TITLE 7. BANKING AND SECURITIES

PART 7. STATE SECURITIES BOARD

CHAPTER 104. PROCEDURE FOR REVIEW OF APPLICATIONS
7 TAC §104.4, §104.5

The Texas State Securities Board proposes amendments to §104.4, concerning registration of securities--review of applications, and §104.5, concerning registration of dealers and investment advisers--review of applications. The amendments to §104.4 and §104.5 would allow modern communication alternatives such as email and facsimile for such communications that the rule requires be in writing (i.e., deficiency and comment letters) and is expected to help speed up the registration process.

Patricia Loutherback, Director, Registration Division, has determined that for the first five-year period the rules are in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the rules.

Ms. Loutherback also has determined that for each year of the first five years the rules are in effect the public benefit anticipated as a result of enforcing the rules will be to reduce the time needed to process registration applications by allowing the use of alternative means of communications, such as email, for deficiency and comment letters. There will be no effect on micro- or small businesses. Since the rules will have no adverse economic effect on micro- or small businesses, 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 rules as proposed. There is no anticipated impact on local employment.

Comments on the proposal must be in writing and will be accepted for 45 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 45 days following publication.

The amendments are proposed under Texas Civil Statutes, Article 581-28-1 and Texas Government Code, §2005.003. Section 28-1 provides the Board with the authority to adopt rules and regulations necessary to carry out and implement the provisions of the Texas Securities Act, including rules and regulations governing registration statements and applications; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes. Section 2005.003 requires state agencies issuing permits to adopt procedural rules for processing permit applications and issuing permits.

The proposals affect Texas Civil Statutes, Articles 581-7, 581-10, 581-13, and 581-15, and Texas Government Code, §2005.003.

§104.4.Registration of Securities--Review of Applications.

(a) Within seven days of receipt by the Agency of an application to register securities, if the application does not contain all required information, the Registration Division will send a written [by United States mail at the Agency's expense a] deficiency letter to the applicant setting forth a list of items or exhibits that have not been filed and that, pursuant to requirements of the Texas Securities Act or Board rules, must be filed with the Agency.

(b) Within 45 days of receipt by the Agency of all requested items and exhibits necessary in order to analyze the offering, the Registration Division shall review the application and shall send a written [by United States mail at the Agency's expense an] initial comment letter setting forth deviations from the substantive requirements of the Act or Board rules relating to the registration of securities. This process may be repeated if the applicant suggests that alternatives be considered, or the applicant's response does not resolve substantive issues.

(c) Written communications between the Registration Division and [Upon request of] the applicant[, comments] may be transmitted [at the applicant's expense] by [telephone,] facsimile, email, U.S. mail, or other more timely means of communication.

(d) - (g) (No change.)

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

(a) Within 14 days of receipt by the Agency of an application and a fee that is sufficient for registration as a dealer or investment adviser, the Registration Division shall send [by United States mail at the Agency's expense,] a written deficiency letter to the applicant setting forth a list of items or exhibits that either have not been filed or that contain errors or omissions. If the applicant is filing through the Central Registration Depository (CRD) or the Investment Adviser Registration Depository (IARD), deficiency corrections of a procedural, non-disciplinary nature will be handled by the CRD or IARD.

(1) If an insufficient fee is submitted with the application, the fee will be returned to the applicant along with immediate notification as to the correct amount owed.

(2) The application will be held in abeyance until the correct fee is received by the Agency.

(b) Within 14 days of receipt by the Agency of all requested items and exhibits, the division staff shall review the file and, if necessary, shall send [by United States mail at the Agency's expense] a written comment letter setting forth any deviations from the substantive requirements of the Texas Securities Act or Board rules relating to the registration of dealers or investment advisers. This process may be repeated to raise subsequent comments.

(c) - (f) (No change.)

(g) Written communications between the Registration Division and the applicant may be transmitted by facsimile, email, U.S. mail, or other more timely means of communication.

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 May 20, 2015.

