TITLE 7. BANKING AND SECURITIES

PART 7. STATE SECURITIES BOARD

CHAPTER 101. GENERAL ADMINISTRATION

7 TAC §101.6

The Texas State Securities Board proposes an amendment to §101.6, concerning Historically Underutilized Business Program. The amendment would update references to the Comptroller of Public Accounts' rules found at 34 TAC, Part 1 Comptroller of Public Accounts, Chapter 20 Statewide Procurement and Support Services, Subchapter D Socio-Economic Program, Division 1 Historically Underutilized Businesses, §§20.281 - 20.298. This amendment is necessary to reflect changes the Comptroller of Public Accounts made to 34 TAC §§20.281 - 20.298.

Derek Lauterjung, Director, Staff Services 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. Lauterjung has also determined that for each year of the first five years the rule is in effect, the public benefit expected as a result of adoption of the proposed amendment will be accurate and current information regarding the Board's participation in the Historically Underutilized Business Program. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the rule will have no adverse economic effect on micro- or small businesses or rural communities, 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.

Mr. Lauterjung has determined that for the first five-year period the rule is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; and it does not positively or negatively affect the state's economy. Additionally, the proposed amendment does not create a new regulation, or expand, limit, or repeal an existing regulation.

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 proposal@ssb.texas.gov. 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 and Texas Government Code, §2161.003. 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 2161.003 requires that a state agency adopt the rules of the Comptroller of Public Accounts regarding Historically Underutilized Businesses under Government Code §2161.002 as its own.

The proposed amendment affects Texas Government Code, §2161.003.

§101.6.Historically Underutilized Business Program.

The State Securities Board adopts by reference the rules of the Comptroller of Public Accounts relating to the Historically Underutilized Business Program, contained in Title 34, Part 1, Chapter 20, Subchapter D [B], of the Texas Administrative Code.

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 December 3, 2018.

TRD-201805137

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: January 13, 2019

For further information, please call: (512) 305-8303

CHAPTER 103. RULEMAKING PROCEDURE

7 TAC §103.5

The Texas State Securities Board proposes an amendment to §103.5, concerning Petitions, to add a cross-reference to §2001.021 of the Texas Government Code, which is implemented by this provision. In connection with any proposed rulemaking (new or amendment), the Government Code requires the Agency to engage in certain analyses of the economic, fiscal, employment, and cost impact of the proposal. To help facilitate the Staff being able to compile this information in connection with rulemaking requested through the petition process, paragraph (5) would be added to the rule to collect that information, to the extent that it is available to the petitioner.

Travis J. Iles, Securities Commissioner; Clint Edgar, Deputy Securities Commissioner; Tommy Green, Director, Inspections and Compliance Division; Derek Lauterjung, Director, Staff Services Division; Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division; and Joseph Rotunda, Director, Enforcement 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. Iles, Mr. Edgar, Mr. Green, Mr. Lauterjung, Ms. Diaz, Mr. Yarroll, and Mr. Rotunda have determined that for each year of the first five years the rule is in effect the public benefit expected as a result of the adoption of the proposed amendment will be that the public will have accurate information regarding the petition process and the petitioner will be alerted of the cost information that the Agency will need to go forward with proposing a new rule or rule change. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the rule will have no adverse economic effect on micro- or small businesses or rural communities, 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.

Mr. Iles, Mr. Edgar, Mr. Green, Mr. Lauterjung, Ms. Diaz, Mr. Yarroll, and Mr. Rotunda have determined that for the first five-year period the rule is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; and it does not positively or negatively affect the state's economy. Additionally, the proposed amendment does not create a new regulation, or expand, limit, or repeal an existing regulation.

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 proposal@ssb.texas.gov. 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, and Texas Government Code, §2001.021. 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 2001.021 requires state agencies to adopt rules prescribing the form for a rulemaking petition and the procedure for its submission, consideration, and disposition.

The proposed amendment affects Texas Civil Statutes, Articles 581-2-5, 581-4.N, 581-4.P, 581-5.T, 581-7.A, 581-8, 581-12.C, 581-12-1.B, 581-13.D, 581-19.B, 581-28.A, 581-28.B, 581-28-1.B, 581-28-1.D, 581-42.A, 581-42.B., 581-44, 581-45.N, and Texas Government Code §2001.021.

