TITLE 7. BANKING AND SECURITIES

PART 7. STATE SECURITIES BOARD

CHAPTER 109. TRANSACTIONS EXEMPT FROM REGISTRATION

7 TAC §109.13

The Texas State Securities Board adopts an amendment to §109.13(k), concerning limited offering exemptions, without changes to the proposed text as published in the June 8, 2018, issue of the Texas Register (43 TexReg 3676).

The amendment to §109.13 amends subsection (k) so that the exemption only applies to offers and sales of federal covered securities pursuant to Securities and Exchange Commission (SEC) Regulation D, Rule 506; removes those provisions within the subsection that are duplicated elsewhere in Regulation D or in §114.4 (relating to federal covered securities); and updates the rule to reflect the current practice followed by the Agency now that almost all of the Form D filings are made through the EFD system.

The amendment to §109.13(k) coordinates provisions of the rule with federal standards and requirements.

No comments were received regarding adoption of the amendment.

The amendment is adopted under Texas Civil Statutes, Articles 581-5.T and 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 adopted amendment affects Texas Civil Statutes, Articles 581-5 and 581-7.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 3, 2018.

TRD-201805166

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: December 23, 2018

Proposal publication date: June 8, 2018

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

CHAPTER 113. REGISTRATION OF SECURITIES

7 TAC §113.5

The Texas State Securities Board adopts an amendment to §113.5, concerning financial statements, to add a new exemption to the list of types of prior securities offerings that would not disqualify a small business issuer from being eligible to file reviewed financial statements in a later registered offering. The amendment is being adopted without changes to the proposed text as published in the June 8, 2018, issue of the Texas Register (43 TexReg 3679).

The exemption in §139.26, Intrastate Crowdfunding Exemption for SEC Rule 147A Offerings, would not disqualify a "small business issuer" from being eligible to file reviewed (rather than audited) financial statements in a subsequent registration of securities by qualification.

The amendment facilitates capital raising efforts of more small business issuers by allowing these issuers to use reviewed (rather than audited) financial statements in conjunction with a registered offering.

No comments were received regarding adoption of the amendment.

The amendment is adopted under Texas Civil Statutes, Articles 581-7.A and 581-28-1. Section 7.A(1)(f)(2) provides the Board with the authority to define and provide requirements for small business issuers permitted to submit reviewed financial statements. 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 adopted amendment affects Texas Civil Statutes, Articles 581-7 and 581-10.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 3, 2018.

TRD-201805170

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: December 23, 2018

Proposal publication date: June 8, 2018

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

CHAPTER 114. FEDERAL COVERED SECURITIES

7 TAC §114.4

The Texas State Securities Board adopts an amendment to §114.4, concerning filings and fees, without changes to the proposed text as published in the June 8, 2018, issue of the Texas Register (43 TexReg 3680). This section will not be republished.

A cross-reference was updated and the rule reflects that the EFD System is now operational.

Cross-references to other rules are accurate.

No comments were received regarding adoption of the amendment.

The amendment is adopted 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 adopted amendment affects Texas Civil Statutes, Article 581‑5.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 3, 2018.

TRD-201805172

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: December 23, 2018

Proposal publication date: June 8, 2018

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

CHAPTER 115. SECURITIES DEALERS AND AGENTS

7 TAC §115.1, §115.3

The Texas State Securities Board adopts amendments to §115.1, concerning general provisions, and §115.3, concerning examinations without changes to the proposed text as published in the June 8, 2018, issue of the Texas Register (43 TexReg 3681).

Crowdfunding portals registered pursuant to §115.20 were added to the definition of "Texas crowdfunding portal;" an unnecessary (repetitive) provision was removed; a cross-reference to the federal Securities Exchange Act of 1934 was updated; and §115.1 will now automatically recognize uniform specialized knowledge examinations administered by the Financial Industry Regulatory Authority ("FINRA") as restricted registration categories.

The examination structure in §115.3 has been simplified and aligned with the examinations administered by FINRA. The FINRA examination changes became effective October 1, 2018.

Although FINRA has eliminated some of their specialized knowledge examinations, FINRA grandfathered and continued the registration of those individuals who were registered in those restricted categories corresponding with the specialized knowledge examinations that were eliminated. Likewise, persons in Texas maintaining a restricted registration in those categories will continue to be eligible for registration in Texas in that restricted capacity following FINRA's elimination of those specialized knowledge examinations.

Section §115.1 reflects that authorized small business development entities created by Section 44 of the Texas Securities Act are included in the definition of "Texas crowdfunding portals;" cross-references to other rules are accurate; and aligns the restricted registration categories with FINRA specialized knowledge examinations. The examination program in §115.3 more closely corresponds to the uniform examinations administered by FINRA, making it easier for applicants entering the securities industry in Texas to understand which examinations are required in the registration category they are pursuing.

No comments were received regarding adoption of the amendments.

The amendments are adopted 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 amendment to §115.1 is also adopted under Texas Civil Statutes, Articles 581-12.C and 581-44. Section 12.C provides the Board with the authority to prescribe new dealer, agent, investment adviser, or investment adviser representative registration exemptions by rule. Section 44 provides the Board with the authority to adopt rules to regulate and facilitate online intrastate crowdfunding applicable to authorized small business development entities.

The adopted amendment to §115.1 affects Texas Civil Statutes, Articles 581-12, 581-13, 581-14, 591-15, 581-18, and 581-44.

The adopted amendment to §115.3 affects Texas Civil Statutes, Article 581-13.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 3, 2018.

TRD-201805175

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: December 23, 2018

Proposal publication date: June 8, 2018

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

CHAPTER 133. FORMS

7 TAC §133.33

The Texas State Securities Board adopts an amendment to §133.33, concerning uniform forms accepted, required or recommended, without changes to the proposed text as published in the June 8, 2018, issue of the Texas Register (43 TexReg 3683) and corrected in the June 22, 2018 issue of the Texas Register (43 TexReg 4261).

A cross-reference and form title were corrected.

Cross-references contained in the rule are accurate.

No comments were received regarding adoption of the amendment.

The amendment is adopted 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 adopted amendment affects Texas Civil Statutes, Article 581-5.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 3, 2018.

TRD-201805177

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: December 23, 2018

Proposal publication date: June 8, 2018

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