TITLE 7. BANKING AND SECURITIES

PART 7. STATE SECURITIES BOARD

CHAPTER 103. RULEMAKING PROCEDURE

7 TAC §103.6

The Texas State Securities Board proposes new §103.6, concerning Negotiated Rulemaking, pursuant to House Bill (HB) 1535 addition of §2-8 of the Texas Securities Act, during the 86th legislative session, which becomes effective September 1, 2019. The rule is proposed in order to comply 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.

Travis J. Iles, Securities Commissioner; and Clint Edgar, Deputy Securities Commissioner, have determined that for the first five-year period the proposed rule is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the proposed rule.

Mr. Iles and Mr. Edgar have also determined that for each year of the first five years the proposed rule is in effect, the public benefit expected as a result of adoption of the proposed rule will be a clear, open, inclusive, and consistent process for the use of negotiated rulemaking in appropriate situations. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed rule will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the rule as proposed. There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The new rule is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposed 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.

§103.6.Negotiated Rulemaking.

(a) Policy. It is the Board's policy to encourage the use of negotiated rulemaking in appropriate situations. When the Securities Commissioner finds that a rule to be proposed is likely to be complex, controversial, or affect disparate groups, the Commissioner may propose to engage in negotiated rulemaking in accordance with the Government Code, Chapter 2008.

(b) Appointment and duties of convener.

(1) The Deputy Securities Commissioner or the Deputy's designee shall serve as the negotiated rulemaking convener.

(2) The convener shall assist in identifying persons who are likely to be affected by a proposed rule, including those who oppose issuance of a rule. The convener shall discuss the items listed in Government Code, §2008.052(c), with those persons or their representatives.

(3) The convener shall then recommend to the Commissioner whether negotiated rulemaking is a feasible method to develop the proposed rule and shall report on the relevant considerations, including those listed in §2008.052(d).

(c) Notice of intent to engage in negotiated rulemaking. After considering the convener's recommendation and report, the Commissioner may direct the Agency Staff to engage in negotiated rulemaking in accordance with the provisions of Government Code, Chapter 2008, and authorize the Agency Staff to perform the duties and requirements set forth Chapter 2008, including providing any required notices, establishing a negotiated rulemaking committee, and appointing the members of the committee, and appointing a facilitator.

(d) Duties of the negotiated rulemaking committee and facilitator.

(1) The facilitator shall preside over meetings of the negotiated rulemaking committee and assist the committee in establishing procedures for conducting negotiations and in attempting to arrive at a consensus on the proposed rule.

(2) At the conclusion of negotiations, the negotiated rulemaking committee shall send a written report to the Commissioner as provided in Government Code §2008.056(d).

(e) Notice and comment rulemaking. After considering the negotiated rulemaking committee's report, if the Commissioner intends to proceed with the rulemaking process, the Commissioner shall present the proposed rule to the Board for consideration in accordance with Government Code, Chapter 2001, Subchapter B.

(f) Rulemaking coordinator. The Board's Deputy Commissioner, or designee, shall act as the designated negotiated rulemaking coordinator to coordinate the implementation of the policy set out in subsection (a) of this section, serve as a resource for any staff training or education needed to implement negotiated rulemaking procedures, and collect data to evaluate the effectiveness of the implementation of negotiated rulemaking procedures.

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902803

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes an amendment to §104.7, concerning Preliminary Evaluation of License Eligibility. This section contains rulemaking required by Chapter 53 of the Texas Occupations Code (Consequences of Criminal Conviction), Subchapter D, which provides a means for potential applicants to obtain preliminary information regarding their eligibility for an occupational license before they begin a training program for the occupation. The amendment would implement the requirements of House Bill 1342 (HB 1342), passed during the 2019 Regular Session of the Texas Legislature, that amended Chapter 53. The changes made by HB 1342 apply to a request for a preliminary evaluation of license eligibility submitted on or after September 1, 2019.

Specifically, the proposed amendment would alter the factors to be considered in determining whether a conviction relates to a registration or license issued by this Agency to a securities professional, add new factors that must be considered in determining eligibility and remove other factors from consideration. The proposed amendment would also include specific references to the new or amended sections of Chapter 53 of the Texas Occupations Code that will require additional information to be included in the determination letter concerning factors considered that served as the basis for potential ineligibility and a link to an Applicant Best Practices Guide, once such guide is developed and published by the state auditor.

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

Mr. Edgar, Mr. Green, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendment is in effect the public benefit expected as a result of adoption of the proposed amendment will be to 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. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendment will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendment as proposed. There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section repeal in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

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

§104.7.Preliminary Evaluation of License Eligibility.

(a) (No change.)

(b) Factors considered. After determining a conviction directly relates to a license issued by the Agency, the [The] Agency considers the following evidence in determining whether the person is eligible for a license issued by the Agency [the present fitness of an applicant who has been convicted of a crime]. Accordingly, the requestor should provide information on the following:

(1) - (5) (No change.)

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

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

(8) [(7)] It shall be the responsibility of the requestor to the extent possible to secure and provide to the Agency the letters of recommendation described by paragraph (7) of this subsection [of the prosecution, law enforcement, and correctional authorities as required under this section. The requestor shall also furnish proof to the Agency that he or she has maintained a record of steady employment and has supported his or her dependents and has otherwise maintained a record of good conduct and has paid all outstanding court costs, supervision fees, fines, and restitution as may have been ordered in all criminal cases in which he or she has been convicted].

(c) (No change.)

(d) Determination of eligibility; letter.

(1) (No change.)

(2) If the Agency determines that the requestor is ineligible for a license, the Agency shall issue a letter which complies with the requirements of Texas Occupations Code, §53.026(b) and §53.104(b), setting out each basis for potential ineligibility and the Agency's determination as to eligibility.

(3) - (4) (No change.)

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902804

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes an amendment to §109.13, concerning limited offering exemptions. The amendment would implement 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, subsection (l) would be amended to remove the reference in subparagraph (9)(A) to Form 133.29 requiring that the notice be sworn to correspond to the repeal of Form 133.29 and adoption of new Form 133.29 which is concurrently proposed for repeal and adoption in order to remove the requirements from the notice form that it be sworn. The new Form 133.29 would not require the notice form to be sworn.

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

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendment is in effect the public benefit expected as a result of adoption of the proposed amendment will be to provide more efficiency in the filing of Form 133.29 with the Texas State Securities Board by removing unnecessary administrative burdens. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendment will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendment as proposed. There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendment is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Articles 581‑5 and 581-7.

§109.13.Limited Offering Exemptions.

(a) - (k) (No change.)

(l) Intrastate limited offering exemption. In addition to sales made under the Texas Securities Act, §5.I, the State Securities Board, pursuant to the Act, §5.T, exempts from the registration requirements of the Act, §7, any offer or sale of any securities by the issuer itself, or by a registered dealer acting as agent for the issuer provided all offers and sales are made pursuant to an offering made and completed solely within this state and all the conditions in paragraphs (1) - (11) of this subsection are satisfied.

(1) - (8) (No change.)

(9) Notice filing requirements.

(A) An issuer who is not a registered securities dealer and who does not sell securities by or through a registered securities dealer shall file a [sworn] notice on Form 133.29 not less than 10 business days before any sale claimed to be exempt under this subsection may be consummated for sales under paragraph (1)(B) of this subsection, in whole or in part to individual accredited investors, as defined in §107.2 of this title.

(B) - (E) (No change.)

(10) - (11) (No change.)

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902805

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes amendments to §113.1, concerning qualification of securities; §113.4, concerning application for registration; and §113.11, concerning shelf registration of securities. Section 113.1 would be amended to delete the reference to Securities and Exchange Commission (SEC) Regulation "B" that has been repealed as obsolete due to the availability of other exemptions.

Section 113.4 would be amended to eliminate paragraph (c)(3), which references the consent to service of process filed through the Securities Registration Depository ("SRD") System, which was never implemented and to eliminate the cross-reference to paragraph (c)(3), contained in paragraph (c)(1).

Section 113.11 would be amended to remove the reference to SEC Form S-2 in paragraph (b)(1), which is no longer in use.

