Part 7.
STATE SECURITIES BOARD
Chapter 101.
GENERAL ADMINISTRATION
7 TAC §101.1
The State Securities Board proposes an amendment to §101.1,
concerning authority, to clearly separate the policymaking and management
responsibilities of the Board and the Securities Commissioner and to cancel
the previous delegation by the Board to the Commissioner, pursuant to §28-1.D
of the Texas Securities Act ("Act"), the authority to hold hearings for adoption
of rules and regulations and to make or adopt rules and regulations, as the
Board may, from time to time, deem appropriate. On this date, the Board is
also filing a notice of withdrawal of its previously published proposal that
appeared in the December 14, 2001 issue of the
Texas
Register
(26 TexReg 10194), which would have permitted the Securities
Commissioner to hold hearings for the adoption of rule and to make or adopt
rules after conferring with the Chair and Vice- Chair of the Board.
John R. Morgan, Deputy Securities Commissioner, has determined that for
the first five-year period the rule is in effect there will be no foreseeable
fiscal implications for state or local government as a result of enforcing
or administering the rule.
Mr. Morgan 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 to implement new §2-4 of the Act, which requires the
Board to develop and implement policies that clearly separate the policymaking
responsibilities of the Board and the management responsibilities of the Securities
Commissioner and the employees of the Board including having all rulemaking
conducted by the Board. There will be no effect on micro- or small businesses.
There is no anticipated economic cost to persons who are required to comply
with the rule as proposed. There is no anticipated impact on local employment.
Comments on the proposal to be considered by the Board should be submitted
in writing within 60 days after publication of the proposed section in the
The amendment is proposed under Texas Civil Statutes, Article
581-28-1. Section 28-1 provides the Board with the authority to adopt rules
and regulations necessary to carry out and implement the provisions of the
Texas 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 581-3, 581-2-4,
and 581-28-1.D.
§101.1.Authority.
(a)
Introduction. Pursuant to the authority granted by the
Texas Securities Act and the Administrative Procedure [
(b)
(No change.)
(c)
Responsibilities of the Board. The Board
is the governing body of the Agency. The Board formulates policy objectives,
oversees implementation of these objectives, and is responsible for the proposal,
adoption, amendment and repeal of Board rules. The Board appoints the Securities
Commissioner, who serves at the pleasure of the Board, to implement the policies
of the Board, administer the provisions of the Texas Securities Act, and to
manage the day-to-day operations of the Agency.
(d)
Responsibilities of the Securities Commissioner.
The Securities Commissioner implements the policies of the Board, administers
the provisions of the Texas Securities Act, and manages the day-to-day operations
of the Agency. It is the duty of the Securities Commissioner to see that the
provisions of the Texas Securities Act are at all times obeyed and to take
such measures and to make such investigations as will prevent or detect the
violation of any provision thereof. The Commissioner appoints other persons
as necessary to carry out the powers and duties of the Commissioner under
the Texas Securities Act and other laws granting jurisdiction or applicable
to the Board or the Commissioner. The Commissioner may delegate to the other
persons appointed such powers and duties of the Commissioner as the Commissioner
considers necessary.
(e)
[
(f)
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 7, 2002.
TRD-200201431
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: April 21, 2002
For further information, please call: (512) 305-8300
7 TAC §109.13
The State Securities Board proposes an amendment to §109.13,
concerning limited offering exemptions. This proposed amendment coordinates,
to a great extent, with the Board's previously published proposal to amend §107.2.
That prior proposal appeared in the December 14, 2001 issue of the
Texas Register
(26 TexReg 10195) and contemplated eliminating several
of the definitions from §107.2 and relocating them to specific provisions
within §109.13 to which they relate. Specifically, the proposal would
make the following changes to §109.13.
The proposed amendment to subsection (f) results from changes to §5.I(b)
of the Texas Securities Act ("Act") made by House Bill 2728, which broadened
the employee plan exemption to cover consultants, advisors, and business trusts.
