TITLE 7. BANKING AND SECURITIES

PART 7. STATE SECURITIES BOARD

CHAPTER 103. RULEMAKING PROCEDURE

7 TAC §103.6

The Texas State Securities Board adopts new rule §103.6, concerning Negotiated Rulemaking, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4789). The rule will not be republished.

New §103.6 implements §2-8 of the Texas Securities Act, which was added by House Bill 1535, passed during the 86th legislative session. The rule complies with an amendment to the Texas Securities Act regarding establishing a policy on the use of negotiated rulemaking and with Texas Government Code, Chapter 2008.

The public will have a clear, open, inclusive, and consistent process for the use of negotiated rulemaking in appropriate situations.

No comments were received regarding adoption of the new rule.

The new rule 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 new rule affects Texas Civil Statutes, Articles 581-2-5, 581-2-8 (effective September 1, 2019), 581-3.D (effective September 1, 2019), 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, Chapter 2008.

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 October 23, 2019.

TRD-201903865

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

CHAPTER 104. PROCEDURE FOR REVIEW OF APPLICATIONS

7 TAC §104.7

The Texas State Securities Board adopts an amendment to §104.7, concerning Preliminary Evaluation of License Eligibility, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4790). The rule will not be republished.

The amendment implements the requirements of House Bill 1342, passed during the 2019 Regular Session of the Texas Legislature, that amended Chapter 53 of the Texas Occupations Code. Specifically, the amendment alters the factors to be considered in determining whether a conviction relates to a registration or license issued by this Agency to a securities professional, adds new factors that must be considered in determining eligibility, removes other factors from consideration, and expands notice requirements.

The rule will enhance opportunities for a person to obtain gainful employment in the securities industry after the person has been convicted of an offense and discharged the sentence for the offense.

No comments were received regarding adoption of the amendment.

The amendment is adopted under Texas Civil Statutes, Article 581-28-1 and Texas Occupations Code, Chapter 53, Subchapter D. 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. Texas Occupations Code, Chapter 53, Subchapter D provides a means for a potential applicant to obtain preliminary information regarding their eligibility for an occupational license before they begin a training program for the occupation.

The adopted amendment affects Texas Occupations Code, Chapter 53, Subchapter D, and Texas Civil Statutes, Article 581‑14.

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 October 23, 2019.

TRD-201903866

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

CHAPTER 109. TRANSACTIONS EXEMPT FROM REGISTRATION

7 TAC §109.13

The Texas State Securities Board adopts an amendment to §109.13, concerning limited offering exemptions, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4791). The amended rule will not be republished.

The amendment implements recommendations made by the Texas Sunset Advisory Commission to eliminate notarization requirements for forms when the Texas Securities Act does not otherwise require the form to be sworn. Specifically, the amendment removes the requirement that Form 133.29 be sworn to correspond to the repeal of Form 133.29 and adoption of new Form 133.29. The new Form 133.29 would not require the form to be sworn.

Filing of Form 133.29 will be more efficient with the removal of the unnecessary notarization requirement and that removal will be reflected in the rule.

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, 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 October 23, 2019.

TRD-201903869

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

CHAPTER 113. REGISTRATION OF SECURITIES

7 TAC §§113.1, 113.4, 113.11

The Texas State Securities Board adopts amendments to §113.1, concerning qualification of securities; §113.4, concerning application for registration; and §113.11, concerning shelf registration of securities, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4792). The amended rules will not be republished.

The amendments delete references to an obsolete Securities and Exchange Commission (SEC) regulation and form and eliminates a reference and cross-reference to the Securities Registration Depository ("SRD") System.

The rules accurately coordinate with federal standards and requirements since outdated references have been eliminated.

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 adopted amendments affect Texas Civil Statutes, Article 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 October 23, 2019.

TRD-201903870

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

CHAPTER 114. FEDERAL COVERED SECURITIES

7 TAC §114.3, §114.4

The Texas State Securities Board adopts amendments to §114.3, concerning consents to service of process, and to §114.4, concerning filings and fees, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4793). The amended rules will not be republished.

The amendments remove an outdated reference and implement recommendations made by the Texas Sunset Advisory Commission to remove notarization and sworn under oath requirements where the Texas Securities Act does not require these forms to be sworn. Additionally, the amendments allow filings and fees by unit investment trusts ("UITs") to be made electronically through the EFD System and permits a filer to use the Uniform Notice Filing of Regulation A - Tier 2 Offering form.

Outdated references and unnecessary administrative burdens were removed, more efficiency provided by allowing electronic filings for UITs, and filing guidance provided for Regulation A+ filers.

No comments were received regarding adoption of the amendments.

The amendments 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 amendments affect 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 October 23, 2019.

TRD-201903871

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

CHAPTER 115. SECURITIES DEALERS AND AGENTS

7 TAC §§115.1, 115.2, 115.4

The Texas State Securities Board adopts amendments to §115.1, concerning general provisions, to §115.2, concerning application requirements, and to §115.4, concerning evidences of registration, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4794). The amended rules will not be republished.

The amendments implement Sunset Advisory Commission recommendations and comply with House Bill 1535, enacted by the 86th Texas Legislature, which amended the Texas Securities Act to remove the requirement that branch offices of dealers be registered and pay a branch office registration fee. Instead, branch offices of dealers are required to make a notice filing, which does not require any filing fee.

The rule aligns the branch office requirements to statutory changes by removing unnecessary administrative burdens, including eliminating a notarization requirement and a fee and by converting a registration to a notice filing.

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 adopted amendments affect Texas Civil Statutes, Articles 581‑12, 581-13, 581-18, and 581-35 (effective September 1, 2019).

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 October 23, 2019.

TRD-201903872

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §115.6

The Texas State Securities Board adopts an amendment to §115.6, concerning Registration of Persons with Criminal Backgrounds, with non-substantive changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4796). The amended rule will be republished.