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

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendments are in effect the public benefit expected as a result of adoption of the proposed amendments will be to accurately coordinate provisions of the rules with federal standards and requirements and to eliminate outdated references. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendments will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendments as proposed. There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed sections in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendments are proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Article 581‑7.

§113.1.Qualification of Securities.

A Regulation "A" filing [and "B" filings] with the SEC is a form [are forms] of exemption and cannot be the basis for a filing for registration by coordination with the State Securities Board under the Texas Securities Act, §7.C. Such a registration [registrations with the Board] should meet the requirements as outlined in the Act, §7.A or, if federal covered securities, the requirements in §114.4 of this title (relating to Filings and Fees).

§113.4.Application for Registration.

(a) - (b) (No change.)

(c) Consents to service of process.

(1) Except as provided in paragraph [paragraphs ] (2) [and (3)] of this subsection, all applications to register securities issued by an issuer which is organized under the laws of any other state, territory, or government, or domiciled in any state other than Texas, must include with the application a written consent to service of process duly executed by an authorized agent of the issuer appointing the Securities Commissioner irrevocably its true and lawful attorney upon whom process in any action or proceeding against such issuer arising out of any transaction subject to the Texas Securities Act may be served with the same effect as if such issuer were organized or created under the laws of Texas and had been lawfully served with process herein.

(2) (No change.)

[(3) The consent to service of process required for applications to register securities filed through the Securities Registration Depository System will satisfy, in all respects, the requirements governing consents to service of process set out in this subsection and in the Texas Securities Act, §8.]

(d) - (e) (No change.)

§113.11.Shelf Registration of Securities.

(a) (No change.)

(b) Certain debt offerings by substantial issuers.

(1) This subsection (b) applies to the registration of debt securities of issuers eligible to use SEC Form [S-2 or] S-3 (17 Code of Federal Regulations [§239.12 and] §239.13), to register debt securities with the SEC under SEC Rule 415.

(2) - (3) (No change.)

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902806

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes amendments to §114.3, concerning consents to service of process, and to §114.4, concerning filings and fees. Section 114.3 would be amended to remove subsection (c), which refers to the Securities Registration Depository ("SRD") System. The development of the SRD System, originally proposed by NASAA, has been abandoned.

Section 114.4 would be amended in part to implement recommendations made by the Texas Sunset Advisory Commission to remove notarization and sworn under oath requirements from the Agency's forms where the Texas Securities Act does not require these forms to be sworn. Specifically, subsections (a) and (f) of §114.4 would be amended to remove the references in subparagraph (1)(A) of each subsection to a notice filing being verified under oath to reflect the current requirements of the Registration Division for filings pursuant to this rule.

Subsection (b) of §114.4 would be amended to remove the reference in subparagraph (4)(A) to a notice filing being verified under oath to correspond to the proposed repeal of Form 133.5 and proposed adoption of new Form 133.5 which is concurrently proposed for repeal and adoption in order to remove the notarization requirements from the form.

In addition to the amendments to implement Sunset recommendations, a new subparagraph (C) would be added under subsection (a)(1) of §114.4 to address filings by unit investment trusts ("UITs"), which would allow them at their option to be filed and fees to be paid electronically through the EFD System. UIT filers would continue to have the option to file directly with the Agency.

A new paragraph (5) would also be added under subsection (b) to specifically address federal covered securities offered pursuant to SEC Regulation A, Tier 2 ("Regulation A+"). Currently these offerings fall within the catch-all for federal covered securities provided by subsection (a). To assist issuers in more readily locating the filing and fee requirements for Regulation A+ offerings, a specific provision covering these offerings would be provided in new paragraph (b)(5). No change would be made to the filing or fee requirements of this rule, other than to permit a filer to use the Uniform Notice Filing of Regulation A - Tier 2 Offering form instead of page 1, Items 1-6 of the Form U-1. The Regulation A - Tier 2 form includes a consent to service of process.

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

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendments are in effect the public benefit expected as a result of adoption of the proposed amendment to §114.3 will be to eliminate an outdated reference in §114.3; the public benefit expected as a result of the proposed amendments to §114.4 will be to provide more efficiency in the filing of Form 133.5 with the Texas State Securities Board by removing unnecessary administrative burdens; and to provide more efficiency for UIT filings and Regulation A+ filings by allowing electronic filings for UIT filings, by setting forth a specific filing requirement for Regulation A+ filings and by permitting Regulation A+ filers to use a different form for these filings. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendments will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required.

There is no anticipated economic cost to persons who are required to comply with the amendments as proposed. The EFD System charges users a one-time $155 system use fee for each Form NF-UIT notice filing submitted through the System. This one-time system fee covers the initial filing at the trust level, as well as any corresponding amendment and renewal filings subsequently made through the EFD System. Since the use of the EFD System by UIT filers is optional, there is no anticipated economic cost to the filers to comply with the proposed amendment to §114.4(a)(1). There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendments are proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Articles 581‑5 and 581-7.

§114.3.Consents to Service of Process.

(a) - (b) (No change.)

[(c) The consent to service of process filed through the Securities Registration Depository System will satisfy, in all respects, the requirements governing consents to service of process set out in this section and in the Texas Securities Act, §8.]

§114.4.Filings and Fees.

(a) Generally. Unless otherwise provided in subsection (b) of this section, prior to the initial offer of the federal covered securities in this state, the issuer shall provide to the Securities Commissioner:

(1) a notice filing, [verified under oath by the applicant,] consisting of:

(A) page 1 of a Form U-1, Uniform Application to Register Securities, with items 1-6 completed, or a document providing substantially the same information; [or]

(B) if the issuer is an investment company, Form NF, Uniform Investment Company Notice Filing; or [.]

(C) if the issuer is a unit investment trust, Form NF may be filed and the payment of the filing fee, set out in paragraph (3) of this subsection, paid electronically through the EFD System.

(2) - (3) (No change.)

(b) Special circumstances.

(1) - (3) (No change.)

(4) Secondary trading. A registered dealer or issuer that chooses to comply with the Texas Securities Act, §5.O(9), by filing a form, shall provide to the Securities Commissioner, prior to the sale of the securities in this state:

(A) a notice filing, [verified under oath by the applicant,] consisting of page 1 of a Form U-1, Uniform Application to Register Securities, with items 1-6 completed, or a document providing substantially the same information;

(B) - (D) (No change.)

(5) SEC Regulation A, Tier 2. Prior to the initial offer of the federal covered securities in this state, the issuer shall provide to the Securities Commissioner:

(A) a notice filing on either:

(i) Uniform Notice Filing of Regulation A - Tier 2 Offering form; or

(ii) page 1 of a Form U-1, Uniform Application to Register Securities, with items 1-6 completed, or a document providing substantially the same information;

(B) a consent to service of process signed by the issuer, if required by §114.3 of this title (relating to Consents to Service of Process), and if the notice filing required by subparagraph (A) of this paragraph is not made on the Uniform Notice Filing of Regulation A - Tier 2 Offering form; and

(C) the fee provided for in the Act, §35.A(1), plus one-tenth of 1.0% of the aggregate amount of federal covered securities proposed to be sold to persons located within this state based on the price at which such securities are to be offered to the public, as provided in the Act, §35.B(2).

(c) - (e) (No change.)

(f) Period of effectiveness.

(1) The initial authorization for federal covered securities of an open-end investment company, as defined in the Investment Company Act of 1940, shall be effective until two months after the end of the issuer's fiscal year. After the initial authorization, the issuer or its agent may renew the authorization by submitting, within two months after the end of the issuer's fiscal year:

(A) a notice filing, [verified under oath by the applicant,] consisting of Form NF, Uniform Investment Company Notice Filing; and

(B) (No change.)

(2) - (5) (No change.)

(g) - (i) (No change.)