It uses the term "persons," rather than a laundry list of eligible parties.
The addition of paragraph (f)(2) would help to more closely coordinate the
5.I(b) exemption with SEC Rule 701 as it relates to insurance agents.
The definition of "employer," as used in the Act, §5.I(b), would be
relocated from §107.2(16) to §109.13(g) and would be changed to
"issuer" because of the expansion of the 5.I(b) exemption by House Bill 2728.
Similar changes would also be made in subsection (h) and the references to
such plans in §109.13(f)-(h) would be changed to refer to "compensatory
or benefit plans" generally, rather than the more restrictive "employee plans."
A change would also be made in paragraph (g)(2) to make the provision gender
neutral.
Subparagraph (k)(15)(C) would be amended to recognize the recent restructuring
of the divisions of the Agency.
The definition of "business days," as used in §109.13(l) would be
relocated from §107.2(6) to §109.13(l)(9)(A). Other changes would
be made to conform to terminology used elsewhere in the Board's rules.
Micheal Northcutt, Director, Registration Division, has determined that
for the first five-year period the rule is in effect there will be no foreseeable
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 consistent use of terminology; an exemption
fits more closely with its federal counterpart; and defined terminology associated
with an exemption can be more easily located by persons using that exemption
and that should help avoid inadvertent violations of the regulation. There
will be no effect on micro- or small businesses. There is no anticipated economic
cost to persons who are required to comply with the rule as proposed. There
is no anticipated impact on local employment.
Comments are specifically sought regarding whether the portion of this
amendment that relates to compensatory benefit plans operates to allow the
exemption contained in the Act, §5.I(b), recently expanded by the Texas
Legislature in House Bill 2255, to more closely mesh with the exemption at
the federal level contained in SEC Rule 701.
Comments on the proposal to be considered by the Board should be submitted
in writing within 60 days after publication of the proposed section in the
The amendment is proposed under Texas Civil Statutes, Articles
581-28-1 and 581-5.T. Section 28-1 provides the Board with the authority to
adopt rules and regulations necessary to carry out and implement the provisions
of the Texas 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. Section 5.T provides that the Board may prescribe new
exemptions by rule.
The proposed amendment affects Texas Civil Statutes, Articles 581-4, 581-5,
and 581-7.
§109.13.Limited Offering Exemptions.
(a) - (b)
(No change.)
(c)
Number of [
(1) - (4)
(No change.)
(5)
"Security holders" or "purchasers of securities,"
as those terms are used in the Act, §5.I(a) and 5.I(c), do not include
holders of any options granted pursuant to a plan that falls within the exemption
for compensatory or benefit plans provided by the Act, §5.I(b).
(d) - (e)
(No change.)
(f)
Compensatory or benefit plans.
(1)
[
(2)
Insurance agents who are exclusive agents
of the issuer or its subsidiary or derive more than 50% of their annual income
from the issuer or its subsidiary are deemed "employees" as that term is used
in §5.I(b).
(g)
Compensatory or benefit
[
(1)
(No change.)
(2)
the employee's activity involving the offer and sale of
such securities is strictly incidental to his
or her
bona fide
primary nonsecurities-related work duties; and
(3)
(No change.)
(h)
Compensatory or benefit
[
(i) - (j)
(No change.)
(k)
Uniform limited offering exemption. In addition to sales
made under the Texas Securities Act, §5.I, the State Securities Board,
pursuant to the Act, §5.T, exempts from the registration requirements
of the Act, §7, any offer or sale of securities offered or sold in compliance
with the Securities Act of 1933, Regulation D, Rules 230.505 and/or 230.506,
including any offer or sale made exempt by application of Rule 508(a), as
made effective in United States Securities and Exchange Commission Release
Number 33-6389 and as amended in Release Numbers 33-6437, 33-6663, 33-6758,
and 33-6825, and which satisfies the following further conditions and limitations.