The amendment implements the requirements of House Bill 1342 passed during the 2019 Regular Session of the Texas Legislature, which required licensing authorities to issue guidelines relating to the licensing of persons with criminal convictions. The amendment alters the factors considered in determining whether a conviction relates to a registered or licensed occupation, adds new factors that must be considered in determining eligibility, removes other factors from consideration, and adds new notification requirements.

The rule enhances opportunities for a person to obtain gainful employment in the securities industry after the person has been convicted of a criminal offense and discharged the sentence.

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 581‑14, and Texas Occupations Code, §53.025.

§115.6.Registration of Persons with Criminal Backgrounds.

(a) An application for registration may be denied, or a registration may be revoked or suspended, if the Securities Commissioner finds that the person has been convicted of any felony, or of a misdemeanor offense that directly relates to its duties and responsibilities. In determining whether a misdemeanor directly relates to such duties and responsibilities, the Securities Commissioner shall consider each of the following factors:

(1) the nature and seriousness of the crime;

(2) the relationship of the crime to the purposes for requiring registration of dealers and agents;

(3) the extent to which the registration applied for might offer an opportunity to engage in further criminal activity of the same type as that in which the applicant previously had been involved;

(4) the relationship of the crime to the ability or capacity required to perform the duties and discharge the responsibilities of a registered dealer or agent; and

(5) any correlation between the elements of the crime and its duties and responsibilities.

(b) After the Securities Commissioner has determined the criminal conviction directly relates to the duties and responsibilities of the license, the Securities Commissioner shall consider the following evidence in determining whether the person is eligible for a license issued by the Agency:

(1) The extent and nature of the person's past criminal activity.

(2) The age of the applicant at the time of the commission of the crime.

(3) The amount of time that has elapsed since the applicant's last criminal activity.

(4) The conduct and work activity of the applicant prior to and following the criminal activity.

(5) Evidence of the applicant's rehabilitation or rehabilitative effort while incarcerated or following release.

(6) Evidence of the person's compliance with any conditions of community supervision, parole, or mandatory supervision.

(7) Other evidence of the applicant's present fitness, including letters of recommendation, may be provided and considered, including letters from prosecution, law enforcement, and correctional officers who prosecuted, arrested, or had custodial responsibility for the applicant; the sheriff and chief of police in the community where the applicant resides; and any other persons in contact with the applicant.

(8) It shall be the responsibility of the applicant to the extent possible to secure and provide to the Securities Commissioner the letters of recommendation described by paragraph (7) of this subsection.

(c) The State Securities Board considers that the following misdemeanors directly relate to the duties and responsibilities of securities dealers and agents:

(1) any criminal violation of which fraud is an essential element or that involves wrongful taking or possession of property or services;

(2) any criminal violation of the securities laws or regulations of this state, or of any other state in the United States, or of the United States, or any foreign jurisdiction;

(3) any criminal violation of statutes designed to protect consumers against unlawful practices involving insurance, securities, commodities or commodity futures, real estate, franchises, business opportunities, consumer goods, or other goods and services; and

(4) any criminal violation involving an assault on a person.

(d) Prior to filing an application, a person may request a preliminary evaluation of license eligibility from the State Securities Board by following the procedure set out in §104.7 of this title (relating to Preliminary Evaluation of License Eligibility) and paying the requisite fee.

(e) Prior to taking any action under subsection (a) of this section to deny any application for registration, the State Securities Board shall comply with the notification requirements of Texas Occupations Code, §53.0231 Notice of Pending Denial of License, and §53.051.

(f) Prior to taking any action under subsection (a) of this section to revoke or suspend any application for registration, the State Securities Board shall comply with the notification requirements of Texas Occupations Code, §53.051.

(g) State Auditor Applicant Best Practices Guide.

(1) The State Securities Board shall post a link on its website to the Applicant Best Practices Guide, to be developed and published by the state auditor as required by Texas Occupations Code, §53.026. This guide, which shall be posted once it becomes available, shall set forth best practices for an applicant with a prior conviction to use when applying for a license.

(2) In each notice to deny, revoke, or suspend a registration or to deny a person the opportunity be examined for a registration, the State Securities Board shall include a link to the guide as described in paragraph (1) of this subsection.

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 October 23, 2019.

TRD-201903873

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §115.18

The Texas State Securities Board adopts an amendment to §115.18, concerning Special Provisions Relating to Military Applicants, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4797). The amended rule will not be republished.

The amendment implements the requirements of Senate Bill 1200, passed in the 2019 Texas Legislative Session, which authorizes a military spouse to engage in a business or occupation for which a license or registration is required for the initial three-year period without obtaining the applicable license or registration. To be eligible the military spouse must hold a current license or registration, that is in good standing, issued by another jurisdiction that has licensing or registration requirements that are substantially equivalent to the requirements for the license or registration in Texas. The amendment sets out the procedure an eligible military spouse would follow to obtain this treatment in connection with activities as a securities professional.

Regulatory and financial burdens are eased for certain military spouses, licensed and in good standing as securities professionals in another state, who are relocating to Texas.

No comments were received regarding adoption of the amendment.

The amendment is adopted under Texas Civil Statutes, Article 581-28-1 and §55.0041 of the Texas Occupations Code. 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 55.0041 of the Texas Occupations Code requires a state agency that issues a license to adopt rules to implement §55.0041 and authorizes a state agency to adopt rules to provide for the issuance of a license to a military spouse to whom the agency provides confirmation under subsection (b)(3) of §55.0041.

The adopted amendment affects Texas Civil Statutes, Articles 581‑12, 581-13, 581-14, 581-15, 581-18, and 581-35.

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 October 23, 2019.

TRD-201903874

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §115.22

The Texas State Securities Board adopts new rule §115.22, concerning electronic submission of forms and fees, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4799). The new rule will not be republished.