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902807

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes amendments to §115.1, concerning general provisions, to §115.2, concerning application requirements, and to §115.4, concerning evidences of registration. The sections would be amended remove the references to branch office registration requirements for dealers, and related registration fees. The amendments to §§115.1, 115.2, and 115.4 are required by House Bill 1535, enacted by the 86th Texas Legislature, that amended §35.B(1) of the Texas Securities Act to remove the requirement that branch offices of dealers and investment advisers be registered and the related requirement to pay a branch office registration fee of $25. The sections would instead be amended to require branch offices of dealers to make a notice filing, which would not require any filing fee. Except for the registration and fee requirements, other existing requirements for branch offices set forth in the rules will continue to apply.

Subsection (a)(4) of §115.2 would also be amended to implement a management recommendation made by the Sunset Advisory Commission to eliminate notarization requirements from agency forms when the Texas Securities Act does not otherwise require the form to be sworn. This amendment would remove the requirement that a dealer's balance sheet, submitted as part of its application for registration, be attested by the applicant's principal financial officer before a notary. Instead the principal financial officer would certify the balance sheet as true and correct using Form 133.18, Certification of Balance Sheet by Principal Financial Officer. Form 133.18 is being repealed and replaced by a new form in related rulemaking to remove a notarization requirement.

Clint Edgar, Deputy Securities Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division, have determined that for the first five-year period the proposed amendments are in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the proposed amendments. Although there would be a negative fiscal impact, it is the direct result of the Legislature's change to the Texas Securities Act, rather than through Agency rulemaking. When the statutory change becomes effective, the Agency will no longer have the authority to collect fees relating to branch office registration or amendments to those registrations. These proposed amendments reflect that change in authority. A decrease in revenue resulting from the elimination of the branch office registration fee for both dealers and investment advisers was reflected in the fiscal note to HB 1535. According to the Comptroller of Public Accounts, "the provision that removes the requirement for registered entities to register individual branch offices would result in a revenue loss to the General Revenue Fund estimated to total $425,850 per fiscal year, beginning in fiscal year 2020, based on collections from branch office registrations in fiscal year 2017."

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendments are in effect the public benefit expected as a result of adoption of the proposed amendments will be to align the rule requirements for branch offices with changes made to the Texas Securities Act by eliminating the branch office registration requirement and removing unnecessary administrative burdens.

There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendments will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendments as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed amendments are effect: they do not create or eliminate a government program; they do not require the creation or elimination of existing employee positions; they do not require an increase or decrease in future legislative appropriations to this agency; they do not require an increase or decrease in fees paid to this agency; they do not increase or decrease the number of individuals subject to the rules' applicability; and they do not positively or negatively affect the state's economy. Additionally, the proposed amendments do not create a new regulation, or expand, limit, or repeal an existing regulation. Although registration of branch offices will no longer be required under the Legislature's change to the Texas Securities Act, which implements the Sunset Commission Recommendation 1.3, the Agency continues to regulate dealer activities occurring at the branch offices. As the Sunset Commission noted, the Agency would continue to: (a) require location information about branch offices, (b) require the designation of a supervisor for each branch office who is responsible for the branch office's activities, and (c) be authorized to inspect a branch office and take action if needed. Similarly, any negative fiscal impact caused by the elimination of fees paid by branch offices for registration and amendments is the direct result of the Legislature's change to the Texas Securities Act, rather than through the Agency's rulemaking to implement the legislative change.

Comments on the proposals must be in writing and will be accepted for 30 days following publication of the proposed sections in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendments are proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Articles 581‑12, 581-13, 581-18, and 581-35 (effective September 1, 2019).

§115.1.General Provisions.

(a) (No change.)

(b) Registration requirements of dealers, issuers, and agents, and notice filings for branch offices.

(1) Requirements of registration or notice filing.

(A) (No change.)

(B) Each branch office in Texas must make a notice filing to become designated as a branch office of a dealer [be registered]. A registered officer, partner, or agent must be named as supervisor.

(2) (No change.)

(c) - (d) (No change.)

§115.2.Application Requirements.

(a) Securities dealer application requirements. A complete application consists of the following and must be filed in paper form with the Securities Commissioner:

(1) - (3) (No change.)

(4) a balance sheet prepared in accordance with United States generally accepted accounting principles reflecting the financial condition of the dealer as of a date not more than 90 days prior to the date of such filing. The balance sheet should be compiled, reviewed, or audited by independent certified public accountants or independent public accountants, or must instead be certified [attested ] by [the sworn notarized statement of] the applicant's principal financial officer. If certified [attested] by the principal financial officer of the applicant, such officer shall make the certification on Form 133.18, Certification of Balance Sheet by Principal Financial Officer.

(5) - (6) (No change.)

(b) (No change.)

(c) Branch office designation [office registration] and inspection.

(1) A [request for registration of a branch office of a] dealer may designate a branch office [be made] upon initial application of the dealer or by amendment to a current Form BR [registration]. No sales-related activity may occur in any branch office location until such time as the dealer has notified [receives notification from] the Securities Commissioner that such location will function [has been approved] as a branch office [. The request for registration of a branch office may be made] by submitting [the submission of] Form BR on CRD for FINRA member firms. For non-FINRA member firms, the request is made by submitting Form BR in paper form to the Securities Commissioner. [The fee for registration of each branch office is $25.]

(2) Simultaneous with the designation [request for registration] of a branch office, a supervisor must be designatedfor that branch office. A supervisor is not required to be registered as a FINRA principal, but must be registered in Texas as an agent and is responsible for supervision of the activities of the branch office. A supervisor may not supervise sales activities encompassing a broader range of products than those covered by the supervisor's qualification examination(s). Within 10 business days after [from when] a supervisor ceases to be employed or registered in such capacity by the dealer, the dealer must designate a new supervisor, qualified by passage of the appropriate examinations, for the branch office. [must be designated. Absent the designation of a new supervisor to the Securities Commissioner within the 10 business day period, the registration of a branch office whose supervisor ceases to be employed as such by a dealer may be automatically terminated. The branch office registration may be reinstated upon the designation of a qualified supervisor and payment of the branch office registration fee.]

(3) Each branch office of a dealer who is registered with the Securities Commissioner is subject to unannounced inspections at any time during normal business hours.

(d) - (e) No change.)

§115.4.Evidences of Registration.

(a) Issuance. An evidence of registration or certificate of registration shall be issued for each registered securities dealer reflecting the registered officer or partner. [An evidence of registration shall be issued for each registered branch office reflecting the registered supervisor.]

(b) - (e) (No change.)

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902808

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §115.6

The Texas State Securities Board proposes an amendment to §115.6, concerning Registration of Persons with Criminal Backgrounds. This section contains rulemaking required by §53.025 of the Texas Occupations Code, which requires licensing authorities to issue guidelines relating to the licensing of persons with criminal convictions. The proposed amendment would implement the requirements of House Bill 1342 (HB 1342), passed during the 2019 Regular Session of the Texas Legislature, that amended Chapter 53 of the Texas Occupations Code (Consequences of Criminal Conviction). The changes made by HB 1342 apply to an application for a license submitted on or after September 1, 2019. Specifically, the proposed amendment would alter the factors to be considered in determining whether a conviction relates to a registered or licensed occupation, add new factors that must be considered in determining eligibility, and remove other factors from consideration. The proposed amendment would also include specific references to the new or amended sections of Chapter 53 of the Texas Occupations Code that will require the Agency to comply with new notification requirements in these sections. Finally, the proposed rule would also be amended to include new requirements added by HB 1342 set forth in new Texas Occupations Code, §53.026, concerning an Applicant Best Practices Guide, once such guide is developed and published by the state auditor on its website.

This proposal would implement the requirements of HB 1342, as they specifically relate to or concern the dealer or agent registration of individuals with criminal backgrounds and the Agency's process to review existing dealer and agent registrations and possibly take action to revoke or suspend the registrations on the basis of certain criminal convictions that may occur after the person is registered.

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

Mr. Edgar, Mr. Green, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendment is in effect the public benefit expected as a result of adoption of the proposed amendment will be to 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. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendment will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendment as proposed. There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendment is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Article 581‑14, 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) - (2) (No change.)

