The State Securities Board was created pursuant to The Securities Act. The Act provides for the registration of securities, registration of firms and individuals who sell securities or render investment advice, examination of registered firms, and enforcement of the Act through administrative, civil, and criminal actions. The Securities Commissioner is charged with the administration of the provisions of the Act. John Morgan was appointed the Securities Commissioner in 2011.
The mission of the State Securities Board is to protect Texas investors. Consistent with that purpose, the Agency seeks to ensure a free and competitive securities market for Texas, increase investor confidence, and thereby encourage the formation of capital and the creation of new jobs in Texas. Texas continues to be one of the major securities markets in the nation and is eagerly sought out by national and international securities issuers.
The Agency is organized into the following Divisions: Enforcement, Registration, Inspections and Compliance, General Counsel, and Staff Services. The main office of the State Securities Board is located at 208 E. 10th Street in Austin. The Agency maintains branch offices in Dallas, Houston, Lubbock, Corpus Christi, and San Antonio.
The Agency is overseen by a Board of five members who are appointed by the Governor, with the advice and consent of the Senate, for six-year overlapping terms. Board members serve without compensation, but are entitled to per diem and reimbursement of actual travel expenses while performing their official duties.
The Board members periodically update the Board Rules to ensure that investors remain adequately protected and that unreasonable burdens on legitimate capital raising activities are avoided.
The Agency maintains a professional staff of attorneys, accountants, and financial examiners to address the variety of issues presented in registration, examination, and enforcement matters and to make prompt and accurate recommendations and decisions concerning securities offerings and plans of business for dealing in securities.
As in every year since its creation, the State Securities Board remains a net contributor to the General Revenue Fund of the state. In FY 2015 the Agency's budget was approximately $7 million and its operations deposited approximately $225 million in revenue, primarily from fees for the registration and filing of securities and the firms and individuals who sell securities or provide investment advice.
Since its inception, the State Securities Board has engaged in vigorous enforcement of The Securities Act. The Enforcement Division is charged with detection and prevention of violations of the Act, including fraud committed in connection with the sale of securities, illegal sales of unregistered securities, and sales of securities by unregistered dealers. The Division is also charged with initiating appropriate administrative, civil, or criminal action against firms or individuals that violate provisions of the Act.
The Enforcement Division places significant emphasis on criminal prosecution of individuals who engage in fraud in connection with the sale of securities. Criminal referrals are made to district attorneys and United States attorneys throughout the State, and the Division routinely assists prosecutors in drafting indictments, presenting cases to grand juries, and the trial of criminal cases. During the 2014 fiscal year enforcement attorneys were appointed as special prosecutors in both state and federal criminal cases.
In other matters, the Enforcement Division uses investigative proceedings and administrative actions to detect and prevent violations of the Securities Act. In appropriate instances, the Division refers evidence to the Texas Attorney General's Office to obtain civil injunctions and receiverships to halt illegal sales of securities and to secure restitution for investors.
More about the Enforcement Division.
The Registration Division reviews all applications to register securities for sale in Texas. The primary function of this review is to ensure that investors have access to full and fair disclosure of all relevant investment information, that the promoter and investor share in the results of the venture, prices being asked for the securities are reasonable, conflicts of interest are minimized, and that promotional expenses are reasonable. For issuers seeking a multi-state registration of securities, the Agency participates in a coordinated review program administered by the North American Securities Administrators' Association. In addition to establishing uniform review standards, coordinated review expedites the registration process, saving the issuer time and money. The Registration Division also processes notice filings to sell securities in the state where registration is not required under the law. In Fiscal Year 2015 the Agency processed 58,000 securities registration and notice filings.
Registration Division staff answer questions from the public concerning securities registration requirements and the status of securities registration applications. The staff also provides assistance to entrepreneurs and small businesses regarding financing alternatives.
Additionally, the Registration Division reviews and processes the applications for registration and renewal of registration for firms and individuals selling securities or offering investment advice in Texas. The review process for registration includes a thorough examination of each application with an emphasis on the proposed plan of business, financial condition, and disciplinary history of applicants.
Dealer and Investment Adviser registrants are required to maintain a registered officer or partner and must register branch offices in Texas locations where business is conducted. A supervisor must be designated for each such office. In order for the Agency to maintain proper oversight, each registrant is required to timely amend its registration information when an event occurs that causes an answer to a question on the application to become incorrect. This ongoing reporting and review process, with attendant amendments to registration, is handled by the Registration Division.
The State Securities Board participates in the Central Registration Depository system (CRD) and Investment Adviser Registration Depository (lARD) system. Together, these systems, developed by the North American Securities Administrators Association (NASAA), the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA), allow dealers and investment advisers to apply for registration of their agents and investment adviser representatives in all desired states via a single form filed at a central location. Fees collected through the CRD/ IARD system are transmitted to the state daily via electronic funds transfer.
As of August 31, 2015, there were 310,807 individuals and businesses authorized by the Agency to sell securities or render investment advice in Texas.
More about Dealer & Investment Adviser Registration.
More about the Regulation of Securities.
Inspections and Compliance Division
The Inspections and Compliance Division conducts periodic examinations of the books and records of registered firms. The primary focus is on state-registered investment advisers who have main offices in Texas as well as dealers who are not members of the Financial Industry Regulatory Authority (FINRA); however, all registered firms may be subject to such examinations.
The Inspections and Compliance Division also investigates complaints against persons and firms registered under the Securities Act; reviews and investigates disciplinary information filed with the Agency to ensure that registered persons and firms remain in compliance with all applicable securities laws and regulations; and pursues appropriate actions for violations of the securities laws and regulations, thereby helping to ensure that Texas investors are protected from fraud. Each year, the Division seeks to examine approximately 25% of Texas dealers and investment advisers not regularly examined by other authorities.
More about Inspections & Compliance.
General Counsel Division
To help ensure that persons subject to regulation are fairly and adequately apprised of the provisions of the Act and Board Rules governing their activities, the General Counsel Division provides formal and informal interpretive advice addressing a wide variety of issues.
The General Counsel Division provides internal legal advice to the Board, the Securities Commissioner, and staff regarding correct interpretations of the Act and Board Rules and compliance with various other state laws, such as the Public Information Act and the Administrative Procedure Act, and certain federal laws, such as the Securities Act of 1933 and the Securities Exchange Act of 1934. The Division also works with the Board, Commissioner, staff and other interested parties in drafting securities-related legislation and Board Rules that interpret the Act.
Staff Services Division
The Staff Services Division performs essential administrative functions of the Agency, including budgeting, accounting, purchasing, accounts payable, inventory, personnel, employee benefits, and data processing. The Division is also responsible for the preparation and distribution of reports required by state government.
The Agency has undertaken a series of investor education initiatives to assist Texans in making informed investment decisions that affect their financial future. This effort has included the distribution of: teaching guides to educators throughout the state; financial planning guides for Texas families; press releases describing recent enforcement actions; and investor alerts explaining steps investors can take to protect themselves from fraudulent schemes. Many of these materials have also been prepared in Spanish.
More about Investor Education.