Part 7.
STATE SECURITIES BOARD
Chapter 105.
RULES OF PRACTICE IN CONTESTED CASES
7 TAC §105.6
The Texas State Securities Board proposes an amendment to §105.6,
concerning notice of hearing. The amendment would add the Director of the
Inspections and Compliance Division to the Staff personnel authorized to sign
a notice of hearing in an administrative case filed with the State Office
of Administrative Hearings. Since the amendment would provide an alternative
director-level person as an authorized signatory, the need for having Assistant
Directors serve in that capacity no longer exists. Accordingly, the signatory
authorization of the Assistant Directors in the Enforcement Division would
be removed from the rule.
John Morgan, Director, Enforcement Division, and Benette Zivley, Director,
Inspections and Compliance 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 and Mr. Zivley also have 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 clear delineation of signatory
authority and the related internal review process in administrative cases.
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
Statutory authority: 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.
Cross-reference to Statute: Texas Civil Statutes, Articles 581-14, 581-23,
581-23-2, and 581-24.
Statutes and codes affected: Texas Civil Statutes, Articles 581-14, 581-23,
581-23-2, and 581-24.
§105.6.Notice of Hearing.
(a)
(No change.)
(b)
Either the
[
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 February 12, 2004.
TRD-200400974
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 28, 2004
For further information, please call: (512) 305-8300
7 TAC §109.3
The Texas State Securities Board proposes an amendment to §109.3,
concerning sales to financial institutions and certain institutional investors
under the Texas Securities Act, §5.H. The amendment to subsection (e)
would add a reference to investment adviser registration to conform to the
bifurcation of dealer and investment adviser registration provisions in the
Act and to update terminology. The addition of a new subsection (f) would
clarify that there is no exemption from registration for an investment adviser
to a private investment entity containing natural persons. An adviser to a
private investment entity, including a hedge fund, with natural person participants
(including individual accredited investors) would either register with the
Securities Commissioner or notice file if it is a federal covered investment
adviser. This is consistent with previous interpretative letters issued by
the Board's General Counsel. An investment adviser to an investment entity
consisting of institutional clients and containing no natural persons would
continue to be exempt from registration and notice filing pursuant to subsection
(c).
Micheal Northcutt, Director, Registration Division, and Benette Zivley,
Director, Inspections and Compliance 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. Northcutt and Mr. Zivley 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 to clarify the applicability of
the exemption to investment advisers to private investment entities. 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 sought regarding several aspects of the proposed amendment
and clarifying that there is no exemption from investment adviser registration
for investment advisers rendering services to certain private investment entities,
including hedge funds. Since discussion of some of the topics raised for comment
may go beyond the provisions being currently considered for amendment, the
input may form the basis for future rulemaking or result in a reformulated
proposal and opportunity for additional comments.
Specific comments are solicited by the Board on the following points:
(1) How should "private investment entity" be defined in determining when
an investment adviser to the entity is not exempt from registration under §109.3(e)?
(2) Should the exemption provided by §109.3(e) be available for an
investment adviser to a private investment entity, with substantial net worth
or total asset holdings, regardless of whether the security holders of that
private investment entity include natural persons? If so, what should the
net worth or total asset standards be?
(3) When analyzing whether an investment adviser to a private investment
entity should be exempt from registration, should a minimum investment in
the private investment entity be required from each of its securities holders?
If so, what should the amount of that minimum investment be?
(4) When analyzing whether an investment adviser to a private investment
entity should be exempt from registration, should a standard higher than that
for natural persons included in "accredited investor" as defined in SEC Rule
501(a) be utilized for the natural persons investing in the private investment
entity that receives the investment advice? If so, what should the standard
be for this "super-accredited investor"?
(5) Any other comments and background information that would assist the
staff in crafting an exemption from investment adviser registration for investment
advisers dealing with natural person investors that are knowledgeable, sophisticated,
and with sufficient net worth to not need the additional protections and oversight
provided by requiring the investment adviser to register or submit a notice
filing to the Securities Commissioner.
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
Statutory authority: Texas Civil Statutes, Articles 581-28-1
and 581-12.C. 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 12.C provides the Board with the authority
to prescribe new dealer/agent registration exemptions by rule.
Cross-reference to Statute: Texas Civil Statutes, Articles 581-12, 581-12-1,
and 581-18.
Statutes and codes affected: Texas Civil Statutes, Articles 581-12, and
581-12-1.