(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; [and]

(4) the relationship of the crime to the ability or [,] capacity[, or fitness] 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 [The] Securities Commissioner shall consider the following evidence in determining whether the person is eligible for a license issued by the Agency [the present fitness of an applicant who has been convicted of a crime]:

(1) - (5) (No change.)

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

(7) [(6)] 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) [(7)] 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 [of the prosecution, law enforcement, and correctional authorities as required under this section. The applicant shall also furnish proof to the Securities Commissioner that he or she has maintained a record of steady employment and has supported his or her dependents and has otherwise maintained a record of good conduct and has paid all outstanding court costs, supervision fees, fines, and restitution as may have been ordered in all criminal cases in which he or she has been convicted].

(c) - (d) (No change.)

(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 proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902809

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §115.18

The Texas State Securities Board proposes an amendment to §115.18, concerning Special Provisions Relating to Military Applicants. The amendment will implement the requirements of Senate Bill 1200, passed in the 2019 Texas Legislative Session, which added §55.0041 to the Texas Occupations Code. Related forms are being concurrently proposed as are comparable amendments to the corresponding rule for investment advisers and investment adviser representatives.

Section 55.0041 of the Texas Occupations Code, effective September 1, 2019, authorizes a military spouse to engage in a business or occupation for which a license or registration is required without obtaining the applicable license or registration if the military spouse holds 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 statute requires the military spouse to comply with all other laws and regulations applicable to the business or occupation in Texas. The military spouse is authorized to engage in the business or occupation only for the period during which the military service member to whom the military spouse is married is stationed at a military installation in Texas but not to exceed three years from the date the spouse receives the requisite confirmation from the agency.

Most participants in the securities industry acting as dealers or as agents of dealers are registered and practice in multiple jurisdictions. Dealer firms that have a compliance department are unlikely to want to keep track of the unique Texas process that allows a military spouse to operate as an agent without registering. In light of this, and in keeping with the spirit of the bill, the proposed amendment would provide the option in paragraph (3) of new subsection (h) (Option 1) to allow military spouses to register and receive a waiver or refund of the initial application and renewal fees for the period covered by §55.0041 in which they would not be required to be registered to conduct activity in Texas.

The Central Registration Depository (CRD) System is used by dealers and their agents to process virtually all Texas dealer and agent registrations. Only applications and renewals with reportable disclosure items or deficiencies remain pending for more than a few days before registration is effective. It is therefore expected that most applications and renewals filed by military spouses choosing Option 1 will, similar to applications filed by other applicants, be processed almost immediately.

Since a military spouse choosing Option 1 (filing through the CRD System) would have to pay the registration fee (initial or renewal) to use the electronic system, the amendment would provide for a refund to a military spouse who pays the fee. This would enable electronic filers to take advantage of the fee waiver authorized by statute. To avoid problems associated with processing stale claims, subsection (h) would provide that a refund request must be received within four years from the date the fee was collected or received. Current law and Board rules already provide for the waiver (or refund) of the initial application fee for military spouses. Accordingly, that procedure, provided under subsection (c) of §115.18, is referenced in the proposed amendment. A new form is being concurrently proposed to allow an eligible military spouse choosing this option to apply for a waiver or refund of a renewal fee in the second and third years of registration in Texas.

Eligible military spouses (or the firms that employ them) may also elect "Option 2." This option, set forth in paragraph (4) of new subsection (h), would track the requirements of the statute by requiring the military spouse to do the following before engaging in the practice of the securities business without first obtaining Texas dealer or agent registration: notify the Agency of the military spouse's intent to practice in Texas; submit to the Agency proof of the spouse's residency in Texas and a copy of the spouse's military identification card; and receive confirmation from the Agency that the Agency has verified the spouse's license in the other jurisdiction and authorized the spouse to engage in the specified activity in Texas without registration. A new form is being concurrently proposed for use by an eligible military spouse choosing this option to request and obtain recognition of out-of-state license or registration.

Additionally, since engaging in unregistered activity can result in administrative, civil, or criminal action against the military spouse and/or the employing firm, the proposed amendment would impose a requirement on a military spouse choosing Option 2 (operating in Texas without a dealer or agent registration) to notify the Securities Commissioner within 30 days if circumstances change and he or she is no longer eligible for §55.0041 treatment and immediately cease activity until such time as he or she becomes registered in the appropriate capacity to conduct securities activity in Texas. This requirement is also noted in proposed new Form 133.23, Request for Recognition of Out-Of-State License or Registration by a Military Spouse, which is being concurrently proposed. Option 2 would, upon issuance of the confirmation by the Agency, be treated as a notice filing, subject to renewal on a calendar year basis, so continued eligibility of the unregistered military spouse can be reassessed annually.

Clint Edgar, Deputy Securities Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division; have determined that for the first five-year period the proposed amendment is in effect there may be foreseeable fiscal implications as a result of enforcing or administering the proposed amendment on state, but not local, government.

The effect on state government for the first five-year period that the proposed amendment will be in effect is an estimated loss in revenue as a result of the up to two years of renewal fee waivers or refunds that would be granted to military spouses that remain in the state after their first year for the subsequent two one-year renewal periods. Although there would be a fiscal impact, it is the result of legislation rather than Agency rulemaking. The fiscal note to Senate Bill 1200 reflected that no significant fiscal implication to the State is anticipated. According to the Comptroller of Public Accounts (CPA), under current law, license application and examination fees are waived for military spouses who hold a current license issued by another jurisdiction with substantially equivalent license requirements, therefore the bill would have no revenue implications. The Agency did not receive any requests for refunds or waivers of initial registration fees from military applicants or other requests under current §115.18 in fiscal years 2018 or 2017. Based on the absence of any such requests in the past two fiscal years, the anticipated fiscal impact is expected to be negligible.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendment is in effect the public benefit expected as a result of adoption of the proposed amendment will be to ease regulatory and financial burdens of certain military spouses, licensed in good standing as securities professionals in another state, who are relocating to Texas. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendment will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendment as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed amendment is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; and it does not positively or negatively affect the state's economy. Additionally, the proposed amendment does not create a new regulation, or expand, limit, or repeal an existing regulation. Although military spouses will be eligible for waivers or refunds of initial registration and renewal fees due to new Texas Occupations Code §55.0041 (which is an expansion of current law and Board rules that apply to initial applications only), the anticipated negative fiscal impact that may be caused by the elimination of renewal fees of military spouses is the direct result of the Legislature's adoption of new Texas Occupations Code §55.0041, rather than through the Agency's rulemaking to implement the legislative change.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendment is proposed under Texas Civil Statutes, Article 581-28-1 and §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 proposal affects Texas Civil Statutes, Articles 581‑12, 581-13, 581-14, 581-15, 581-18, and 581-35.

§115.18.Special Provisions Relating to Military Applicants.

(a) - (g) (No change.)

(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 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 with waiver or refund of the initial registration and renewal fees. If the military spouse is registered 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 registration 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. 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 the appropriate capacity to conduct activity in Texas.

(C) Before engaging in an activity requiring registration 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 in Texas without registration 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 proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902810

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §115.22

The Texas State Securities Board proposes new §115.22, concerning electronic submission of forms and fees. The new rule would implement a management recommendation of the Sunset Advisory Commission to allow dealer and agent applicants the option to electronically submit registration documents (those not presently filed through the CRD System) with the Agency that are currently being submitted in paper format. Forms, payments, and fees currently required to be submitted through CRD will continue to be submitted through and maintained on that system.

Since these electronic filing and fee payment processes are still being developed, the proposal specifically addresses applicants - the category specified in the Sunset recommendation. However, once staff has experience with the electronic submission system, the staff contemplates expanding it to cover other filings and fees. Subsection (c) in the proposal takes this future expansion into account.

Staff anticipates initially the electronic submission system will operate to permit an applicant to submit electronic copies of required documents as attachments through an email address dedicated solely for that purpose. A process using the Agency's email system, which automatically scans emails and attachments for viruses and malware, has already been implemented to accomplish this goal of the Sunset recommendation.

