areas. Night lights 
and emergency illumination shall be provided. All corridors, passages to exits, 
discharging stairways, other means of egress and exit signs shall be 
continuously illuminated. Adequate exterior lighting shall be provided. 
 
   
  sec.259.622. Electrical Power. <ol> All electrical wiring shall be in a 
suitable conduit and comply with local electrical codes or the National 
Electrical Code. Emergency power shall be provided, as applicable, for 
electrical door locks, smoke detection, smoke removal, emergency lighting, 
communication, and ventilation. A non-automatic start generator system may be 
used. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 23, 1994. 
 TRD-9436621 
  Jack E. Crump 
 Executive Director 
 Texas Commission on Jail Standards 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 463-5505 
         
         
  Temporary Emergency Housing-Tents 
 
  37 TAC sec.sec.259.501-259.524 
 
  (Editor's note: The text of the following sections proposed for repeal will 
not be published. The sections may be examined in the offices of the Texas 
Commission on Jail Standards or in the Texas Register office, Room 245, James 
Earl Rudder Building, 1019 Brazos Street, Austin.) 
   
  The Commission on Jail Standards proposes the repeal of  ssec.259.501-259. 
524, concerning New Construction Rules, to allow for revisions to temporary 
housing standards. 
 Jack E. Crump, executive director, has determined that for the first five-year 
period the repeals are in effect there will be no fiscal implications for state 
or local government as a result of enforcing or administering the repeals. 
 Mr. Crump also has determined that for each year of the first five years the 
repeals are in effect the public benefit anticipated as a result of enforcing 
the repeals will be to allow construction of temporary buildings and tents at a 
reduced cost to counties. 
 There will be no effect on small businesses. There is no anticipated economic 
cost to persons required to comply with the repeals as proposed. 
 Comments on the proposal may be submitted to Rhonda C. Long, P.O. Box 12985, 
Austin, Texas 78711, (512) 463-5505. 
 The repeals are proposed under the Government Code, Chapter 511, which provides 
the Texas Commission on Jail Standards with the authority to adopt reasonable 
rules and procedures establishing minimum standards for the construction, 
equipment, maintenance and operation of county jails. 
 The repeals implement the Government Code, sec.351.002 and sec.351.015. 
 
 
  sec.259.501. Qualifications for Use. 
 
   
  sec.259.502. Time Period. 
 
   
  sec.259.503. Custody Level Assessment. 
 
   
  sec.259.504. Compound Security. 
 
   
  sec.259.505. Construction Approval. 
 
   
  sec.259.506. Site Requirements. 
 
   
  sec.259.507. Construction Materials. 
 
   
  sec.259.508. Sleeping Areas. 
 
   
  sec.259.509. Day Rooms. 
 
   
  sec.259.510. Dimensions. 
 
   
  sec.259.511. Capacity. 
 
   
  sec.259.512. Tent Openings. 
 
   
  sec.259.513. Furnishings. 
 
   
  sec.259.514. Storage. 
 
   
  sec.259.515. Guard Stations. 
 
   
  sec.259.516. Support Areas. 
 
   
  sec.259.517. Sanitary Facilities. 
 
   
  sec.259.518. Temperature Control. 
 
   
  sec.259.519. Emergency First Aid Equipment. 
 
   
  sec.259.520. Life Safety Equipment. 
 
   
  sec.259.521. Audible Communication. 
 
   
  sec.259.522. Lighting. 
 
   
  sec.259.523. Electrical Wiring. 
 
   
  sec.259.524. Supervision. 
 
  This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's authority to adopt. 
 Issued in Austin, Texas, on February 23, 1994. 
 TRD-9436651 
  Jack E. Crump 
 Executive Director 
 Texas Commission on Jail Standards 
    Earliest possible date of adoption: April 4, 1994 
 For further information, please call: (512) 463-5505