TITLE 7. BANKING AND SECURITIES

PART 7.  STATE SECURITIES BOARD

CHAPTER 107. TERMINOLOGY

7 TAC §107.2

The Texas State Securities Board adopts an amendment to §107.2, concerning Definitions, without changes to the proposed text as published in the November 6, 2020, issue of the Texas Register (45 TexReg 7822). The amended rule will not be republished.

The amendment aligns the definitions of individual accredited investor, institutional accredited investor, and qualified institutional buyer, with the definitions of accredited investor and qualified institutional buyer used by the Securities and Exchange Commission (SEC). The SEC recently adopted amendments to these terms, which became effective December 8, 2020. The amendment also moves the definitions of qualified institutional buyer set forth elsewhere in the rules to this section, changes the definition of Form D to reference the current SEC Form D, and expands the definition of the EFD System from accepting only Form D filings to include additional types of electronic filings as permitted by Board Rule.

Definitions in the rule are coordinated with federal standards and requirements, and the amendment facilitates the Agency's ability to accept additional types of electronic filings as permitted by Board rule.

No comments were received regarding the 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 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 affects Texas Civil Statutes, Articles 581-5, 581-7, 581-12, and 581-12-1.

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 March 1, 2021.

TRD-202100847

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: March 21, 2021

Proposal publication date: November 6, 2020

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

CHAPTER 109. TRANSACTIONS EXEMPT FROM REGISTRATION

7 TAC §§109.4 - 109.6

The Texas State Securities Board adopts amendments to §109.4, concerning Securities Registration Exemption for Sales to Financial Institutions and Certain Institutional Investors; §109.5, concerning Dealer Registration Exemption for Sales to Financial Institutions and Certain Institutional Investors; and §109.6, concerning Investment Adviser Registration Exemption for Investment Advice to Financial Institutions and Certain Institutional Investors.

The proposals were published in the November 6, 2020, issue of the Texas Register (45 TexReg 7823). The amendments to §109.4 and §109.5 were adopted with changes to the published proposal and will be republished. The changes consisted of adding the missing closing parenthesis in §109.4(b)(2) and in §109.5(b)(2). The amendment to §109.6 was adopted without changes and will not be republished.

The Securities and Exchange Commission (SEC) recently amended its definitions of accredited investors and qualified institutional buyers, which became effective December 8, 2020. The amendments incorporate the SEC definitions relating to accredited investors and qualified institutional buyers in these sections by cross-referencing §107.2, concerning Definitions, which was concurrently amended to incorporate the SEC's amendments to these definitions.

The rules are coordinated with federal standards and requirements.

No comments were received regarding adoption of the amendments.

The amendments are adopted under Texas Civil Statutes, Articles 581-5.T, 581-12.C, and 581-28-1. Section 5.T provides that the Board may prescribe new exemptions by rule. 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 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 amendments affect Texas Civil Statutes, Articles 581-5, 581-7, 581-12, and 581-12-1.

§109.4.Securities Registration Exemption for Sales to Financial Institutions and Certain Institutional Investors.

(a) Availability. The exemption from securities registration provided by the Texas Securities Act, §5.H, or this section is not available if the financial institution or other institutional investor named therein is in fact acting only as agent for another purchaser that is not a financial institution or other institutional investor listed in §5.H or this section. These exemptions are available only if the financial institution or other institutional investor named therein is acting for its own account or as a bona fide trustee of a trust organized and existing other than for the purpose of acquiring the specific securities for which the seller is claiming the exemption.

(b) Sales to certain institutional investors. The State Securities Board, pursuant to the Act, §5.T, exempts from the securities registration requirements of the Act, §7, the offer and sale of any securities to any of the following persons:

(1) an "institutional accredited investor," as that term is defined in §107.2 of this title (relating to Definitions), excluding, however, any self-directed employee benefit plan with investment decisions made solely by persons that are "individual accredited investors" as defined in §107.2 of this title;

(2) any "qualified institutional buyer" (as that term is defined in §107.2 of this title (relating to Definitions)); and

(3) a corporation, partnership, trust, estate, or other entity (excluding individuals) having net worth of not less than $5 million, or a wholly-owned subsidiary of such entity, as long as the entity was not formed for the purpose of acquiring the specific securities.