The new rule implements a management recommendation of the Sunset Advisory Commission to allow dealer and agent applicants the option to electronically submit certain registration documents (not presently filed through the CRD system) with the Agency.

Burdens on filers are reduced by providing online submission of application forms and supplemental documents currently being submitted on paper.

No comments were received regarding adoption of the new rule.

The new rule 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 new rule affects Texas Civil Statutes, Articles 581‑12, 581-13, 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 October 23, 2019.

TRD-201903876

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

CHAPTER 116. INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES

7 TAC §§116.1, 116.2, 116.4

The Texas State Securities Board adopts amendments to §116.1, concerning general provisions, to §116.2, concerning application requirements, and to §116.4, concerning evidences of registration. Section 116.1 was adopted with changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4801). Sections 116.2 and 116.4 were adopted without changes and will not be republished.

Subsection (b) in §116.1 has been changed to remove a comma after "investment advisers."

The amendments implement Sunset Advisory Commission recommendations and comply with House Bill 1535, enacted by the 86th Texas Legislature, which amended the Texas Securities Act to remove the requirement that branch offices of investment advisers be registered and pay a branch office registration fee. Instead, branch offices of investment advisers are required to make a notice filing, which does not require any filing fee.

The rule aligns the branch office requirements to statutory changes by removing unnecessary administrative burdens, including eliminating a notarization requirement and a fee and by converting a registration to a notice filing.

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 adopted amendments affect Texas Civil Statutes, Articles 581‑12, 581-13, 581-18, and 581-35.

§116.1.General Provisions.

(a) Definitions. Words and terms used in this chapter are also defined in §107.2 of this title (relating to Definitions). The following words and terms, when used in this chapter, shall have the following meanings unless the context clearly indicates otherwise.

(1) Applicant--A person who submits an application for registration as an investment adviser or an investment adviser representative.

(2) Branch office--Any location where one or more representatives of an investment adviser regularly conduct investment advisory services or that is held out as such.

(A) This definition excludes:

(i) any location that is established solely for customer service and/or back office type functions where no advisory services are conducted and that is not held out to the public as a branch office;

(ii) any location that is the investment adviser representative's primary residence, provided that:

(I) only one investment adviser representative, or multiple representatives who reside at that location and are members of the same immediate family, conduct business at the location;

(II) the location is not held out to the public as an office and the investment adviser representative does not meet with customers at the location;

(III) neither customer funds nor securities are handled at that location;

(IV) the investment adviser representative is assigned to a designated branch office, and such designated branch office is reflected on all business cards, stationery, advertisements, and other communications to the public by such representative;

(V) the investment adviser representative's correspondence and communications with the public are subject to the investment adviser's supervision;

(VI) electronic communications (e.g., e-mail) are made through the investment adviser's electronic system;

(VII) all orders are entered through the designated branch office or an electronic system established by the investment adviser that is reviewable at the branch office;

(VIII) written supervisory procedures pertaining to supervision of investment advisory services conducted at the residence are maintained by the investment adviser; and

(IX) a list of the residence locations are maintained by the investment adviser;

(iii) any location, other than a primary residence, that is used for investment advisory services for less than 30 business days in any one calendar year, provided the investment adviser complies with the provisions of clause (ii)(II) - (VIII) of this subparagraph;

(iv) any office of convenience, where investment adviser representatives occasionally and exclusively by appointment meet with customers, which is not held out to the public as an office;

(v) any location that is used primarily to engage in non-securities activities and from which the investment adviser representative(s) effects no more than 25 investment advisory services in any one calendar year; provided that any advertisement or sales literature identifying such location also sets forth the address and telephone number of the location from which the representative(s) conducting business at the non-branch locations are directly supervised; and

(vi) a temporary location established in response to the implementation of a business continuity plan.

(B) Notwithstanding the exclusions in subparagraph (A) of this paragraph, any location that is responsible for supervising the activities of persons associated with the investment adviser at one or more non-branch locations of the investment adviser is considered to be a branch office.

(C) The term "business day" shall not include any partial business day provided that the investment adviser representative spends at least four hours on such business day at his or her designated branch office during the hours that such office is normally open for business.

(3) Supervisor--The person named by the investment adviser to supervise the activities of a branch office and registered as an investment adviser representative.

(4) Control--The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or company, whether through the ownership of voting securities, by contract, or otherwise.

(5) In this state--

(A) A person renders services as an investment adviser "in this state" as set out in the Texas Securities Act, §12.B, if either the person or the person's agent is present in this state or the client/customer or the client/customer's agent is present in this state at the time of the particular activity. A person can be an investment adviser in more than one state at the same time.

(B) Likewise, a person renders services as an investment adviser representative "in this state" as set out in the Texas Securities Act, §12.B, whether by direct act or through subagents except as otherwise provided, if either the person or the person's agent is present in this state or the client/customer or the client/customer's agent is present in this state at the time of the particular activity. A person can be an investment adviser representative in more than one state at the same time.

(C) Rendering services as an investment adviser or as an investment adviser representative can be made by personal contact, mail, telegram, telephone, wireless, electronic communication, or any other form of oral or written communication.

(6) Investment adviser--A person who, for compensation, engages in the business of advising others, either directly or through publications or writings, with respect to the value of securities or to the advisability of investing in, purchasing, or selling securities or a person who, for compensation and as part of a regular business, issues or adopts analyses or a report concerning securities. The term does not include:

(A) a bank or a bank holding company, as defined by the Bank Holding Company Act of 1956 (12 U.S.C. §1841 et seq.), as amended, that is not an investment company;

(B) a lawyer, accountant, engineer, teacher, or geologist whose performance of the services is solely incidental to the practice of the person's profession;

(C) a dealer or agent who receives no special compensation for those services and whose performance of those services is solely incidental to transacting business as a dealer or agent;

(D) the publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular circulation; or

(E) a person whose advice, analyses, or report does not concern a security other than a security that is:

(i) a direct obligation of or an obligation the principal or interest of which is guaranteed by the United States government, or

(ii) issued or guaranteed by a corporation in which the United States has a direct or indirect interest and designated by the United States Secretary of the Treasury under Securities Exchange Act of 1934, §3(a)(12), (15 U.S.C. §78c(a)(12)), as amended, as an exempt security for purposes of that Act.