Clint Edgar, Deputy Securities Commissioner, and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division, have determined that, for the first five-year period the proposed rule is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the proposed rule. The Agency staff will administer the optional, electronic submission of forms portion of the rule by using existing resources. The portion of the proposed rule concerning optional online fee submissions would not impose a cost on the Agency because it is not being implemented at this time.

When the Agency implements an online payment system in the future, there would be a cost to the Agency and state government, but at this time that future cost cannot be ascertained. The Agency currently lacks sufficient information to provide an estimate of the anticipated cost to implement an online payment system, because implementation will require the Agency to use the Texas.gov payment system, operated by DIR. DIR has plans to replace this system with a newer, updated system, which DIR anticipates will significantly decrease the implementation costs to the Agency. The Agency is deferring implementation of the online payment system portion of the rule until DIR puts this new system in place. The actual costs to the Agency and state government to implement the Agency's online acceptance of dealer and agent application fees through the new DIR system are unknown at this time and there is no timeline currently in place for the implementation of DIR's new system.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed rule is in effect the public benefit expected as a result of adoption of the proposed rule will be to reduce the burden on applicants by providing an online option for submission of application forms and supplemental documents and, when implemented in the future, and option for fee payment other than to mail in checks.

Due to the choices provided in the proposed rule, which would give filers the options to pay online rather than by check and to submit documents electronically or on paper, there will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed rule will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required.

There is no anticipated economic cost to persons who are required to comply with the rule as proposed. Once the online payment system is implemented through Texas.gov, credit card payments submitted through that site will be required to pay an online processing fee (or convenience fee) in addition to the underlying state fee for the registration or service. This additional processing fee would be a cost incurred by each of the Agency's applicants who opt to pay a fee electronically, when that service is available. At the present time, it appears that the maximum online processing fee is $5 for an annual occupational license. Comptroller's APS 029, updated 8/31/2018. Since the use of the online system to pay a fee electronically will be optional, there is no anticipated economic cost to the filers to comply with the rule as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed rule is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; and it does not positively or negatively affect the state's economy. Additionally, the proposed rule does not create a new regulation, or expand, limit or repeal an existing regulation. Although the proposal creates a new rule, there would be no new regulation created since the new rule only addresses the manner in which fees can be paid and filings made. The filings and fees affected by the proposal are ones that are already required by statute and current rules.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The new rule is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Articles 581‑12, 581-13, and 581-18.

§115.22.Electronic Submission of Forms and Fees.

(a) This section does not apply to forms or fees required by §115.2 of this chapter (relating to Application Requirements), to be submitted electronically through the CRD System.

(b) Documents and fees submitted by applicants for dealer and agent registration may, at the option of the filer, be submitted electronically to the Securities Commissioner.

(c) Filings made and fees paid by dealers and agents may be submitted electronically, as the Agency's system is developed to accept them.

(d) All electronic submissions of forms or fees must be made in accordance with the submission procedures set out on the Agency's website (www.ssb.texas.gov). Please check the Agency's website for a complete list of forms and fees that are currently being accepted electronically.

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902811

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes amendments to §116.1, concerning general provisions, to §116.2, concerning application requirements, and to §116.4, concerning evidences of registration. The sections would be amended to remove the references to branch office registration requirements for investment advisers and related registration fees. The amendments to §§116.1, 116.2, and 116.4 are required by House Bill 1535, enacted by the 86th Texas Legislature, that amended §35.B(1) of the Texas Securities Act to remove the requirement that branch offices of dealers and investment advisers be registered and the related requirement to pay a branch office registration fee of $25. The sections would instead be amended to require branch offices of investment advisers to make a notice filing, which would not require any filing fee. Other requirements for branch offices set forth in the rules will continue to apply.

Subsection (a)(2)(B) of §116.2 would also be amended to implement a management recommendation made by the Sunset Advisory Commission to eliminate notarization requirements from agency forms when the Texas Securities Act does not otherwise require the form to be sworn. This amendment would remove the requirement that an investment adviser's balance sheet, submitted as part of its application for registration, be attested by the applicant's principal financial officer before a notary. Instead the principal financial officer would certify the balance sheet as true and correct using Form 133.18, Certification of Balance Sheet by Principal Financial Officer. Form 133.18 is being repealed and replaced by a new form in related rulemaking to remove a notarization requirement.

Clint Edgar, Deputy Securities Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division, have determined that for the first five-year period the proposed amendments are in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the proposed amendments. Although there would be a negative fiscal impact, it is the result of the Legislature's change to the Texas Securities Act, rather than through Agency rulemaking. When the statutory change becomes effective, the Agency will no longer have the authority to collect fees relating to branch office registration or amendments to those registrations. These proposed amendments reflect that change in authority. A decrease in revenue resulting from the elimination of the branch office registration fee for both dealers and investment advisers was reflected in the fiscal note to HB 1535. According to the Comptroller of Public Accounts, "the provision that removes the requirement for registered entities to register individual branch offices would result in a revenue loss to the General Revenue Fund estimated to total $425,850 per fiscal year, beginning in fiscal year 2020, based on collections from branch office registrations in fiscal year 2017."

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendments are in effect, the public benefit expected as a result of adoption of the proposed amendments will be to align the rule requirements for branch offices with changes made to the Texas Securities Act by eliminating the branch office registration requirement and removing unnecessary administrative burdens.

There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendments will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendments as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed amendments are effect: they do not create or eliminate a government program; they do not require the creation or elimination of existing employee positions; they do not require an increase or decrease in future legislative appropriations to this agency; they do not require an increase or decrease in fees paid to this agency; they do not increase or decrease the number of individuals subject to the rules' applicability; and they do not positively or negatively affect the state's economy. Additionally, the proposed amendments do not create a new regulation, or expand, limit, or repeal an existing regulation. Although registration of branch offices will no longer be required under the Legislature's change to the Texas Securities Act, which implements the Sunset Commission Recommendation 1.3, the Agency continues to regulate investment adviser activities occurring at the branch offices. As the Sunset Commission noted, the Agency would continue to: (a) require location information about branch offices, (b) require the designation of a supervisor for each branch office who is responsible for the branch office's activities, and (c) be authorized to inspect a branch office and take action if needed. Similarly, any negative fiscal impact caused by the elimination of fees paid by branch offices for registration and amendments is the direct result of the Legislature's change to the Texas Securities Act, rather than through the Agency's rulemaking to implement the legislative change.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed sections in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendments are proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Articles 581‑12, 581-13, 581-18, and 581-35 (effective September 1, 2019).

§116.1.General Provisions.

(a) (No change.)

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

(1) Requirements of registration or notice filing.

(A) (No change.)

(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 [be registered]. A registered officer, partner, or investment adviser representative must be named as supervisor.

(2) (No change.)

(c) - (d) (No change.)

§116.2.Application Requirements.

(a) Investment adviser and investment adviser representative application requirements. A complete application consists of the following:

(1) (No change.)

(2) items filed in paper form with the Securities Commissioner:

(A) (No change.)

(B) a balance sheet prepared in accordance with United States generally accepted accounting principles reflecting the financial condition of the investment adviser as of a date not more than 90 days prior to the date of such filing. The balance sheet should be compiled, reviewed, or audited by independent certified public accountants or independent public accountants, or must instead be certified [attested ] by [the sworn notarized statement of] the applicant's principal financial officer. If certified [attested] by the principal financial officer of the applicant, such officer shall make the certification on Form 133.18, Certification of Balance Sheet by Principal Financial Officer.

(C) - (E) (No change.)

(b) (No change.)

(c) Branch office designation [registration ] and inspection.

(1) An [A request for registration of a branch office of an] investment adviser may designate a branch office [be made] upon initial application of the investment adviser or by amendment to a current Form BR [registration]. No investment advisory activity may occur in any branch office location until such time as the investment adviser has notified [receives notification from] the Securities Commissioner that such location will function [has been approved] as a branch office [. The request for registration of a branch office is made] by submitting [the submission of] Form BR on CRD. [The fee for registration of each branch office is $25.]