(1) - (14)
(No change.)
(15)
Review of Form D.
(A) - (B)
(No change.)
(C)
In order to assist voluntary compliance within this subsection
and to aid users in filing notices required under paragraph (5) of this subsection,
the staff of the State Securities Board is available to answer questions about
this regulation. Inquiries should be addressed to the Director of
the
[
(16) - (17)
(No change.)
(l)
Intrastate limited offering exemption. In addition to sales
made under the
Texas
Securities Act, §5.I, the State Securities
Board, pursuant to the [
(1) - (8)
(No change.)
(9)
Notice filing requirements.
(A)
For sales under subparagraph (1)(B) of this subsection,
in whole or in part to accredited investors listed in paragraph (11)(E)-(H)
of this subsection of such definition of accredited investor issuers who are
not registered securities dealers and who do not sell securities by or through
registered securities dealers shall file a sworn notice on Form 133.29 or
a reproduction thereof not less than 10 business days before any sale claimed
to be exempt under this subsection may be consummated.
For the purpose
of filing Form 133.29, "business days" means ordinary business days and does
not include Saturdays, Sundays, or state holidays.
However, no notice
is required for sales made under paragraph (1)(A) of this subsection or under
paragraph (1)(B) of this subsection where the sales are made exclusively to
accredited investors as defined in paragraph (11)(A)-(D) of this subsection
or to entities in which all of the equity owners are accredited investors
listed in paragraph (11)(A)-(D) of this subsection of such definition. The
issuer may be required by the Securities Commissioner to give details concerning
any information requested in Form 133.29 and may be required to furnish any
additional information deemed necessary by the Securities Commissioner to
determine the issuer's business repute and qualifications.
(B)
(No change.)
(10) - (11)
(No change.)
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on March 7, 2002.
TRD-200201432
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: April 21, 2002
For further information, please call: (512) 305-8300
7 TAC §115.2
The State Securities Board proposes an amendment to §115.2,
concerning application requirements. The amendment would eliminate certain
paper filing requirements in light of the Uniform Electronic Transactions
Act, passed by the 77th Texas Legislature and effective January 1, 2002, and
further uniformity.
Michael S. Gunst, Director, Inspections and Compliance Division, and Micheal
Northcutt, Director, Registration Division, have determined that for the first
five-year period the rule is in effect there will be no foreseeable fiscal
implications for state or local government as a result of enforcing or administering
the rule.
Mr. Gunst and Mr. Northcutt also have 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 an unnecessary
filing requirement, i.e., the filing of a paper copy of page 1 of Form BD
and page 1 of Form U-4 for a designated officer. There will be no effect on
micro- or small businesses. There is no anticipated economic cost to persons
who are required to comply with the rule as proposed. There is no anticipated
impact on local employment.
Comments on the proposal to be considered by the Board should be submitted
in writing within 60 days after publication of the proposed section in the
The amendment is proposed under Texas Civil Statutes, Article
581-28-1. Section 28-1 provides the Board with the authority to adopt rules
and regulations necessary to carry out and implement the provisions of the
Texas 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 581-13.
§115.2.Application Requirements.
(a) - (d)
(No change.)
(e)
Central Registration Depository System (CRD).
(1)
Whenever the Texas Securities Act or Board rules require
the filing of an application with the Securities Commissioner for dealer or
agent registration, members of the National Association of Securities Dealers,
Inc. (NASD) or applicants for membership in the NASD shall make such filing
electronically through the CRD which is jointly operated by the NASD and the
North American Securities Administrators Association, Inc. (NASAA). Applicants
shall use the applicable uniform form for the submission of the filing in
question and shall supplement their electronic filing by filing, in paper
form, the items listed in paragraphs (3)-(6) of subsection (a) of this section,
directly with the Commissioner. [
(2)
(No change.)
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on March 7, 2002.
