A meeting of the State Securities Board was held on May 16, 2018, in Room 320, Thomas Jefferson Rusk State Office Building, at 10:00 a.m. Those present were: Beth Ann Blackwood, Chair; E. Wally Kinney, Member; Member; David A. Appleby, Member; G. Alan Waldrop, Member; Miguel Romano, Jr., Member; Travis J. Iles, Securities Commissioner; Clinton Edgar, Deputy Commissioner; Tommy Green, Director, Inspections and Compliance Division; Derek Lauterjung, Director, Staff Services Division; Joseph J. Rotunda, Director, Enforcement Division; Marlene K. Sparkman, General Counsel; Robert Elder, Communications and Investor Education; Emily Diaz, Assistant Director, Registration Division; Cheryn Netz, Assistant General Counsel; and Sonia Fergerson, Executive Assistant. Also attending were Kim Lopez-Gonzales, Christopher Smith, Alan Leonard, Taj Sheikh, and Walter Bryan.

Chair Blackwood called the meeting to order at 10:20 a.m.

Minutes of the November 14, 2017, meeting were approved.

The Board voted to adopt the following proposed rules:

1. Creating new §139.26, concerning intrastate crowdfunding exemption for SEC Rule 147A offerings.

2. Adopting new Form 133.21, concerning crowdfunding exemption notice for SEC Rule 147A offerings using §139.26.

3. Amending §115.19, concerning Texas crowdfunding portal registration and activities, and §115.20, concerning Texas crowdfunding portal registration and activities of small business development entities, to add SEC Rule 147A offerings as ones that may be offered and sold through the registered portal’s Internet website.

4. Adopting new Form 133.15, Texas crowdfunding portal registration, and new Form 133.20, Texas crowdfunding portal registration by an authorized small business development entity, to correspond to the changes being made to §115.19 and §115.20 adding SEC Rule 147A offerings.

5. Repeal of Form 133.15, Texas crowdfunding portal registration, and Form 133.20, Texas crowdfunding portal registration by an authorized small business development entity.

6. Amending §113.14, concerning statements of policy, to add the NASAA Statement of Policy (SOP) for Use of Electronic Offering Documents and Electronic Signatures; update the rule to reflect revisions to the NASAA SOPs for Preferred Stock, Promoters’ Equity Investment, Specificity in Use of Proceeds, and Unequal Voting Rights; and update the Agency’s website homepage.

7. Creating new §115.21, System Addressing Suspected Financial Exploitation of Vulnerable Customers Pursuant to the Texas Securities Act, Section 45.

8. Creating new §116.21, System Addressing Suspected Financial Exploitation of Vulnerable Customers Pursuant to the Texas Securities Act, Section 45.

The Board voted to publish for public comment the following new rule proposals:

1. Amending §109.13(k), concerning limited offering exemptions, to limit its applicability to SEC Rule 506 offerings and to remove the portions applicable solely to SEC Rule 505 offerings in light of the SEC’s repeal of Rule 505.

2. Amending §113.5(c), concerning financial statements, to add the new crowdfunding rule (§139.26) to the list of types of prior securities offerings that would not disqualify an issuer from being eligible to file reviewed financial statements in a later registered offering.

3. Amending §114.4(b) and (d), concerning filings and fees, to update a cross-reference and reflect that the EFD System is operational.

4. Amending §115.1, concerning general provisions, to update the definition of “crowdfunding portal,” update a cross-reference to a federal statute, and to better align the
restricted registration categories with the specialized knowledge examinations administered by FINRA.

5. Amending §115.3(a) and (b), concerning examination, to reflect changes in FINRA examinations and better coordinate the required examinations, especially the specialized
knowledge ones, with those administered by FINRA.

6. Amending §133.33(c), concerning uniform forms accepted, required, or recommended, to update a cross-reference and form name.

The Commissioner discussed Section 35.A.1 fees. The Board voted to decrease Section 35.A(1) fees for the filing of any original, amended or renewal application to sell or dispose of securities from $100 to $70. The change to the Section 35.A(1) fees would also include fees for notice filings for federal covered securities that are subject to the Section 35.A(1) fee pursuant to Board Rule 114.4. The decrease in Section 35.A(1) fees will become effective July 1, 2018.

The Board received information on two prospective grants that are pending before the Investor Protection Trust. The first is for $9,680 (for printing 2,500 copies of the 2018 Investor Guide) and the second is for $6,000 (to develop the Investor Guide to Cryptocurrencies). The Board also acknowledged and accepted a grant of $6,942 from the Investor Protection Trust for the translation of the 2018 Investor Guide into Spanish and related materials on the website.

The Audit Committee gave a report on the plan prepared by Garza/Gonzalez & Associates for the Fiscal Year 2018 internal audit, and the Board voted to approve the Internal Audit Plan for Fiscal Year 2018. The Board voted to retain the current committee members, E. Wally Kinney and David A. Appleby, to serve on the Audit Committee and work with the Board’s internal auditor.

The Commissioner gave a report on the Agency’s budget and performance measures.

The Commissioner gave a general update on Agency operations.

The meeting was then adjourned.