(2) Simultaneous with the designation [request for registration] of a branch office, a supervisor must be named for that branch office. The supervisor must satisfy the examination qualifications required of the investment adviser before the branch office is designated [may be registered ]. A supervisor is responsible for supervision of the activities of the branch office. Within 10 business days after [from when] a supervisor ceases to be employed or registered in such capacity by the investment adviser, the investment adviser must designate a new supervisor, qualified by passage of the appropriate examinations, for the branch office [must be named. Absent the designation of a new supervisor to the Commissioner within the 10 business day period, the registration of a branch office whose supervisor ceases to be employed as such by an investment adviser shall be automatically terminated. The branch office registration may be reinstated upon the designation of a qualified supervisor and payment of the branch office registration fee.]

(3) Each branch office of an investment adviser who is registered with the Commissioner is subject to unannounced inspections at any time during normal business hours.

(d) - (e) (No change.)

§116.4.Evidences of Registration.

(a) Issuance. An evidence of registration or certificate of registration shall be issued for each registered investment adviser reflecting the registered officer or partner. [An evidence of registration shall be issued for each registered branch office reflecting the registered supervisor.]

(b) - (e) (No change.)

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902812

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §116.6

The Texas State Securities Board proposes an amendment to §116.6, concerning Registration of Persons with Criminal Backgrounds. This section contains rulemaking required by §53.025 of the Texas Occupations Code, which requires licensing authorities to issue guidelines relating to the licensing of persons with criminal convictions. The proposed amendment would implement the requirements of House Bill 1342 (HB 1342), passed during the 2019 Regular Session of the Texas Legislature, that amended Chapter 53 of the Texas Occupations Code (Consequences of Criminal Conviction). The changes made by HB 1342 apply to an application for a license submitted on or after September 1, 2019. Specifically, the proposed amendment would alter the factors to be considered in determining whether a conviction relates to a registered or licensed occupation, add new factors that must be considered in determining eligibility, and remove other factors from consideration. The proposed amendment would also include specific references to the new or amended sections of Chapter 53 of the Texas Occupations Code that will require the Agency to comply with new notification requirements in these sections. Finally, the proposed rule would also be amended to include new requirements added by HB 1342 set forth in new Texas Occupations Code, §53.026, concerning an Applicant Best Practices Guide, once such guide is developed and published by the state auditor on its website.

This proposal would implement the requirements of HB 1342, as they specifically relate to or concern the investment adviser or representative registration of individuals with criminal backgrounds and the Agency's process to review existing investment adviser and representative registrations and possibly take action to revoke or suspend the registrations on the basis of certain criminal convictions that may occur after the person is registered.

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

Mr. Edgar, Mr. Green, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendment is in effect the public benefit expected as a result of adoption of the proposed amendment will be to 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. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendment will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendment as proposed. There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendment is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Article 581‑14, and Texas Occupations Code, §53.025.

§116.6.Registration of Persons with Criminal Backgrounds.

(a) An [The] application for registration may be denied, or a registration may be revoked or suspended, [suspended, or revoked] 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) - (2) (No change.)

(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; [and]

(4) the relationship of the crime to the ability or [,] capacity[, or fitness] 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 [The] Securities Commissioner shall consider the following evidence in determining whether the person is eligible for a license issued by the Agency [the present fitness of an applicant who has been convicted of a crime]:

(1) - (5) (No change.)

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

(7) [(6)] 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) [(7)] 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 [of the prosecution, law enforcement, and correctional authorities as required under this section. The applicant shall also furnish proof to the Securities Commissioner that he or she has maintained a record of steady employment and has supported his or her dependents and has otherwise maintained a record of good conduct and has paid all outstanding court costs, supervision fees, fines, and restitution as may have been ordered in all criminal cases in which he or she has been convicted].

(c) - (d) (No change.)

(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 proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902813

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §116.18

The Texas State Securities Board proposes an amendment to §116.18, concerning Special Provisions Relating to Military Applicants. The amendment is proposed to implement the requirements of Senate Bill 1200, passed in the 2019 Texas Legislative Session, which added §55.0041 to the Texas Occupations Code. Related forms are being concurrently proposed as are comparable amendments to the corresponding rule for dealers and agents.

Section 55.0041 of the Texas Occupations Code, effective September 1, 2019, authorizes a military spouse to engage in a business or occupation for which a license or registration is required without obtaining the applicable license or registration if the military spouse holds 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 statute requires the military spouse to comply with all other laws and regulations applicable to the business or occupation in Texas. The military spouse is authorized to engage in the business or occupation only for the period during which the military service member to whom the military spouse is married is stationed at a military installation in Texas but not to exceed three years from the date the spouse receives the requisite confirmation from the agency.

Most participants in the securities industry acting as investment advisers or investment adviser representatives are either registered or notice-filed and practice in multiple jurisdictions. Before they can engage in the securities business in Texas, the Texas Securities Act generally requires investment advisers and their representatives to either register with the Agency or to notice file pursuant to §116.1(b)(2), by filing the applicable form and paying the application fee (in this preamble registrations and notice filings will be collectively referred to as "licenses"). Investment adviser firms that have a compliance department are unlikely to want to keep track of the unique Texas process that allows a military spouse to operate as a representative without being licensed. In light of this, and in keeping with the spirit of the bill, the proposed amendment would provide the option in paragraph (3) of new subsection (h) (Option 1) to allow military spouses to become licensed and receive a waiver or refund of the initial application and renewal fees for the period covered by §55.0041 in which they would not be required to be licensed to conduct activity in Texas.

The Investment Adviser Registration Depository (IARD) System is used by investment advisers and their representatives to process virtually all Texas investment adviser and representative licenses. Only applications and renewals with reportable disclosure items or deficiencies remain pending for more than a few days before registration is effective. It is therefore expected that most applications and renewals filed by military spouses choosing Option 1 will, similar to applications filed by other applicants, be processed almost immediately.

Since a military spouse choosing Option 1 (filing through the IARD System) would have to pay the application fee (initial or renewal) to use the electronic system, the amendment would provide for a refund to a military spouse who pays the fee. This would enable electronic filers to take advantage of the fee waiver authorized by statute. To avoid problems associated with processing stale claims, subsection (h) would provide that a refund request must be received within four years from the date the fee was collected or received. Current law and Board rules already provide for the waiver (or refund) of the initial application fee for military spouses. Accordingly, that procedure, provided under subsection (c) of §116.18, is referenced in the proposed amendment. A new form is being concurrently proposed to allow an eligible military spouse choosing this option to apply for a waiver or refund of a renewal fee in the second and third years of being licensed in Texas.

Eligible military spouses (or the firms that employ them) may also elect "Option 2." This option, set forth in paragraph (4) of new subsection (h), would track the requirements of the statute by requiring the military spouse to do the following before engaging in the practice of the securities business without first being licensed as an investment adviser or investment adviser representative in Texas: notify the Agency of the military spouse's intent to practice in Texas; submit to the Agency proof of the spouse's residency in Texas and a copy of the spouse's military identification card; and receive confirmation from the Agency that the Agency has verified the spouse's license in the other jurisdiction and authorized the spouse to engage in the specified activity in Texas without being licensed in Texas. A new form is being concurrently proposed for use by an eligible military spouse choosing this option to request and obtain recognition of out-of-state license or registration.

Additionally, since engaging in unlicensed activity can result in administrative, civil, or criminal action against the military spouse and/or the employing firm, the proposed amendment would impose a requirement on a military spouse choosing Option 2 (operating in Texas without an investment adviser or investment adviser representative license) to notify the Securities Commissioner within 30 days if circumstances change and he or she is no longer eligible for §55.0041 treatment and immediately cease activity until such time as he or she becomes licensed in the appropriate capacity to conduct securities activity in Texas. This requirement is also noted in proposed new Form 133.23, Request for Recognition of Out-Of-State License or Registration by a Military Spouse, which is being concurrently proposed. Option 2 would, upon issuance of the confirmation by the Agency, be treated as a notice filing, subject to renewal on a calendar year basis, so continued eligibility of the military spouse can be reassessed annually.

Clint Edgar, Deputy Securities Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division; have determined that for the first five-year period the proposed amendment is in effect there may be foreseeable fiscal implications as a result of enforcing or administering the proposed amendment on state, but not local, government.