(7) Investment adviser representative or representative of an investment adviser--Each person or company who, for compensation, is employed, appointed, or authorized by an investment adviser to solicit clients for the investment adviser or who, on behalf of an investment adviser, provides investment advice, directly or through subagents, to the investment adviser's clients. The term does not include a partner of a partnership or an officer of a corporation or other entity that is registered as an investment adviser under the Texas Securities Act solely because of the person's status as an officer or partner of that entity.

(8) Rendering services as an investment adviser--Any act by which investment advisory services are provided for compensation.

(9) Solicitor--Any investment adviser or investment adviser representative who limits their activities to referring potential clients to an investment adviser for compensation.

(10) Federal covered investment adviser--An investment adviser who is registered under the Investment Advisers Act of 1940 (15 U.S.C. §80b-1 et seq.), as amended. A federal covered investment adviser is not required to be registered pursuant to the Texas Securities Act.

(11) Registered investment adviser--An investment adviser who has been issued a registration certificate by the Securities Commissioner under the Texas Securities Act, §15. (A federal covered investment adviser is not prohibited from being registered with the Securities Commissioner. If a federal covered investment adviser elects to register with the Securities Commissioner, it is subject to all of the registration requirements of the Act.)

(12) Officer--A president, vice president, secretary, treasurer, or principal financial officer, comptroller, or principal accounting officer, or any other person occupying a similar status or performing similar functions with respect to any organization or entity, whether incorporated or unincorporated.

(b) Registration of investment advisers and investment adviser representatives, and notice filings for branch offices.

(1) Requirements of registration or notice filing.

(A) Any person who renders services as an investment adviser, including acting as a solicitor, may not engage in such activity for compensation without first being registered as an investment adviser under the provisions of the Texas Securities Act or notice-filed under the provisions of paragraph (2) of this subsection. Likewise, every person employed or appointed, or authorized by such person to render services, which include the giving of investment advice or acting as a solicitor, cannot conduct such activities unless registered as an investment adviser or an investment adviser representative under the provisions of the Act, or notice-filed as an investment adviser or an investment adviser representative under the provisions of paragraph (2) of this subsection.

(B) Each branch office of a registered investment adviser in Texas must make a notice filing to become designated as a branch office of the investment adviser. A registered officer, partner, or investment adviser representative must be named as supervisor.

(2) Exemption from the registration requirements. The Board pursuant to the Texas Securities Act, §§12.C and 5.T, exempts from the registration provisions of the Act, §12, persons not required to register as an investment adviser or an investment adviser representative on or after July 8, 1997, by act of Congress in Public Law Number 104-290, Title III.

(A) Registration as an investment adviser is not required for the following:

(i) an investment adviser registered under the Investment Advisers Act of 1940, §203;

(ii) an investment adviser registered with the Securities and Exchange Commission pursuant to a rule or order adopted under the Investment Advisers Act of 1940, §203A(c);

(iii) a person not registered under the Investment Advisers Act of 1940, §203, because such person is excepted from the definition of an investment adviser under the Investment Advisers Act of 1940, §202(a)(11); or

(iv) an investment adviser who does not have a place of business located in this state and, during the preceding 12-month period, has had fewer than six clients who are Texas residents.

(B) Registration as an investment adviser representative of an investment adviser described in subparagraph (A) of this paragraph is not required for an investment adviser representative who does not have a place of business located in Texas but who otherwise engages in the rendering of investment advice in this state.

(C) Notice filing requirements and fees for investment advisers and investment adviser representatives exempted from registration pursuant to this subsection only.

(i) Initially, the provisions of subparagraphs (A) and (B) of this paragraph are available provided that the investment adviser files:

(I) Form ADV through the IARD designating Texas as a jurisdiction in which the filing is to be made; and

(II) an initial fee equal to the amount that would have been paid had the investment adviser and each investment adviser representative filed for registration in Texas.

(ii) Annually, the investment adviser files renewal fees which would have been paid had the investment adviser and each investment adviser representative been registered in Texas.

(D) Persons not required to register with the Securities Commissioner pursuant to subparagraphs (A) and (B) of this paragraph, are reminded that the Texas Securities Act prohibits fraud or fraudulent practices in dealing in any manner in any securities whether or not the person engaging in fraud or fraudulent practices is required to be registered. The Agency has jurisdiction to investigate and bring enforcement actions to the full extent authorized in the Texas Securities Act with respect to fraud or deceit, or unlawful conduct by an investment adviser or investment adviser representative in connection with transactions involving securities in Texas.

(c) Types of registrations.

(1) General registration. A general registration is a registration to render advisory services regarding all categories of securities, without limitation.

(2) Restricted registration. A restricted registration as an investment adviser or as an investment adviser representative may be issued based upon the qualifying examination(s) passed by the investment adviser or investment adviser representative.

(3) In restricted registration, the evidence of registration shall indicate that the holder thereof is entitled to act as an investment adviser, investment adviser representative, or solicitor only in the restricted capacity.

(d) Prohibition on fraud and availability of an exemption from registration. The Texas Securities Act prohibits fraud or fraudulent practices in dealing in any manner in any securities whether or not the person engaging in fraud or fraudulent practices is required to be registered. The Agency has jurisdiction to investigate and bring enforcement actions to the full extent authorized in the Texas Securities Act with respect to fraud or deceit, or unlawful conduct by an investment adviser or investment adviser representative in connection with transactions involving securities in Texas. However, the registration requirements detailed in this chapter do not apply to investment advisers and investment adviser representatives that are exempt from registration as such pursuant to the Texas Securities Act, §5, or by Board rule pursuant to the Texas Securities Act, §5.T or §12.C, contained in Chapters 109 or 139 of this title.

