January 4, 1991
TO: STATE LIAISON COMMITTEE NO. 1-91
RE: INSTITUTE COMMENTS ON PROPOSED TEXAS RULE
__________________________________________________________
As we previously informed you, the Texas State Securities
Board recently proposed for public comment an amendment to
Section 123.2 of the Texas Administrative Code that would exclude
securities eligible for resale pursuant to Rule 144A of the
Securities and Exchange Commission from the current 15%
investment limitation in restricted securities. (See Memorandum
to State Liaison Committee No. 29-90 dated November 30, 1990.)
The Institute submitted a comment letter supporting the
proposed amendment since the proposed amendment, if adopted,
would greatly benefit mutual funds by allowing such funds to
utilize the liberalized guidelines recently adopted by the SEC
with respect to restricted securities.
The Institute also recommended that the current provision
excluding bonds or other debt obligations customarily sold to
institutional investors from the category of unmarketable
investments not be deleted from the proposed amendment to Section
123.2(3) since there may be some securities which, although they
may not qualify as Rule 144A securities, are marketedto
institutional investors and for which an active and institutional
market exists.
The Institute further recommended that the Securities Board
continue to re-examine the necessity of the other limitations and
restrictions contained in Section 123.2. Such provisions include
restrictions on lending, short sales, investing in warrants, real
estate, oil, gas and other mineral leases. Inasmuch as these
provisions are concerns that are effectively dealt with on the
federal level by the SEC, the Institute noted that such could be
repealed by the Securities Board without jeopardizing investor
protection.
* * *
Attached is a copy of the Institute’s comment letter. We
will keep you advised of further developments.
Patricia Louie
Assistant General Counsel
Attachment