§109.3.Sales to Financial Institutions and Certain Institutional Investors under the Texas Securities Act, §5.H.
(a) - (d)
(No change.)
(e)
Exemption from registration for dealers,
agents
[
(f)
Not applicable to certain investment advisers.
The exemption provided by subsection (e) of this section does not provide
an exemption from registration for an investment adviser or investment adviser
representative rendering investment advice to a private investment entity,
including a hedge fund, when the owners/participants of the investment entity
include individuals who are natural persons, regardless of whether the individuals
are "accredited investors."
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 February 12, 2004.
TRD-200400975
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 28, 2004
For further information, please call: (512) 305-8300
7 TAC §115.1
The Texas State Securities Board proposes an amendment to §115.1,
concerning general provisions applicable to dealers and their agents. The
amendment to §115.1 would add subsection (d) containing reminders to
dealers and their agents that registration is not required if an exemption
from registration is available and that the antifraud provisions of the Texas
Securities Act (Act) will apply to their activities.
Micheal Northcutt, Director, Registration Division, and Benette Zivley,
Director, Inspections and Compliance 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. Northcutt and Mr. Zivley also have 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 dealers and agents will be
reminded that registration exemptions exist and that the antifraud provisions
of the Act apply to exempt activities. 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
Statutory authority: 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.
Cross-reference to Statute: Texas Civil Statutes, Articles 581-12, 581-18,
581-23, 581-23-1, 581-23-2, 581-25-1, 581-29, 581-29-1, 581-29-2, 581-29-3,
581-32, and 581-33.
Statutes and codes affected: Texas Civil Statutes, Articles 581-12 and
581-18.
§115.1.General Provisions.
(a) - (c)
(No change.)
(d)
Availability of an exemption from registration.
The requirements detailed in this chapter do not apply to dealers and agents
that are exempt from registration as such pursuant to the Texas Securities
Act, §5, or by Board rule pursuant to the Texas Securities Act, §5.T
or §12.C, contained in Chapters 109 or 139 of this title. Persons not
required to register with the Securities Commissioner pursuant to an exemption
are reminded that the Texas Securities Act prohibits fraud or fraudulent practices
in dealing in any manner in any securities whether or not the person engaging
in fraud or fraudulent practices is required to be registered. The Agency
has jurisdiction to investigate and bring enforcement actions to the full
extent authorized in the Texas Securities Act with respect to fraud or deceit,
or unlawful conduct by a dealer or agent in connection with transactions involving
securities in Texas.
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 February 12, 2004.
TRD-200400976
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 28, 2004
For further information, please call: (512) 305-8300
7 TAC §115.2
The Texas State Securities Board proposes an amendment to §115.2,
concerning application requirements. The proposal would amend the requirement
that a branch office manager must satisfy the examination qualification requirements
of the dealer and eliminate the necessity for submission of a branch-specific,
written undertaking where conditions justify a waiver of the rule. The amendment
would make it the branch manager's responsibility to restrict activities of
the branch based on the examination(s) he or she has passed. By formalizing
an existing practice in the regulation it would be possible to eliminate the
need for a dealer to request a waiver and enter into an undertaking when it
limits its branch office's activities to activities corresponding to the branch
office manager's qualification examinations.
Micheal Northcutt, Director, Registration Division, and Benette Zivley,
Director, Inspections and Compliance 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. Northcutt and Mr. Zivley 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 to alleviate the need for certain
dealers restricting activities in their branch offices to make an additional
paper filing. 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
Statutory authority: 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.
Cross-reference to Statute: Texas Civil Statutes, Articles 581-12, and
581-13.
Statutes and codes affected: Texas Civil Statutes, Article 581-13.
§115.2.Application Requirements.
(a) - (b)
(No change.)
(c)
Branch office registration and inspection. A request for
registration of a branch office of a dealer may be made upon initial application
of the dealer or by amendment to a current registration. No sales-related
activity may occur in any branch office location until such time as the dealer
receives notification from the Securities Commissioner that such location
has been approved as a branch office. The request for registration of a branch
office may be made in letter form or by the submission of Schedule E of Form
BD. The fee for registration of each branch office is $25. Simultaneous with
the request for registration of a branch office, a branch office manager must
be designated. [
(d) - (e)
(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 February 12, 2004.