TRD-201501837

John Morgan

Securities Commissioner

State Securities Board

Earliest possible date of adoption: July 5, 2015

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

CHAPTER 115. SECURITIES DEALERS AND AGENTS
7 TAC §115.2

The Texas State Securities Board proposes amendments to §115.2, concerning application requirements. The amendments to the application requirements for dealer registration would specify requirements for a balance sheet from an independent certified public accountant or independent public accountant and reference new Form 133.18, which is being concurrently proposed, to be used for certification of the applicant's balance sheet by its principal financial officer. Currently, the Staff provides a template with suggested language on its website, but applicants have some difficulty locating and completing the template. Staff feels this difficulty can be overcome if a specific form is provided and referenced in the rule.

Patricia Loutherback, Director, Registration Division, has determined that for the first five-year period the rule is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the rule.

Ms. Loutherback also has determined that for each year of the first five years the rule is in effect the public benefit anticipated as a result of enforcing the rule will be to simplify the registration process by providing a specific certification form for applicants to complete. There will be no effect on micro- or small businesses. Since the rule will have no adverse economic effect on micro- or small businesses, 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.

Comments on the proposal must be in writing and will be accepted for 45 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 45 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, and 581-18.

§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 [practices ] 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 becompiled, reviewed, or audited [prepared] by independent certified public accountants or independent public accountants, or must instead be attested by the sworn notarized statement of the applicant's principal financial officer. If 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 [certify as follows: I am the principal financial officer of (name of dealer). The accompanying balance sheet has been prepared under my direction and control and presents fairly its financial position on the dates indicated to the best of my knowledge, belief, and ability. (Signature and Title)].

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

(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 May 20, 2015.

TRD-201501838

John Morgan

Securities Commissioner

State Securities Board

Earliest possible date of adoption: July 5, 2015

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

CHAPTER 116. INVESTMENT ADVISERS AND INVESTMENT ADVISER REPRESENTATIVES
7 TAC §116.2

The Texas State Securities Board proposes amendments to §116.2, concerning application requirements. The amendments to the application requirements for investment adviser registration would specify requirements for a balance sheet from an independent certified public accountant or independent public accountant and reference new Form 133.18, which is being concurrently proposed, to be used for certification of the applicant's balance sheet by its principal financial officer. Currently, the Staff provides a template with suggested language on its website, but applicants have some difficulty locating and completing the template. Staff feels this difficulty can be overcome if a specific form is provided and referenced in the rule.

Patricia Loutherback, Director, Registration Division, has determined that for the first five-year period the rule is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the rule.

Ms. Loutherback also has determined that for each year of the first five years the rule is in effect the public benefit anticipated as a result of enforcing the rule will be to simplify the registration process by providing a specific certification form for applicants to complete. There will be no effect on micro- or small businesses. Since the rule will have no adverse economic effect on micro- or small businesses, 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.

Comments on the proposal must be in writing and will be accepted for 45 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 45 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, and 581-18.

§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 [practices ] 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 [prepared] by independent certified public accountants or independent public accountants, or must instead be attested by the sworn notarized statement of the applicant's principal financial officer. If 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 [certify as follows: I am the principal financial officer of (name of investment adviser). The accompanying balance sheet has been prepared under my direction and control and presents fairly its financial position on the dates indicated to the best of my knowledge, belief, and ability. (Signature and Title)].

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

(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 May 20, 2015.

TRD-201501839

John Morgan

Securities Commissioner

State Securities Board

Earliest possible date of adoption: July 5, 2015

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

CHAPTER 133. FORMS
7 TAC §133.18

The Texas State Securities Board proposes new §133.18, which adopts by reference a form concerning certification of balance sheet by principal financial officer. The form would be used for certification of an applicant 's balance sheet to be filed with their application for registration as a dealer or investment adviser.

Patricia Loutherback, Director, Registration Division, has determined that for the first five-year period the rule is in effect there will be no foreseeable fiscal implications for state or local government as a result of enforcing or administering the rule.

Ms. Loutherback also has determined that for each year of the first five years the rule is in effect the public benefit anticipated as a result of enforcing the rule will be to simplify the registration process by providing a specific certification form for applicants to complete. There will be no effect on micro- or small businesses. Since the rule will have no adverse economic effect on micro- or small businesses, 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.

Comments on the proposal must be in writing and will be accepted for 45 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 45 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.

§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.state.tx.us.

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 May 20, 2015.

TRD-201501840

John Morgan

Securities Commissioner

State Securities Board

Earliest possible date of adoption: July 5, 2015

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