A meeting of the State Securities Board was held on October 22, 2019, in Room 320, Thomas Jefferson Rusk State Office Building, at 10:00 a.m. Those present were: E. Wally Kinney, Member; Miguel Romano, Jr., Member; Robert Belt, Member; Melissa Tyroch, 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; Tina Lawrence, Assistant Director, Enforcement Division; Emily Diaz, Assistant Director, Registration Division; Shaun Yarroll, Assistant Director, Registration Division; Cheryn Netz, Assistant General Counsel; Misty Smith, Assistant Director, Staff Services Division; Betsy Hodges, Assistant Director, Inspections and Compliance Division; Robert Elder, Communications and Investor Education; Cristi Ochoa, Attorney, Inspections and Compliance Division; Sonia Ferguson, Executive Assistant; and Lena Proft, Staff Attorney, General Counsel Division.  Also attending were Rene Gonzalez, Kim Lopez-Gonzales, and Christopher Smith.

Chair Kinney called the meeting to order at 10:02 a.m.

Minutes of the August 1, 2019, meeting were approved.

The Board voted to excuse Member Koncaba’s absence from the meeting.

The Chair decided to take Item 6 on the Agenda first.  The Audit Committee reported on the Agency’s Internal Audit Report for Fiscal Year 2019 prepared by Garza/Gonzalez & Associates, and the Board reviewed the report.

The Board voted to adopt the following published rule proposals:   

1.     Amendments to §115.1(b), concerning general provisions; §115.2(c), concerning application requirements, and §115.4(a), concerning evidences of registration; to remove the registration requirement for branch offices and replace it with a notification.

2.     Amendments to §116.1(b), concerning general provisions; §116.2(c), concerning application requirements; and §116.4(a), concerning evidences of registration; to remove the registration requirement for branch offices and replace it with a notification requirement.

3.     New §115.22, concerning electronic submission of applications and fees, to provide dealer and agent applicants with the option to submit certain documents and fees electronically.

4.     New §116.22, concerning electronic submission of applications and fees, to provide investment adviser and investment adviser representative applicants with the option to submit certain documents and fees electronically.

5.     Amendment to §109.13(l)(9)(A), concerning limited offering exemptions, to remove the requirement that Form 133.29 be sworn.

6.     Amendment to §114.4(a), (b), and (f), concerning filings and fees, to remove the requirement that these notice filings be verified under oath.

7.     Amendment to §115.2(a)(4), concerning application requirements, to permit a dealer applicant’s principal financial officer to certify that the balance sheet submitted with the dealer’s application is true and correct.

8.     Amending §116.2(a)(2)(B), concerning application requirements, to permit an investment adviser applicant’s principal financial officer to certify that the balance sheet submitted with the adviser’s application is true and correct.

9.     New Forms to be signed under penalty of perjury and certified as true and correct, rather than notarized:

        Form 133.5, Secondary Exemption Trading Notice;

        Form 133.6, Secondary Trading Exemption Renewal Notice;

        Form 133.8, Consent to Service;

        Form 133.12, Renewal Application for Mutual Funds and Other Continuous Offerings;

        Form 133.13, Application for Renewal Permit;

        Form 133.16, Texas Crowdfunding Portal Withdrawal of Registration;

        Form 133.18, Certification of Balance Sheet by Principal Financial Officer;

        Form 133.26, Request for Determination of Money Market Fund Status for Federal Covered Securities;

        Form 133.29, Intrastate Exemption Notice;

        Form 133.30, Information Concerning Projected Market Prices and Related Market Information;

        Form 133.34, Undertaking Regarding Non-Issuer Sales;

        Form 133.35, Application for Designation as Matching Service Under §109.15;

        Form 133.36, Request for Reduced Fees for Certain Persons Registered in Multiple Capacities.

        Additionally, the title for Form 133.8 would also be changed to reflect that it operates as a consent to service, required  by Section 8 of the Texas Securities Act.

10.    Repeal current forms that are being replaced:

        Form 133.5, Secondary Exemption Trading Notice;

        Form 133.6, Secondary Trading Exemption Renewal Notice;

        Form 133.8, Power of Attorney;

        Form 133.12, Renewal Application for Mutual Funds and Other Continuous Offerings;

        Form 133.13, Application for Renewal Permit;

        Form 133.16, Texas Crowdfunding Portal Withdrawal of Registration;

        Form 133.18, Certification of Balance Sheet by Principal Financial Officer;

        Form 133.26, Request for Determination of Money Market Fund Status for Federal Covered Securities;

        Form 133.29, Intrastate Exemption Notice;

        Form 133.30, Information Concerning Projected Market Prices and Related Market Information;

        Form 133.34, Undertaking Regarding Non-Issuer Sales;

        Form 133.35, Application for Designation as Matching Service Under §109.15;

        Form 133.36, Request for Reduced Fees for Certain Persons Registered in Multiple Capacities.

11.    New §103.6, concerning negotiated rulemaking.

12.     Amending §113.1, concerning qualification of securities, to delete the reference to SEC Regulation B, which has been repealed. Amending §113.4(c), concerning application for registration, to eliminate paragraph (3) relating to the Securities Registration Depository (“SRD”) System and remove a cross-reference to the eliminated paragraph. Amending §113.11(b)(1), concerning shelf registration of securities, to remove the reference to SEC Form S-2, which the SEC no longer uses.