The effect on state government for the first five-year period that the proposed amendment will be in effect is an estimated loss in revenue as a result of the up to two years of renewal fee waivers or refunds that would be granted to military spouses that remain in the state after their first year for the subsequent two one-year renewal periods. Although there would be a fiscal impact, it is the result of legislation rather than Agency rulemaking. The fiscal note to Senate Bill 1200 reflected that no significant fiscal implication to the State is anticipated. According to the Comptroller of Public Accounts (CPA), under current law, license application and examination fees are waived for military spouses who hold a current license issued by another jurisdiction with substantially equivalent license requirements, therefore the bill would have no revenue implications. The Agency did not receive any requests for refunds or waivers of initial application fees from military applicants or other requests under current §116.18 in fiscal years 2018 or 2017. Based on the absence of any such requests in the past two fiscal years, the anticipated fiscal impact is expected to be negligible.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendment is in effect the public benefit expected as a result of adoption of the proposed amendment will be to ease regulatory and financial burdens of certain military spouses, licensed in good standing as securities professionals in another state, who are relocating to Texas. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendment will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendment as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed amendment is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; and it does not positively or negatively affect the state's economy. Additionally, the proposed amendment does not create a new regulation, or expand, limit, or repeal an existing regulation. Although military spouses will be eligible for waivers or refunds of renewal fees due to new Texas Occupations Code §55.0041 (which is an expansion of current law and Board rules that apply to initial applications only), the anticipated negative fiscal impact that may be caused by the elimination of renewal fees of military spouses is the direct result of the Legislature's adoption of new Texas Occupations Code §55.0041, rather than through the Agency's rulemaking to implement the legislative change.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendment is proposed under Texas Civil Statutes, Article 581-28-1 and §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 proposal 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) - (g) (No change.)

(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 registration 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 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, Section 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 proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902814

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §116.22

The Texas State Securities Board proposes new §116.22, concerning electronic submission of forms and fees. The new rule would implement a management recommendation of the Sunset Advisory Commission to allow investment adviser and investment adviser representative applicants the option to electronically submit supplemental, required documents (those not presently filed through the IARD System) with the Agency that are currently being submitted in paper format. Forms, payments, and fees currently required to be submitted through IARD will continue to be submitted through and maintained on that system.

Since these electronic filing processes are still being developed, the proposal specifically addresses applicants - the category specified in the Sunset recommendation. However, once staff has experience with the electronic submission system, the staff contemplates expanding it to cover other filings and fees. Subsection (c) in the proposal takes this future expansion into account.

Staff anticipates initially the electronic submission system will operate to permit an applicant to submit electronic copies of required documents as attachments through an email address dedicated solely for that purpose. A process using the Agency's email system, which automatically scans emails and attachments for viruses and malware, has already been implemented to accomplish this goal of the Sunset recommendation.

Clint Edgar, Deputy Securities Commissioner, and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division, have determined that, for the first five-year period the proposed rule is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the proposed rule. The Agency staff will administer the optional, electronic submission of forms portion of the rule by using existing resources. The portion of the proposed rule concerning optional online fee submissions would not currently impose a cost on the Agency or state government because, at this time, all investment advisers and investment adviser applicants are currently required to pay their fees online through IARD. If that changes in the future and the Agency implements an online payment system, there would be a cost to the Agency and state government, at this time, the cost cannot be ascertained.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed rule is in effect the public benefit expected as a result of adoption of the proposed rule will be to reduce the burden on applicants by providing them the option to submit additional, required documents electronically rather than in hard copy format and to reduce the burden on certain applicants in the future who would be required to pay fees directly to the Agency, by providing them with the option to pay fees electronically rather than mailing in checks.

Due to the choices provided in the proposed rule, which would give filers the options to submit required documents electronically or on paper, and which would give certain filers (that are not required to use IARD for fee payments) the option to pay online instead of by check, there will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed rule will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required.

There is no anticipated economic cost to persons who are required to comply with the rule as proposed. At the present time, all investment adviser and investment adviser representative application and renewal fees are paid electronically through IARD, and under the proposal would continue to be paid that way. In the future, if there are investment adviser or investment adviser representative applicants who are not required to use IARD, they will have the option to submit their fees to the Agency electronically when an online payment system is implemented. Once an online payment system is implemented through Texas.gov, credit card payments submitted through that site will be required to pay an online processing fee (or convenience fee) in addition to the underlying state fee for the registration or service. This additional processing fee would be a cost incurred by each of the Agency's applicants who opt to pay a fee electronically, when that service is available. At the present time, it appears that the maximum online processing fee is $5 for an annual occupational license. Comptroller's APS 029, updated 8/31/2018. Since the use of the online system to pay a fee electronically will be optional, there is no anticipated economic cost to the filers to comply with the rule as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed rule is in effect: it does not create or eliminate a government program; it does not require the creation or elimination of existing employee positions; it does not require an increase or decrease in future legislative appropriations to this agency; it does not require an increase or decrease in fees paid to this agency; it does not increase or decrease the number of individuals subject to the rule's applicability; and it does not positively or negatively affect the state's economy. Additionally, the proposed rule does not create a new regulation, or expand, limit or repeal an existing regulation. Although the proposal creates a new rule, there would be no new regulation created since the new rule only addresses the manner in which fees can be paid and filings can be made. The filings and fees affected by the proposal are ones that are already required by statute and current rules.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The new rule is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Articles 581‑12, 581-13, and 581-18.

§116.22.Electronic Submission of Forms and Fees.

(a) This section does not apply to forms or fees required by §116.2 of this chapter (relating to Application Requirements), to be submitted electronically through the IARD System or the CRD System.

(b) Documents and fees submitted by applicants for investment adviser and investment adviser representative registration or notice filing may, at the option of the filer, be submitted electronically to the Securities Commissioner.

(c) Filings made and fees paid by investment advisers or investment adviser representatives may be submitted electronically, as the Agency's system is developed to accept them.

(d) All electronic submissions of forms or fees must be made in accordance with the submission procedures set out on the Agency's website (www.ssb.texas.gov). Please check the Agency's website for a complete list of forms and fees that are currently being accepted electronically.

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902815

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes the repeal of thirteen rules, concerning forms adopted by reference. These forms, which contain notarization and sworn under oath requirements, would be repealed to implement recommendations made by the Texas Sunset Advisory Commission to remove these requirements from the forms when the Texas Securities Act doesn't otherwise require the form to be sworn. New replacement forms that would be certified to be true and correct and to be signed under penalty of perjury are being currently proposed. Specifically, the State Securities Board proposes 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.

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

Mr. Edgar, Mr. Green, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed repeals are in effect the public benefit expected as a result of adoption of the proposed repeals will be that forms that are no longer needed will be eliminated. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed repeals will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the repeals as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Mr. Green, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed repeals of the rules adopting by reference the forms are in effect: they do not create or eliminate a government program; they do not require the creation or elimination of existing employee positions; they do not require an increase or decrease in future legislative appropriations to this agency; they do not require an increase or decrease in fees paid to this agency; they do not increase or decrease the number of individuals subject to the rule's applicability; they do not positively or negatively affect the state's economy; and they do not create a new regulation, or expand, limit, or repeal an existing regulation. Although the rulemaking involves repealing existing forms, the net effect is to merely replace the forms with new forms that are being concurrently proposed, while leaving the scope and the content of the current regulations that relate to these forms unchanged.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed repeals in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The repeals are proposed 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 proposal affects Texas Civil Statutes, Articles 581-5, 581-7, 581-8, 581-12, 581-18, and 581-42.

§133.5.Secondary Trading Exemption Notice.

§133.6.Secondary Trading Exemption Renewal Notice.

§133.8.Power of Attorney.

§133.12.Renewal Application for Mutual Funds and Other Continuous Offerings.

§133.13.Application for Renewal Permit.

§133.16.Texas Crowdfunding Portal Withdrawal of Registration.

§133.18.Certification of Balance Sheet by Principal Financial Officer.