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 October 23, 2019.

TRD-201903877

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §116.6

The Texas State Securities Board adopts an amendment to §116.6, concerning Registration of Persons with Criminal Backgrounds, with non-substantive changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4802). The amended rule will be republished.

The amendment implements the requirements of House Bill 1342 passed during the 2019 Regular Session of the Texas Legislature, which required licensing authorities to issue guidelines relating to the licensing of persons with criminal convictions. The amendment alters the factors considered in determining whether a conviction relates to a registered or licensed occupation, adds new factors that must be considered in determining eligibility, removes other factors from consideration, and adds new notification requirements.

The rule enhances opportunities for a person to obtain gainful employment in the securities industry after the person has been convicted of a criminal offense and discharged the sentence.

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 581‑14, and Texas Occupations Code, §53.025.

§116.6.Registration of Persons with Criminal Backgrounds.

(a) An application for registration may be denied, or a registration may be revoked or suspended, if the Securities Commissioner finds that the person has been convicted of any felony, or of a misdemeanor offense that directly relates to its duties and responsibilities. In determining whether a misdemeanor conviction directly relates to such duties and responsibilities, the Securities Commissioner shall consider each of the following factors:

(1) the nature and seriousness of the crime;

(2) the relationship of the crime to the purposes for requiring registration of investment advisers and investment adviser representatives;

(3) the extent to which the registration applied for might offer an opportunity to engage in further criminal activity of the same type as that in which the applicant previously had been involved;

(4) the relationship of the crime to the ability or capacity required to perform the duties and discharge the responsibilities of a registered investment adviser or investment adviser representative; and

(5) any correlation between the elements of the crime and its duties and responsibilities.

(b) After the Securities Commissioner has determined the criminal conviction directly relates to the duties and responsibilities of the license, the Securities Commissioner shall consider the following evidence in determining whether the person is eligible for a license issued by the Agency:

(1) The extent and nature of the person's past criminal activity.

(2) The age of the applicant at the time of the commission of the crime.

(3) The amount of time that has elapsed since the applicant's last criminal activity.

(4) The conduct and work activity of the applicant prior to and following the criminal activity.

(5) Evidence of the applicant's rehabilitation or rehabilitative effort while incarcerated or following release.

(6) Evidence of the person's compliance with any conditions of community supervision, parole, or mandatory supervision.

(7) Other evidence of the applicant's present fitness, including letters of recommendation, may be provided and considered, including letters from prosecution, law enforcement, and correctional officers who prosecuted, arrested, or had custodial responsibility for the applicant; the sheriff and chief of police in the community where the applicant resides; and any other persons in contact with the applicant.

(8) It shall be the responsibility of the applicant to the extent possible to secure and provide to the Securities Commissioner the letters of recommendation described by paragraph (7) of this subsection.

(c) The State Securities Board considers that the following crimes directly relate to the duties and responsibilities of investment advisers and investment adviser representatives:

(1) any criminal violation of which fraud is an essential element or that involves wrongful taking or possession of property or services;

(2) any criminal violation of the securities laws or regulations of this state, or of any other state in the United States, or of the United States, or any foreign jurisdiction;

(3) any criminal violation of statutes designed to protect consumers against unlawful practices involving insurance, securities, commodities or commodity futures, real estate, franchises, business opportunities, consumer goods, or other goods and services; and

(4) any criminal violation involving an assault on a person.

(d) Prior to filing an application, a person may request a preliminary evaluation of license eligibility from the State Securities Board by following the procedure set out in §104.7 of this title (relating to Preliminary Evaluation of License Eligibility) and paying the requisite fee.

(e) Prior to taking any action under subsection (a) of this section to deny any application for registration, the State Securities Board shall comply with the notification requirements of Texas Occupations Code, §53.0231 Notice of Pending Denial of License, and §53.051.

(f) Prior to taking any action under subsection (a) of this section to revoke or suspend any application for registration, the State Securities Board shall comply with the notification requirements of Texas Occupations Code, §53.051.

(g) State Auditor Applicant Best Practices Guide.

(1) The State Securities Board shall post a link on its website to the Applicant Best Practices Guide, to be developed and published by the state auditor as required by Texas Occupations Code, §53.026. This guide, which shall be posted once it becomes available, shall set forth best practices for an applicant with a prior conviction to use when applying for a license.

(2) In each notice to deny, revoke, or suspend a registration or to deny a person the opportunity be examined for a registration, the State Securities Board shall include a link to the guide as described in paragraph (1) of this subsection.

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 October 23, 2019.

TRD-201903878

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §116.18

The Texas State Securities Board adopts an amendment to §116.18, concerning Special Provisions Relating to Military Applicants, with changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4804). The amended rule will be republished.

Subsection (h)(4)(B) in §116.18 has been changed to include the language "Texas, or makes a notice filing pursuant to §116.1(b)(2) of this chapter, in" to encompass persons making a notice filing rather than registering.

The amendment implements the requirements of Senate Bill 1200, passed in the 2019 Texas Legislative Session, which authorizes a military spouse to engage in a business or occupation for which a license or registration is required for the initial three-year period without obtaining the applicable license or registration. To be eligible the military spouse must hold a current license or registration, that is in good standing, issued by another jurisdiction that has licensing or registration requirements that are substantially equivalent to the requirements for the license or registration in Texas. The amendment sets out the procedure an eligible military spouse would follow to obtain this treatment in connection with activities as a securities professional.

Regulatory and financial burdens are eased for certain military spouses, licensed and in good standing as securities professionals in another state, who are relocating to Texas.

No comments were received regarding adoption of the amendment.