TRD-200201433
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: April 21, 2002
For further information, please call: (512) 305-8300
7 TAC §131.1
The State Securities Board proposes an amendment to §131.1,
concerning general provisions relating confidential information. The proposal
would combine §131.1 and §131.2 and conform the provision to the
Act, §28, as amended by House Bill 2255. The repeal of §131.2 is
being concurrently proposed.
John R. Morgan, Deputy Securities Commissioner, David Grauer, Director,
Enforcement Division, Michael S. Gunst, Director, Inspections and Compliance
Division, and Micheal Northcutt, Director, Registration Division, have determined
that for the first five-year period the rule is in effect there will be no
foreseeable fiscal implications for state or local government as a result
of enforcing or administering the rule.
Mr. Morgan, Mr. Grauer, Mr. Gunst, and Mr. Northcutt also have 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 the Commissioner
will be able to share confidential information with regulatory authorities
and associations of governmental or regulatory authorities to assist in the
detection and prevention of violations of the law and to further administrative,
civil, and criminal actions. There will be no effect on micro- or small businesses.
There is no anticipated economic cost to persons who are required to comply
with the rule as proposed. There is no anticipated impact on local employment.
Comments on the proposal to be considered by the Board should be submitted
in writing within 60 days after publication of the proposed section in the
The amendment is proposed under Texas Civil Statutes, Articles
581-28-1 and 581-28.B. Section 28-1 provides the Board with the authority
to adopt rules and regulations necessary to carry out and implement the provisions
of the Texas 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. Section 28.B provides the Board to approve governmental
and regulatory authorities and associations of governmental and regulatory
authorities to which the Commissioner may disclose confidential information
at the Commissioner's discretion.
The proposed amendment affects Texas Civil Statutes, Article 581-28.
§131.1. Information Sharing [
(a)
Pursuant to the authority given to the State
Securities Board under the
Texas
Securities Act, §28, the
Board, recognizing the need for cooperative law enforcement among agencies
responsible for prevention, detection, and prosecution of white collar crime,
for the regulation and policing of persons who offer and sell securities,
and for the regulation of offerings of securities, and recognizing the policies
underlying [
(b)
Disclosure for limited purposes. Disclosure
of such confidential information will be made only for the purpose(s) of assisting
in the detection or prevention of violations of law or to further administrative,
civil, or criminal action.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 7, 2002.
TRD-200201434
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: April 21, 2002
For further information, please call: (512) 305-8300
7 TAC §131.2
(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 §131.2,
concerning disclosure for limited purposes. The repeal would eliminate §131.2
because its provisions are proposed to be moved to §131.1(b) in a concurrently
proposed amendment to that section.
John R. Morgan, Deputy Securities Commissioner, David Grauer, Director,
Enforcement Division, Michael S. Gunst, Director, Inspections and Compliance
Division, and Micheal Northcutt, Director, Registration Division, have determined
that for the first five-year period the repeal is in effect there will be
no foreseeable fiscal implications for state or local government as a result
of enforcing or administering the repeal.
Mr. Morgan, Mr. Grauer, Mr. Gunst, and Mr. Northcutt also have determined
that for each year of the first five years the repeal is in effect the public
benefit anticipated as a result of enforcing the repeal will be the elimination
of a duplicate provision. There will be no effect on micro- or small businesses.
There is no anticipated economic cost to persons who are required to comply
with the repeal as proposed. There is no anticipated impact on local employment.
Comments on the proposal to be considered by the Board should be submitted
in writing within 60 days after publication of the proposed repeal in the
The repeal is proposed under Texas Civil Statutes, Article 581-28-1.
Section 28-1 provides the Board with the authority to adopt rules and regulations
necessary to carry out and implement the provisions of the Texas 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 repeal affects Texas Civil Statutes, Article 581-28.
§131.2. Disclosure for Limited Purposes.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on March 7, 2002.