§133.26.Request for Determination of Money Market Fund Status for Federal Covered Securities.

§133.29.Intrastate Exemption Notice.

§133.30.Information Concerning Projected Market Prices and Related Market Information.

§133.34.Undertaking Regarding Non-issuer Sales.

§133.35.Application for Designation as Matching Service under §109.15.

§133.36.Request for Reduced Fees for Certain Persons Registered in Multiple Capacities.

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902816

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 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 proposes thirteen new rules, concerning forms adopted by reference. Specifically, the State Securities Board proposes 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.

The new sections would adopt by reference forms that are updated to remove notarization requirements to implement a recommendation made by the Texas Sunset Advisory Commission to remove the requirement from the forms when the Texas Securities Act doesn't otherwise require the form to be sworn. Instead of being signed before a notary the new forms would be certified to be true and correct and would be signed under penalty of perjury. Other non-substantive changes would be made to sections and the forms, and the name of Form 133.8 would be changed to more accurately reflect the purpose of the form and to conform the terminology with that used in §8 of the Texas Securities Act. Existing forms §§133.5, 133.6, 133.8, 133.12, 133.13, 133.16, 133.18, 133.26, 133.29, 133.30, 133.34, 133.35, and 133.36 are being concurrently proposed for repeal.

Clint Edgar, Deputy Securities Commissioner; Tommy Green, Director, Inspections and Compliance Division; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division, have determined that for the first five-year period the proposed forms are used there will be no foreseeable fiscal implications for state or local government as a result of using the proposed forms.

Mr. Edgar, Mr. Green, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed forms are used the public benefit expected as a result of adoption of the proposed forms will be to provide more efficiency in the filing of forms with the Board by removing unnecessary administrative burdens. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed forms will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to use the forms as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Mr. Green, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed rules adopting by reference the forms are in effect: they do not create or eliminate a government program; they do not require the creation or elimination of existing employee positions; they do not require an increase or decrease in future legislative appropriations to this agency; they do not require an increase or decrease in fees paid to this agency; they do not increase or decrease the number of individuals subject to the rule's applicability; they do not positively or negatively affect the state's economy; and they do not create a new regulation, or expand, limit or repeal an existing regulation. Although the rulemaking involves the creation of new forms, there would be no new regulation created since the net effect is to merely replace forms that are being concurrently proposed for repeal, while leaving the scope and the content of the current regulations that relate to these forms unchanged.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed sections in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The new rules are proposed 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 proposal affects Texas Civil Statutes, Articles 581-5, 581-7, 581-8, 581-12, 581-18, and 581-42.

§133.5.Secondary Trading Exemption Notice.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.6.Secondary Trading Exemption Renewal Notice.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.8.Consent to Service.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.12.Renewal Application for Mutual Funds and Other Continuous Offerings.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.13.Application for Renewal Permit.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.16.Texas Crowdfunding Portal Withdrawal of Registration.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.18.Certification of Balance Sheet by Principal Financial Officer.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.26.Request for Determination of Money Market Fund Status for Federal Covered Securities.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.29.Intrastate Exemption Notice.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.30.Information Concerning Projected Market Prices and Related Market Information.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.34.Undertaking Regarding Non-issuer Sales.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.35.Application for Designation as Matching Service under §109.15.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.36.Request for Reduced Fees for Certain Persons Registered in Multiple Capacities.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902817

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §133.22, §133.23

The Texas State Securities Board proposes 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. The new sections would adopt by reference forms that are created to implement proposed amendments to §115.18 and §116.18, which are concurrently proposed for adoption to implement the requirements of Senate Bill 1200, passed in the 2019 Texas Legislative Session, which added §55.0041 to the Texas Occupations Code.

New Form 133.22 would allow a military spouse falling within the provisions of Texas Occupations Code §55.0041 to apply for a waiver or refund of a renewal fee pursuant to proposed amendments to §115.18 or §116.18, which are being concurrently amended.

New Form 133.23 would be filed by a military spouse eligible for non-registration under Occupations Code §55.0041, to provide the Agency with information needed to determine eligibility for such treatment. The form would need to be resubmitted annually during the period that the military spouse qualifies for unique treatment under Texas Occupations Code §55.0041. Upon issuance of the confirmation by the Registration Division for the intial or a renewal filing, the military spouse would be considered to be notice filed for purposes of recordkeeping and certification.

Clint Edgar, Deputy Securities Commissioner; and Emily Diaz and Shaun Yarroll, Assistant Directors, Registration Division, have determined that for the first five-year period the proposed forms are used there will be no foreseeable fiscal implications for state or local government as a result of using the proposed forms.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed forms are used the public benefit expected as a result of adoption of the proposed forms will be that an eligible military spouse can complete the forms to either obtain a waiver or refund of renewal fees or to practice securities business in Texas without being registered. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed forms will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to use the forms as proposed. There is no anticipated impact on local employment.

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for the first five-year period the proposed rules adopting by reference the forms are in effect: they do not create or eliminate a government program; they do not require the creation or elimination of existing employee positions; they do not require an increase or decrease in future legislative appropriations to this agency; they do not require an increase or decrease in fees paid to this agency; they do not increase or decrease the number of individuals subject to the rule's applicability; they do not positively or negatively affect the state's economy; and they do not create a new regulation, or expand, limit or repeal an existing regulation. Although the rulemaking involves the creation of new forms, the forms are created as part of the implementation of Senate Bill 1200.

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed sections in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The new rules are proposed 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 proposal affects Texas Civil Statutes, Articles 581‑12, 581-13, 581-14, 581-15, 581-18, and 581-35.

§133.22.Waiver or Refund Request by a Military Spouse for a Renewal Fee.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

§133.23.Request for Recognition of Out-Of-State License or Registration by a Military Spouse.

This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167 and at www.ssb.texas.gov.

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902818

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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

7 TAC §133.33

The Texas State Securities Board proposes an amendment to §133.33, concerning uniform forms accepted, required, or recommended. Section 133.33 would be amended to specifically address federal covered securities offered pursuant to SEC Regulation A, Tier II ("Regulation A+") by adding the Uniform Notice Filing of Regulation A - Tier 2 form to the list of uniform forms accepted. This form is used for making the required notice filings for this type of federal covered securities. A related change to §114.4 has been concurrently proposed for adoption.

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

Mr. Edgar, Ms. Diaz, and Mr. Yarroll have also determined that for each year of the first five years the proposed amendment is in effect the public benefit expected as a result of adoption of the proposed amendment will be to provide for more efficiency for Regulation A+ filings by permitting Regulation A+ filers to use a different form for these filings. There will be no adverse economic effect on micro- or small businesses or rural communities. Since the proposed amendment will have no adverse economic effect on micro- or small businesses or rural communities, preparation of an economic impact statement and a regulatory flexibility analysis is not required. There is no anticipated economic cost to persons who are required to comply with the amendment as proposed. There is no anticipated impact on local employment.

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

Comments on the proposal must be in writing and will be accepted for 30 days following publication of the proposed section in the Texas Register. Written comments should be submitted to Marlene K. Sparkman, General Counsel, State Securities Board, P.O. Box 13167, Austin, Texas 78711‑3167 or faxed to (512) 305‑8336. Comments may also be submitted electronically to proposal@ssb.texas.gov. In order to be considered by the Board at adoption, comments must be received no later than 30 days following publication.

The amendment is proposed under Texas Civil Statutes, Article 581-28-1. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes.

The proposal affects Texas Civil Statutes, Article 581‑5.

§133.33.Uniform Forms Accepted, Required, or Recommended.

(a) Assuming the appropriate exhibits and supplements are filed, the State Securities Board will accept for filing the following "Uniform Forms" in lieu of the requisite Texas form, if any.

(1) - (11) (No change.)

(12) Regulation A - Tier 2 form.

(b) - (c) (No change.)

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

Filed with the Office of the Secretary of State on August 20, 2019.

TRD-201902819

Travis J. Iles

Securities Commissioner

State Securities Board

Earliest possible date of adoption: October 6, 2019

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