The amendment is adopted under Texas Civil Statutes, Article 581-28-1 and §55.0041 of the Texas Occupations Code. 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 55.0041 of the Texas Occupations Code requires a state agency that issues a license to adopt rules to implement §55.0041 and authorizes a state agency to adopt rules to provide for the issuance of a license to a military spouse to whom the agency provides confirmation under subsection (b)(3) of §55.0041.

The adopted amendment affects Texas Civil Statutes, Articles 581‑12, 581-13, 581-14, 581-15, 581-18, and 581-35.

§116.18.Special Provisions Relating to Military Applicants.

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Current registration--A registration or license that is:

(A) issued by another state, the District of Columbia, or a territory of the United States that has registration requirements that are substantially equivalent to the requirements for a Texas registration in the same capacity;

(B) in good standing; and

(C) in the same capacity as the application for registration in Texas.

(2) Good standing--A registration or license that is effective and unrestricted. A registration or license is considered to be restricted and not in good standing if it is subject to:

(A) an undertaking, special stipulations or agreements relating to payments, limitations on activity or other restrictions;

(B) a pending administrative or civil action; or

(C) an order or other written directive issued pursuant to statutory authority and procedures, including orders of denial, suspension, or revocation.

(3) Military spouse--A person who is married to a military service member.

(4) Military service member--A person who is on active duty.

(5) Military veteran--A person who has served on active duty and who was discharged or released from active duty.

(6) Active duty--Current full-time military service in the armed forces of the United States or active duty military service as a member of the Texas military forces, as defined by Government Code, §437.001, or similar military service of another state.

(7) Armed forces of the United States--The Army, Navy, Air Force, Coast Guard, or Marine Corps of the United States or a reserve unit of one of those branches of the armed forces.

(8) Military applicant--A military spouse, military service member, or military veteran.

(b) Expedited review of an application submitted by a military applicant as authorized by Occupations Code, §§55.004 - 55.006.

(1) A military applicant may use the procedure set out in this subsection if the military applicant:

(A) holds a current registration in another jurisdiction; or

(B) has been registered in Texas in the same capacity within the five years preceding the date of the application for registration.

(2) If the military applicant is not registered within five days of submitting an application, the military applicant may request special consideration of his or her application for registration by filing Form 133.4, Request for Consideration of a Registration Application by a Military Applicant, with the Securities Commissioner ("Commissioner"). Within five business days of receipt of the completed Form 133.4, the military applicant will be notified in writing of the reason(s) for the pending or deficient status assigned to the application.

(3) In addition to the waivers of examination requirements set out in §116.3 of this title (relating to Examination), the Commissioner in his or her discretion is authorized by the Board to grant full or partial waivers of the examination requirements of the Texas Securities Act, §13.D, on a showing of alternative demonstrations of competency to meet the requirements for obtaining the registration sought.

(4) A military applicant proceeding under this subsection may be registered despite having pending and/or deficient items ("deficiencies"). The deficiencies will be communicated to the military applicant in writing or by electronic means within five business days from approval of the registration.

(5) The deficiencies noted at the time the registration is granted must be resolved by the military applicant within a 12 month period. Failure to resolve outstanding deficiencies will cause the registration granted under this subsection or any renewal of such registration to automatically terminate 12 months after the date the registration was initially granted pursuant to this subsection.

(c) Waiver or refund of initial application fee and Texas Securities Law Examination fee for a military applicant as authorized by Occupations Code, §55.009.

(1) To qualify for a fee waiver or refund, the applicant must be:

(A) a military applicant who holds a current registration in another jurisdiction; or

(B) a military service member or military veteran whose military service, training, or education substantially meets all the requirements for the registration sought who submits Form 133.4, Request for Consideration of a Registration Application by a Military Applicant, with the applicant's registration application.

(2) To request a waiver or refund of a fee previously paid, the applicant must submit Form 133.19, Waiver or Refund Request by a Military Applicant.

(A) If requesting a waiver of the fee to take the Texas Securities Law Examination, Form 133.19 must be submitted when filing the request to take the Texas Securities Law Examination.

(B) If requesting a waiver of the initial application fee, Form 133.19 must be submitted with the initial application.

(C) If requesting a refund of the initial application fee or Texas Securities Law Examination fee that was paid in error, Form 133.19 must be submitted within four years from the date the fee was collected or received.

(d) Registration of persons with military experience as authorized by Occupations Code, §55.007.

(1) An applicant who is a military service member or military veteran may request special consideration of verified military service, training, or education towards registration requirements, other than an examination requirement, for the registration sought by submitting Form 133.4, Request for Consideration of a Registration Application by a Military Applicant, with the applicant's registration application.

(2) The procedure authorized by this subsection is not available to a military service member or military veteran who:

(A) is registered in another jurisdiction but such registration is not in good standing; or

(B) has been convicted of a crime that could be the basis for denial of the registration pursuant to the Texas Securities Act, §14.A.

(e) Renewals by military service members. If a military service member's registration is not renewed in a timely manner, the military service member may renew the registration pursuant to this subsection.

(1) Renewal of the registration may be requested by the military service member, the military service member's spouse, or an individual having power of attorney from the military service member. The renewal application shall include a current address and telephone number for the individual requesting the renewal.

(2) Renewal may be requested before or within two years after expiration of the registration.

(3) A copy of the official orders or other official military documentation showing that the military service member is or was on active duty shall be submitted to the Securities Commissioner along with the renewal application.

(4) A copy of the power of attorney from the military service member, if any, shall be filed with the Securities Commissioner along with the renewal application if the individual having the power of attorney executes any of the documents required in this subsection.

(5) A renewal application submitted to the Securities Commissioner pursuant to this subsection shall be accompanied by the applicable renewal fee set out in §116.8 of this title (relating to Fee Requirements).

