PART 7. STATE SECURITIES BOARD

CHAPTER 109. TRANSACTIONS EXEMPT FROM REGISTRATION

7 TAC §§109.1 - 109.8, 109.11, 109.13, 109.14, 109.17

The Texas State Securities Board adopts amendments to twelve rules in this chapter, §§109.1 - 109.8, 109.11, 109.13, 109.14, and 109.17, without changes to the proposed text as published in the March 29, 2024, issue of the Texas Register (49 TexReg 2021), and corrected in the April 12, 2024, issue of the Texas Register (49 TexReg 2348). The amended rules will not be republished.

The amended rules make nonsubstantive changes to the chapter. Specifically, the Board adopts amendments to §109.1, concerning Transactions Involving Existing Security Holders; §109.2, concerning Parent Subsidiary Transactions; §109.3, concerning Financial Institutions under the Texas Securities Act, §5.H; §109.4, concerning Securities Registration Exemption for Sales to Financial Institutions and Certain Institutional Investors; §109.5, concerning Dealer Registration Exemption for Sales to Financial Institutions and Certain Institutional Investors; §109.6, concerning Investment Adviser Registration Exemption for Investment Advice to Financial Institutions and Certain Institutional Investors; §109.7, concerning Secondary Trading Exemption under the Texas Securities Act, §5.O; §109.8, concerning Initial Offering Completed; §109.11, concerning Guarantee of Options; §109.13, concerning Limited Offering Exemptions; §109.14, concerning Oil, Gas, and Other Mineral Interests; and §109.17, concerning Banks under the Securities Act, §5.L.

The references to sections of the Texas Securities Act (Act) in §§109.1 - 109.8, 109.11, 109.13, 109.14, and 109.17 are updated to refer to the correct sections in the codified version of the Act in the Texas Government Code. The codification was adopted by HB 4171, 86th Legislature, 2019 Regular Session, and became effective January 1, 2022. The captions of §§109.3, 109.7, and 109.17 are also updated to refer to the codified version of the Act. The rest of the amendments make other nonsubstantive and cleanup changes.

Section 109.1 is amended to replace the references to the term "Securities and Exchange Commission" with "SEC" and to abbreviate a cite to the Code of Federal Regulations found in subsection (d). SEC and CFR are already defined terms in §107.2, concerning Definitions.

Sections 109.7(b), 109.8, 109.13, and 109.17 are amended to adjust the quotations to the Act in these provisions to be consistent with the codified Act.

Section 109.11 is amended to capitalize the term "Commissioner" for consistency.

Section 109.13 is amended to add a new definitions subsection in subsection (a) for use in this section, with the current text of that subsection being revised and reorganized into multiple paragraphs to incorporate the added definitions. Subsections (f), (g), and (h) of §109.13 are renamed with more descriptive and precise captions.

The references to the term "Securities and Exchange Commission" found in §109.13(f)(1) and (l)(3) are replaced with "SEC," which is already a defined term in §107.2, concerning Definitions.

Section 109.13(l) is amended to add "of this subsection" to paragraphs (3), (4), and (5) of that subsection. Cross references in this section are corrected and conformed to the other adopted changes to this section.

Statutory references are current and accurate and conform to the codified version of the Act; and terminology, quotations, and references are updated.

No comments were received regarding adoption of the amendments.

The amendments are adopted under the authority of the Texas Government Code, §4002.151, as adopted by HB 4171, 86th Legislature, 2019 Regular Session, effective January 1, 2022 (HB 4171). Section 4002.151 provides the Board with the authority to adopt rules as necessary to implement the provisions of the Texas Securities Act, including rules governing registration statements, applications, notices, and reports; defining terms; classifying securities, persons, and matters within its jurisdiction; and prescribing different requirements for different classes. Additionally, §§109.3, 109.4, 109.8, and 109.14 are also adopted under the authority of the Texas Government Code, §4005.024, as also adopted by HB 4171, which provides that the Board may prescribe new exemptions by rule. Finally, §109.5 and §109.6 are also adopted under the authority of the Texas Government Code, §4004.001, as also adopted by HB 4171, which provides the Board with the authority to prescribe new dealer, agent, investment adviser, or investment adviser representative registration exemptions by rule.

The adopted amendments to §§109.4, 109.13, and 109.14 affect the following sections of the Texas Securities Act: Texas Government Code Chapter 4003, Subchapters A, B, and C. The adopted amendments to §§109.5, 109.6, and 109.14 affect Chapter 4004 of the Act. The adopted amendments to §§109.1 - 109.4, 109.7, 109.8, 109.11, 109.13, 109.14, and 109.17 affect Chapter 4005, Subchapter A of the Act.

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

Filed with the Office of the Secretary of State on June 28, 2024.

TRD-202402888

Travis J. Iles

Securities Commissioner

State Securities Board

Effective date: July 18, 2024

Proposal publication date: March 29, 2024

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