13.     Amending §114.3, concerning consents to service of process, to remove subsection (c) relating to the SRD System. Amending §114.4(a) and (b), concerning filings and fees, to permit unit investment trusts to file Form NF electronically through the EFD System, and to add a new paragraph (b)(5) to specifically address federal covered securities offered pursuant to SEC Regulation A, Tier 2 (“Regulation A+”).

14.     Amending §133.33, concerning uniform forms accepted, required, or recommended, to add the Regulation A - Tier 2 form to the list of uniform forms accepted.

15.     Amending §115.18, concerning special provisions relating to military applicants, to implement S.B. 1200 relating to military spouses.

16.     Amending §116.18, concerning special provisions relating to military applicants, to implement S.B. 1200 relating to military spouses.

17.     New Forms 133.22, Waiver or Refund Request by a Military Spouse for a Renewal Fee, and 133.23, Request for Recognition of Out-Of-State License or Registration by a Military Spouse.

18.     Amending §115.6, concerning registration of persons with criminal backgrounds, to implement H.B. 1342.

19.     Amending §116.6, concerning registration of persons with criminal backgrounds, to implement H.B. 1342.

20.     Amending §104.7, concerning preliminary consideration of license eligibility, to implement H.B. 1342.

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

1.      New §127.4, concerning prosecutorial assistance.

2.     New Chapter 102. Complaint Process.

        §102.1. Policy.

        §102.2. Definitions.

        §102.3. Filing Complaints.

        §102.4. Processing of Complaints.

        §102.5. Prioritization of Complaint Investigations.

        §102.6. Complaint Resolution.

3.     New §127.2, concerning alternative dispute resolution.

4.     New §115.23, concerning cybersecurity breach notification.

5.     New §116.23, concerning cybersecurity breach notification.

The Board voted to re-adopt the following rule chapters:

1.     Chapter 109. Transactions Exempt from Registration.

2.     Chapter 111. Securities Exempt from Registration.

3.     Chapter 139. Exemptions by Rule or Order.

The Board acknowledged and accepted a grant from the Investor Protection Trust for $44,700 for updating The Investor Guide for 2020, printing 10,000 copies of the English version, translation of the Guide into Spanish, and creation of an e-book version of the publication.  The Board also received information on a prospective grant for $8,334 from the Investor Protection Trust (for partial funding the first season of the Friends Talk Money Podcast) and voted to preapprove that grant.

The Commissioner discussed Section 35.A.1 fees.

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

The Commissioner gave a general update on Agency operations.

A draft resolution honoring recently-retired Board Chair Beth Ann Blackwood was provided to the Board.  The Board voted to adopt the resolution and directed that the resolution be included in the Minutes.  The resolution will be attached to the Minutes of this meeting.

The meeting was then adjourned at 12:44 p.m.

RESOLUTION

    WHEREAS, THE HONORABLE BETH ANN BLACKWOOD, of Dallas, Texas, served the public of Texas with honor and distinction as Chair of the Texas State Securities Board from July 3, 2008 through August 7, 2019, and during her term as a member of the Board from March 5, 2004, until her retirement on August 21, 2019; and

    WHEREAS Ms. Blackwood served with dedication, honesty, and wisdom in such office, and brought with it sound knowledge and sympathetic understanding of the issues facing both investors and the business community; and

    WHEREAS, Ms. Blackwood carried her participation in marathons to her service on the State Securities Board, being both the longest serving Board member and Board Chair in the history of the Agency, having served alongside thirteen other Board members and four Securities Commissioners; and

    WHEREAS, Ms. Blackwood has contributed many hours of her valuable time and talent over her fifteen years of service on the Board contributing to the growth of the capital markets in Texas and well-being of the Texas investing public through her thoughtful consideration when formulating Agency policies and unselfish devotion to duty;
                            
    WHEREAS, Ms. Blackwood’s calm and diplomatic leadership style and consistent support of the Agency as an institution during her eleven years as Chair have enabled the Agency to weather significant changes while preserving and enhancing the reputation of the Agency;

    WHEREAS, Texas is a better place for both investors and entrepreneurs as a result of Ms. Blackwood’s leadership and service on the Board;

    WHEREAS, All who have known Ms. Blackwood at the Texas State Securities Board know her as kind and thoughtful, admire her sense of humor and colorful personality, and are proud to have her friendship; and

    WHEREAS, Her high standards of integrity and devotion to duty will continue to provide inspiration and guidance to all who were privileged to serve with or alongside her;

    NOW, THEREFORE, BE IT RESOLVED That the Board Members, her successor in office, and all personnel of the Texas State Securities Board hereby acknowledge our deep respect and admiration for Beth Ann Blackwood, and thank her for the contributions to the success of this Agency and acknowledge the lasting debt of gratitude the citizens of Texas owe her for her outstanding and distinguished service to the State of Texas as a Member and Chair of this Board.

    AND BE IT FURTHER RESOLVED that this Resolution be included in the official minutes of the October 22, 2019, meeting of the State Securities Board.