(6) The State Securities Board will not assess any increased fee or other penalty against the military service member for failure to timely renew the registration if it is established to the satisfaction of the Securities Commissioner that all requirements of this subsection have been met.

(f) Other provisions in this chapter.

(1) Unless specifically allowed in this section, an applicant must meet the requirements for registration or renewal specified in this chapter. This includes the requirement that certain filings be made electronically through the IARD.

(2) A one-year period, instead of the 90-day period contained in §116.2 of this title (relating to Application Requirements), will apply to the automatic withdrawal of an application for which a Form 133.4 is properly filed.

(g) Additional information. An applicant receiving special consideration pursuant to this section in connection with a registration application or renewal shall provide any other information deemed necessary by the Commissioner. Such information may include, but is not limited to documentation:

(1) demonstrating status as a military spouse, service member, or military veteran;

(2) to determine whether the applicant meets licensing requirements through some alternative method;

(3) relating to prior military service, training, or education that may be credited towards a registration requirement; or

(4) to determine an investment adviser's financial responsibility or an investment adviser's or investment adviser representative's business repute or qualifications.

(h) Recognition of out-of-state license or registration of a military spouse as authorized by Occupations Code, §55.0041.

(1) A military spouse may use the procedure set out in this subsection if he or she holds a current registration in another jurisdiction.

(2) The period covered by this subsection is only for the time during which the military service member to whom the military spouse is married is stationed at a military installation in Texas. This period may not exceed three years from the date the military spouse:

(A) first becomes registered, or makes a notice filing pursuant to §116.1(b)(2) of this chapter (relating to general provisions), in Texas under Option 1, set out in paragraph (3) of this subsection; or

(B) first receives the confirmation from the Registration Division under Option 2, set out in paragraph (4)(C)(ii) of this subsection.

(3) Option 1: registration in Texas, or a notice filing made pursuant to §116.1(b)(2) of this chapter, with waiver or refund of the initial filing fee and renewal fees. If the military spouse is registered or notice filed in Texas, for all or part of the period set out in paragraph (2) of this subsection, he or she may request a waiver or refund of a fee previously paid.

(A) The initial filing fee may be waived or refunded by following the procedure set out in subsection (c) of this section, including filing Form 133.19, Waiver or Refund Request by a Military Applicant.

(B) A renewal fee may be waived by submitting Form 133.22, Waiver or Refund Request by a Military Spouse for a Renewal Fee, at the time the renewal is submitted. A refund of a renewal fee that was paid in error, is requested by submitting Form 133.22 within four years from the date the fee was collected or received.

(4) Option 2: notification and authorization of activity without registration, or notice filing pursuant to §116.1(b)(2) of this chapter. Upon confirmation under subparagraph (C) or (D) of this paragraph, the military spouse will be considered to be notice filed in Texas. Such notice filing expires at the end of the calendar year.

(A) A military spouse may engage in activity without a license or registration under the authority of Occupations Code, §55.0041, and this paragraph, only for the period specified in paragraph (2) of this subsection.

(B) A military spouse who becomes ineligible under Occupations Code, §55.0041, or paragraph (1) or (2) of this subsection prior to the three year period identified in paragraph (2), must notify the Securities Commissioner of such ineligibility within 30 days and immediately cease activity until such time as he or she is registered in Texas, or makes a notice filing pursuant to §116.1(b)(2) of this chapter, in the appropriate capacity to conduct activity in Texas.

(C) Before engaging in an activity requiring registration in Texas, or a notice filing pursuant to §116.1(b)(2) of this chapter, in Texas, the military spouse must initially:

(i) provide notice of his or her intent to engage in activity in Texas and specify the type of activity by filing with the Securities Commissioner:

(I) Form 133.23, Request for Recognition of Out-Of-State License or Registration by a Military Spouse;

(II) proof of his or her residency in Texas; and

(III) a copy of his or her military identification card.

(ii) receive confirmation that the Registration Division:

(I) has verified the individual's license in another jurisdiction; and

(II) authorizes the individual to engage in the specified activity.

(D) To continue to conduct business without registration in Texas, or a notice filing pursuant to §116.1(b)(2) of this chapter, under Option 2, after the expiration of the initial confirmation under subparagraph (C)(ii), the military spouse must renew annually on the same schedule as renewals of registration. This enables the Registration Division to determine that the military spouse remains eligible under Occupations Code, §55.0041, to continue to conduct securities activities in Texas without being registered.

(i) A renewal is made by submitting the same documents identified in subparagraph (C)(i) of this paragraph.

(ii) A renewal is not effective until the military spouse receives confirmation that the Registration Division:

(I) has verified the individual's license in another jurisdiction; and

(II) authorizes the individual to engage in specified activity.

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 October 23, 2019.

TRD-201903879

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §116.22

The Texas State Securities Board adopts new rule §116.22, concerning electronic submission of forms and fees, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4806). The new rule will not be republished.

The new rule implements a management recommendation of the Sunset Advisory Commission to allow investment adviser and investment adviser representative applicants the option to electronically submit certain registration documents (not presently filed through the IARD system) with the Agency.

Burdens on filers are reduced by providing online submission of application forms and supplemental documents currently being submitted on paper.

No comments were received regarding adoption of the new rule.

The new rule 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 new rule affects Texas Civil Statutes, Articles 581‑12, 581-13, 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 October 23, 2019.