TRD-200201435
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: April 21, 2002
For further information, please call: (512) 305-8300
and Texas Register
] Act, Texas Government Code, Chapter 2001, the State Securities Board
prescribes the following sections regarding the administration and implementation
of the Texas Securities Act, and the procedure and practice before the Texas
Securities Commissioner.
(c)
] Delegated authority. The Board
hereby delegates to the Commissioner the authority to [
hold hearings
for adoption of sections and to make or adopt sections, and to
] waive
[
the
] requirements
contained in the Board's rules
[
thereof
], as the Commissioner may, from time to time, deem appropriate.
[
However, the Board may, as it deems appropriate, perform such of these
acts and hold such hearings as are required in the rulemaking procedures or
by the Texas Securities Act.
]
(d)
] Severability. If any provision
of these sections be held invalid, such invalidity shall not affect other
provisions which can be given effect without the invalid provision, and to
this end the provisions of these sections are declared to be severable.
Chapter 109.
TRANSACTIONS EXEMPT FROM REGISTRATION
persons or
] security holders
or purchasers of securities
. In computing the number of purchasers or
security holders for §5.I, the following criteria shall be used.
Employee plan advertising.
] No public
solicitation or advertisement under §5.I occurs by the distribution to
eligible
persons
[
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 §5.I(b).
Employee
]
plan sales. Only the employer and its participating subsidiaries, parents,
or subsidiaries of such parents, if any, may offer or sell securities in connection
with the employee plan without registration as dealers.
For purposes
of the Act, §5.I(b), the term "issuer" includes a general partner of
a limited partnership with respect to a security sold or distributed by such
limited partnership in a transaction otherwise meeting the requirements of §5.I(b).
An employee of the
issuer
[
employer
] or
its
participating subsidiary who aids in offering or selling such securities
in connection with the [
employee
] plan is not required to be registered
as an agent provided the employee meets all of the following conditions:
Employee
]
plans for counting purposes. A noncontributory [
employees
] stock
ownership plan or [
employees
] stock ownership trust
that
[
which
] holds securities of the
issuer
[
employer
company
] for the benefit of
the participants in
that
issuer's plan
[
company's employees
] shall be counted as one
security holder under §
5.I(a)
[
5.I
].
Plan
[
Employee
] participants in such
a
[
an employee
] stock ownership plan or trust will not be deemed security holders
of the
issuer
[
employer company
] for purposes of counting
security holders under §
5.I(a)
[
5.I
] solely because
of their participation in the plan or trust. However, [
employee
]
participants receiving distributions of securities from the plan or trust
will be deemed security holders of the
issuer
[
employer
]
on receipt of securities of the
issuer
[
employer
] from
the plan or trust.
Securities
] Registration
Division
.
Securities
] Act, §5.T, exempts from
the registration requirements of the [
Securities
] Act, §7,
any offer or sale of any securities by the issuer itself, or by a registered
dealer acting as agent for the issuer provided all offers and sales are made
pursuant to an offering made and completed solely within this state and all
the conditions in paragraphs (1)-(11) of this subsection are satisfied.
Chapter 115.
SECURITIES DEALERS AND AGENTS
With regard to the items listed in paragraphs
(1) and (2) of subsection (a) of this section, only page 1 of Form BD and
page 1 of Form U-4 for designated officer must be filed in paper form directly
with the Commissioner.
]
Chapter 131.
GUIDELINES FOR CONFIDENTIALITY OF INFORMATION General Provisions ].
the Securities Act,
] §28, authorizes the Securities
Commissioner in his or her discretion to supply
any confidential
information
in the Commissioner's possession
[
obtained during
the course of investigations conducted pursuant to The Securities Act, §28,
] to any governmental
or regulatory
authority
or association
of governmental or regulatory authorities
, [
any quasi-governmental
authority charged with overseeing securities activities,
] or any receiver
appointed under the [
Securities
] Act, §25-1.
Chapter 139.
EXEMPTIONS BY RULE OR ORDER