(c) Financial statements. For purposes of determining a purchaser's total assets or net worth under this section, the issuer and the seller may rely upon the entity's most recent annual balance sheet or other financial statement which shall have been audited by an independent accountant or which shall have been verified by a principal of the purchaser.

§109.5.Dealer Registration Exemption for Sales to Financial Institutions and Certain Institutional Investors.

(a) Availability. The exemption from dealer and agent registration provided by the Texas Securities Act, §5.H, or this section is not available if the financial institution or other institutional investor named therein is in fact acting only as agent for another purchaser that is not a financial institution or other institutional investor listed in §5.H or this section. These exemptions are available only if the financial institution or other institutional investor named therein is acting for its own account or as a bona fide trustee of a trust organized and existing other than for the purpose of acquiring the specific securities for which the dealer or agent is claiming the exemption.

(b) Sales to certain institutional investors. The State Securities Board, pursuant to the Act, §5.T and §12.C, exempts a person from the dealer and agent registration requirements of the Act, when the person sells or offers for sale any securities to any of the following persons:

(1) an "institutional accredited investor," as that term is defined in §107.2 of this title (relating to Definitions), excluding, however, any self-directed employee benefit plan with investment decisions made solely by persons that are "individual accredited investors" as defined in §107.2 of this title;

(2) any "qualified institutional buyer" (as that term is defined in §107.2 of this title (relating to Definitions)); and

(3) a corporation, partnership, trust, estate, or other entity (excluding individuals) having net worth of not less than $5 million, or a wholly-owned subsidiary of such entity, as long as the entity was not formed for the purpose of acquiring the specific securities.

(c) Financial statements. For purposes of determining a purchaser's total assets or net worth under this section, the issuer and the seller may rely upon the entity's most recent annual balance sheet or other financial statement which shall have been audited by an independent accountant or which shall have been verified by a principal of the purchaser.

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 March 1, 2021.

TRD-202100848

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: March 21, 2021

Proposal publication date: November 6, 2020

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

7 TAC §109.15

The Texas State Securities Board adopts the repeal of §109.15, concerning Designated Matching Services, without changes to the proposed text as published in the November 6, 2020, issue of the Texas Register (45 TexReg 7824). A related rule, §133.35, concerning Application for Designation as Matching Service, has also been concurrently repealed. The repeal will not be republished.

The purpose of the repeal is to repeal a rule that is no longer in use and has become obsolete.

A rule that is no longer needed has been eliminated.

No comments were received regarding the repeal.

The repeal is adopted under Texas Civil Statutes, Articles 581-12.C and 581-28-1. 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 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 581-12 and 581-18.

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 March 1, 2021.

TRD-202100846

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: March 21, 2021

Proposal publication date: November 6, 2020

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

CHAPTER 133. FORMS

7 TAC §133.35

The Texas State Securities Board adopts the repeal of §133.35, which adopts by reference the Application for Designation as Matching Service under §109.15 form, without changes to the proposed text as published in the November 6, 2020, issue of the Texas Register (45 TexReg 7825). The form is used to apply to become a designated matching service pursuant to §109.15, which has also been concurrently repealed. The repeal will not be republished.

The purpose of the repeal is to repeal a form that is no longer in use and has become obsolete.

A form that is no longer needed has been eliminated.

No comments were received regarding the repeal.

The repeal is adopted under Texas Civil Statutes, Articles 581-12.C and 581-28-1. 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 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 581-12 and 581-18.

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 March 1, 2021.

TRD-202100845

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: March 21, 2021

Proposal publication date: November 6, 2020

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