TRD-201903880

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

CHAPTER 133. FORMS

7 TAC §§133.5, 133.6, 133.8, 133.12, 133.13, 133.16, 133.18, 133.26, 133.29, 133.30, 133.34 - 133.36

The Texas State Securities Board adopts the repeal of thirteen rules, concerning forms adopted by reference. Specifically, the Board adopts the repeal of §133.5, a form concerning Secondary Trading Exemption Notice; §133.6, a form concerning Secondary Trading Exemption Renewal Notice; §133.8, a form concerning Power of Attorney; §133.12, a form concerning Renewal Application for Mutual Funds and Other Continuous Offerings; §133.13, a form concerning Application for Renewal Permit; §133.16, a form concerning Texas Crowdfunding Portal Withdrawal of Registration; §133.18, a form concerning Certification of Balance Sheet by Principal Financial Officer; §133.26, a form concerning Request for Determination of Money Market Fund Status for Federal Covered Securities; §133.29, a form concerning Intrastate Exemption Notice; §133.30, a form concerning Information Concerning Projected Market Prices and Related Market Information; §133.34, a form concerning Undertaking Regarding Non-Issuer Sales; §133.35, a form concerning Application for Designation as Matching Service under §109.15; and §133.36, a form concerning Request for Reduced Fees for Certain Persons Registered in Multiple Capacities, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4807). The repealed rules will not be republished.

The repeals implement recommendations made by the Texas Sunset Advisory Commission to eliminate notarization and sworn under oath requirements for forms when the Texas Securities Act does not otherwise require the form to be sworn. New replacement forms that are certified to be true and correct and signed under penalty of perjury are being concurrently adopted.

Thirteen existing forms containing burdensome notarization requirements or sworn under oath requirements have been eliminated so they can be replaced.

No comments were received regarding adoption of the repeals.

The repeals are adopted under Texas Civil Statutes, Articles 581-28-1 and 581-42.B. 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 42.B provides the Board with the authority to adopt rules reducing fees for persons registered in two or more capacities.

The repeals affect Texas Civil Statutes, Articles 581-5, 581-7, 581-8, 581-12, 581-18, and 581-42.

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 October 23, 2019.

TRD-201903881

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §§133.5, 133.6, 133.8, 133.12, 133.13, 133.16, 133.18, 133.26, 133.29, 133.30, 133.34 - 133.36

The Texas State Securities Board adopts thirteen rules, concerning forms adopted by reference. Specifically, the Board adopts new §133.5, a form concerning Secondary Trading Exemption Notice; §133.6, a form concerning Secondary Trading Exemption Renewal Notice; §133.8, a form concerning Consent to Service; §133.12, a form concerning Renewal Application for Mutual Funds and Other Continuous Offerings; §133.13, a form concerning Application for Renewal Permit; §133.16, a form concerning Texas Crowdfunding Portal Withdrawal of Registration; §133.18, a form concerning Certification of Balance Sheet by Principal Financial Officer; §133.26, a form concerning Request for Determination of Money Market Fund Status for Federal Covered Securities; §133.29, a form concerning Intrastate Exemption Notice; §133.30, a form concerning Information Concerning Projected Market Prices and Related Market Information; §133.34, a form concerning Undertaking Regarding Non-Issuer Sales; §133.35, a form concerning Application for Designation as Matching Service under §109.15; and §133.36, a form concerning Request for Reduced Fees for Certain Persons Registered in Multiple Capacities, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4808). The new rules will not be republished.

The new sections adopt by reference forms that were updated to implement a recommendation made by the Texas Sunset Advisory Commission to remove the notarization requirements from forms when the Texas Securities Act doesn't otherwise require the form to be sworn. Instead, the new forms are certified to be true and correct and are signed under penalty of perjury.

The thirteen new forms provide more efficiency in the filing of forms with the Board by removing unnecessary administrative burdens.

No comments were received regarding adoption of the new rules.

The new rules are adopted under Texas Civil Statutes, Articles 581-28-1 and 581-42.B. 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 42.B provides the Board with the authority to adopt rules reducing fees for persons registered in two or more capacities.

The new rules affect Texas Civil Statutes, Articles 581-5, 581-7, 581-8, 581-12, 581-18, and 581-42.

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 October 23, 2019.

TRD-201903883

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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

7 TAC §133.22, §133.23

The Texas State Securities Board adopts new §133.22, a form concerning Waiver or Refund Request by a Military Spouse for a Renewal Fee, and new §133.23, a form concerning Request for Recognition of Out-Of-State License or Registration by a Military Spouse, without changes to the proposed text as published in the September 6, 2019, issue of the Texas Register (44 TexReg 4810). The new rules will not be republished.

The new sections adopt by reference forms that were created to correspond with amendments to §115.18 and §116.18, which are concurrently adopted and implement the requirements of Senate Bill 1200, passed in the 2019 Texas Legislative Session. The new forms allow military spouses to apply for a waiver or refund of a renewal fee and allow a military spouse eligible for non-registration to provide the Agency with information needed to determine eligibility for such treatment.

Regulatory and financial burdens are eased for eligible military spouses providing them with forms to either obtain a waiver or refund of renewal fees or to practice securities business in Texas without being registered.

No comments were received regarding adoption of the new rules.

The new rules are adopted under Texas Civil Statutes, Article 581-28-1 and §55.0041 of the Texas Occupations Code. 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 55.0041 of the Texas Occupations Code requires a state agency that issues a license to adopt rules to implement §55.0041 and authorizes a state agency to adopt rules to provide for the issuance of a license to a military spouse to whom the agency provides confirmation under subsection (b)(3) of §55.0041.

The new rules affect Texas Civil Statutes, Articles 581‑12, 581-13, 581-14, 581-15, 581-18, and 581-35.

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 October 23, 2019.

TRD-201903884

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

For further information, please call: (5122) 305-8303

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 September 6, 2019, issue of the Texas Register (44 TexReg 4810). The amended rule will not be republished.

The amended rule adds the Regulation A - Tier 2 form to the list of uniform forms accepted by the Agency. This form is used for making the required notice filings for this type of federal covered securities. A related change to §114.4 is concurrently adopted.

More efficiency is provided for Regulation A+ filings by permitting Regulation A+ filers to use a uniform form, accepted in multiple jurisdictions, to notice file when offering this type of federal covered securities in Texas.

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 October 23, 2019.

TRD-201903882

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: November 12, 2019

Proposal publication date: September 6, 2019

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