§103.5.Petitions.

Pursuant to Texas Government Code, §2001.021, any [Any] interested person may petition the Commissioner requesting the adoption of a rule, and within 60 days the Commissioner will initiate rulemaking proceedings, or deny the petition in writing, stating his or her reasons therefor. The petition must set forth the following:

(1) The text of the proposed rule and a brief explanation thereof.

(2) A statement of the statutory or other authority under which the rule is proposed.

(3) A statement of the particular statute or statutes and sections thereof to which the proposed rule relates.

(4) A concise statement of the principal reasons for adoption of the rule; and the date submitted and by whom.

(5) If available to the petitioner(s), the following analyses related to the adoption of the rule:

(A) an analysis supporting the draft government growth impact statement required by Texas Government Code, §2001.0221;

(B) an analysis supporting the economic impact statement required by Texas Government Code, §2006.002;

(C) an analysis supporting the regulatory flexibility analysis required by Texas Government Code, §2006.002;

(D) an analysis supporting the takings impact assessment required by Texas Government Code, §2007.043;

(E) an analysis supporting the local employment impact statement required by Texas Government Code, §2001.024(a)(6);

(F) an analysis supporting the cost-benefit analysis required by Texas Government Code, §2001.024(a)(5);

(G) an analysis supporting the fiscal note required by Texas Government Code, §2001.024(a)(4); and

(H) if Texas Government Code, §2001.0045(b) would apply to the adopted rule:

(i) identify the proposed repeal or amendment that is being suggested to offset costs of the adopted rule; and

(ii) explain the reasoning behind the estimate of the costs that would be offset by the proposed repeal or amendment.

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 December 3, 2018.

TRD-201805140

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: January 13, 2019

For further information, please call: (512) 305-8303

CHAPTER 104. PROCEDURE FOR REVIEW OF APPLICATIONS

7 TAC §104.5

The Texas State Securities Board proposes an amendment to §104.5, concerning Registration of Dealers and Investment Advisers--Review of Applications, to recognize the recent reorganization of the Registration Division and to more closely mirror the review process in §104.4 for securities registration.

Clint Edgar, Deputy Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division; have determined that for the first five-year period the proposed rule is in effect there will be no foreseeable fiscal implications for the state or local government as a result of enforcing or administering the rule.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll also have determined that for each year of the first five years the proposed rule is in effect, the public benefit expected as a result of adoption of the proposed rule will be to accurately reflect the review process for registrations. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed rule will have no adverse economic effect on micro- or small businesses or rural communities, 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.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have determined that for the first five-year period the proposed rule is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the proposed rule's applicability; and it does not positively or negatively affect the state's economy. The rule as proposed does not create a new regulation, and it does not expand, limit or repeal an existing regulation.

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. Comments should be sent to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167, or sent by facsimile to (512) 305-8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. 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 and Texas Government Code §2005.003. 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 2005.003 requires state agencies issuing permits to adopt procedural rules for processing permit applications and issuing permits.

The proposal affects Texas Civil Statutes, Articles 581‑13 and 581-15, and Texas Government Code §2005.003.

§104.5.Registration of Dealers and Investment Advisers--Review of Applications.

(a) - (d) (No change.)

(e) Within 14 days of the division staff's recommendation, any remaining issues shall be addressed by the Director (or an Assistant Director) of the Registration Division and the Deputy Commissioner. Additional comments, if any, raised at this stage of review must be communicated to the applicant immediately.

(f) - (g) (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 December 3, 2018.

TRD-201805141

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: January 13, 2019

For further information, please call: (512) 305-8303

CHAPTER 113. REGISTRATION OF SECURITIES

7 TAC §113.14

The Texas State Securities Board proposes an amendment to §113.14, concerning Statements of Policy. The amendment would adopt by reference certain updated North American Securities Administrators Association ("NASAA") statements of policy ("SOPs") that were amended by NASAA on May 6, 2018. The amendment would also correct the placement of an apostrophe in subsection (b)(6).

