7 TAC §139.25

The Texas State Securities Board proposes an amendment to §139.25, concerning the intrastate crowdfunding exemption. The proposed amendment is identical to the one published in the February 17, 2017, issue of the Texas Register (42 TexReg 647), which has expired and has been automatically withdrawn.

Subsection (f) would be amended to permit the use of a segregated account in lieu of an escrow account for offerings up to $1 million conducted pursuant to this exemption.

The financial institution that has acted as escrow agent for most of the intrastate crowdfunding offerings has decided to stop providing that service and the staff is unaware of another financial institution that has opted to generally enter this area. This would leave crowdfunding offerings seeking to raise between $100,000 and $1 million without access to an escrow account as required by the rule. The proposed amendment would permit these offerings to use a segregated account in lieu of an escrow account.

Clint Edgar, 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. Edgar also has 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 keep intrastate crowdfunding viable in Texas for offerings over $100,000. There will be no adverse economic effect on micro- or small businesses. Since the rule will have no adverse economic effect on micro- or small businesses, preparation of an economic impact statement and a regulatory flexibility analysis is not required. 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 must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 or faxed to (512) 305-8336. Comments may also be submitted electronically to: In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

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 proposal affects Texas Civil Statutes, Articles 581-12, 581-13, 581-14, 581-15, and 581-18.

§139.25.Intrastate Crowdfunding Exemption.

(a) - (e) (No change.)

(f) Escrow or segregated account to safeguard investor and issuer funds.

(1) (No change.)

(2) A segregated account may be used in lieu of an escrow account if the maximum offering amount is $1 million [$100,000] or less.

(3) - (6) (No change.)

(g) - (m) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 18, 2017.


John Morgan

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 1, 2017

For further information, please call: (512) 305-8301