TRD-200400977
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 28, 2004
For further information, please call: (512) 305-8300
7 TAC §116.1
The Texas State Securities Board proposes an amendment to §116.1,
concerning general provisions applicable to investment advisers and their
representatives. The amendment would add subsection (d) containing reminders
to investment advisers and their representatives that registration is not
required if an exemption from registration is available and that the antifraud
provisions of the Texas Securities Act will apply to their activities.
Micheal Northcutt, Director, Registration Division, and Benette Zivley,
Director, Inspections and Compliance 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. Northcutt and Mr. Zivley also have 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 investment advisers and their
representatives will be reminded that registration exemptions exist and that
the antifraud provisions of the Act apply to exempt activities. 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
Statutory authority: 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.
Cross-reference to Statute: Texas Civil Statutes, Articles 581-12, 581-12-1,
581-18, 581-23, 581-23-1, 581-23-2, 581-25-1, 581-29, 581-29-1, 581-29-2,
581-29-3, 581-32, 581-33, and 581-33- 1.
Statutes and codes affected: Texas Civil Statutes, Articles 581-12, 581-12-1,
and 581-18.
§116.1.General Provisions.
(a) - (c)
(No change.)
(d)
Availability of an exemption from registration.
The requirements detailed in this chapter do not apply to investment advisers
and investment adviser representatives that are exempt from registration as
such pursuant to the Texas Securities Act, §5, or by Board rule pursuant
to the Texas Securities Act, §5.T or §12.C, contained in Chapters
109 or 139 of this title. Persons not required to register with the Securities
Commissioner pursuant to an exemption are reminded that the Texas Securities
Act prohibits fraud or fraudulent practices in dealing in any manner in any
securities whether or not the person engaging in fraud or fraudulent practices
is required to be registered. The Agency has jurisdiction to investigate and
bring enforcement actions to the full extent authorized in the Texas Securities
Act with respect to fraud or deceit, or unlawful conduct by an investment
adviser or investment adviser representative in connection with transactions
involving securities in Texas.
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 February 12, 2004.
TRD-200400978
Denise Voigt Crawford
Securities Commissioner
State Securities Board
Earliest possible date of adoption: March 28, 2004
For further information, please call: (512) 305-8300
The
] Director [
or an Assistant Director
] of the Enforcement Division
or of the
Inspections and Compliance Division
may sign notices of hearings.
Chapter 109.
TRANSACTIONS EXEMPT FROM REGISTRATION
salesmen
], investment advisers, and
investment adviser representatives
[
agents
]. The State Securities Board, pursuant to the Texas
Securities Act, §5.T and
§12.C
[
§12.B
],
exempts a dealer,
agent
[
salesman
], investment adviser,
or
investment adviser representative
[
agent
] from the
dealer
and/or investment adviser
registration requirements of the
Texas Securities Act, when such person is engaging in the offer or sale of
securities and/or the rendering of investment advisory services to a financial
institution or other institutional investor listed in the Texas Securities
Act, §5.H, or subsection (c) of this section, where such financial institution
or other institutional investor is acting for its own account or as a bona
fide trustee of a trust organized and existing other than for the purpose
of acquiring the specific securities or the investment advisory services for
which the dealer,
agent
[
salesman
], investment adviser,
or
investment adviser representative
[
agent
] is claiming
an exemption under §5.H or subsection (c) of this section.
Chapter 115.
SECURITIES DEALERS AND AGENTS
The manager must satisfy the examination qualifications
required of the dealer before the branch office may be registered.
]
A branch office manager is not required to be registered as a NASD principal,
but must be registered in Texas as an agent and is responsible for supervision
of the activities of the branch office.
A branch office manager may not
supervise sales activities encompassing a broader range of products than those
covered by the manager's qualification examination(s).
Within 10 business
days from when a branch office manager ceases to be employed or registered
in such capacity by the dealer, a new branch office manager, qualified by
passage of the appropriate examinations, must be designated. Absent the designation
of a new branch manager to the Securities Commissioner within the 10 business
day period, the registration of a branch office whose manager ceases to be
employed as such by a dealer may be automatically terminated. The branch office
registration may be reinstated upon the designation of a qualified branch
office manager and payment of the branch office registration fee. Each branch
office registered with the Securities Commissioner is subject to unannounced
inspections at any time during normal business hours.
Chapter 116.
INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES
Chapter 139.
EXEMPTIONS BY RULE OR ORDER