Clint Edgar, Deputy Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division; have determined that for the first five-year period the rule is in effect there will be no foreseeable fiscal implications for the state or local government as a result of enforcing or administering the rule.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll also have determined that for each year of the first five years the rule is in effect the public benefit expected as a result of adoption of the proposed amendment will be to increase uniformity with other states when reviewing applications to register securities. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the rule will have no adverse economic effect on micro- or small businesses or rural communities, 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.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have determined that for the first five-year period the rule is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; and it does not positively or negatively affect the state's economy. The rule as proposed does not create a new regulation, and it does not expand, limit or repeal an existing regulation.

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. Comments should be sent to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167, or sent by facsimile to (512) 305-8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. 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, Article 581‑7.

§113.14.Statements of Policy.

(a) (No change.)

(b) In order to promote uniform regulation, the following NASAA Statements of Policy shall apply to the registration of securities:

(1) Corporate Securities Definitions, as amended by NASAA on May 6, 2018 [March 31, 2008];

(2) (No change.)

(3) Loans and Other Material Affiliated Transactions, as amended by NASAA on May 6, 2018 [March 31, 2008];

(4) - (5) (No change.)

(6) Promoters' [Promoter's] Equity Investment, as amended by NASAA on September 11, 2016;

(7) - (8) (No change.)

(9) Underwriting Expenses, Underwriter's Warrants, Selling Expenses, and Selling Security Holders, as amended by NASAA on May 6, 2018 [March 31, 2008];

(10) Unsound Financial Condition, as amended by NASAA on May 6, 2018 [March 31, 2008];

(11) - (21) (No change.)

(c) (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 December 3, 2018.

TRD-201805142

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: January 13, 2019

For further information, please call: (512) 305-8303

CHAPTER 133. FORMS

7 TAC §133.17

The Texas State Securities Board proposes the repeal of §133.17, which adopts by reference the Crowdfunding Exemption Notice form used to claim the exemption in §139.25, which is concurrently being proposed for repeal. The form and exemption are being repealed because they have been replaced with a new, more-flexible offering exemption and form to coordinate with the recently-adopted SEC Rule 147A.

Clint Edgar, Deputy Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division; have determined that for the first five-year period the repeal is in effect, there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the repeal.

Mr. Edgar, Ms. Diaz and Mr. Yarroll also have determined that for each year of the first five years the repeal is in effect, the public benefit expected as a result of adoption of the proposed repeal will be that a form that is no longer needed will be eliminated. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the repeal will have no adverse economic effect on micro- or small businesses or rural communities, 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 repeal as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have determined that for the first five-year period the repeal of the rule adopting by reference the form is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; it does not positively or negatively affect the state's economy; it does not create a new regulation; and it does not limit or expand an existing regulation. The proposal repeals an existing form that is used to claim an exemption that has also been proposed for repeal.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed repeal 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 proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The repeal is proposed under Texas Civil Statutes, Article 581-5.T and Article 581-28-1. Section 5.T provides that the Board may prescribe new exemptions by rule. 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 repeal affects Texas Civil Statutes, Article 581-7.

§133.17.Crowdfunding Exemption Notice.

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 December 3, 2018.

TRD-201805145

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: January 13, 2019

For further information, please call: (512) 305-8303

CHAPTER 139. EXEMPTIONS BY RULE OR ORDER

7 TAC §139.25

The Texas State Securities Board proposes the repeal of §139.25, concerning Intrastate Crowdfunding Exemption. The exemption is being repealed because it has been replaced with a new, more-flexible offering exemption (§139.26) to coordinate with the recently-adopted SEC Rule 147A.

Clint Edgar, Deputy Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division; have determined that for the first five-year period the repeal is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the repeal.

Mr. Edgar, Ms. Diaz and Mr. Yarroll also have determined that for each year of the first five years the repeal is in effect the public benefit anticipated as a result of enforcing the repeal will be that an exemption that is no longer needed will be eliminated. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the repeal will have no adverse economic effect on micro- or small businesses or rural communities, 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 repeal as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have determined that for the first five-year period the repeal of the rule is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; it does not positively or negatively affect the state's economy; it does not create a new regulation; and it does not limit or expand an existing regulation. The proposed repeal repeals an existing regulation that has been replaced with a new, more-flexible intrastate offering exemption.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed repeal 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 proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The repeal 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 repeal affects Texas Civil Statutes, Articles 581-7 and 581-12.

§139.25.Intrastate Crowdfunding Exemption.

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 December 3, 2018.

TRD-201805153

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: January 13, 2019

For further information, please call: (512) 305-8303