May 13, 1994
TO: INVESTMENT ADVISERS COMMITTEE NO. 34-94
STATE LIAISON COMMITTEE NO. 32-94
UNIT INVESTMENT TRUST COMMITTEE NO. 35-94
RE: TEXAS ISSUES PROPOSED LEGISLATIVE RECOMMENDATIONS FOR
COMMENT
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The Texas State Securities Board (the "Board") has issued for
comment a package of legislative recommendations they would like to
have considered during the upcoming legislative session. For the
most part, the recommendations contained in the package are
technical or procedural in nature. The items impacting investment
companies or investment advisers are briefly summarized below.
1. Assessment of Administrative Fines: Item 1 of the package
(pp. 1-4) would authorize the Texas Securities Commissioner (the
"Commissioner") to assess administrative fines, after notice and
opportunity for a hearing, against any person who has violated the
Texas Securities Act (the "Act"). Such fine could not exceed
$10,000 per violation.
2. Civil Liability for Investment Advisers: Item 2 of the
package (pp. 10-11) proposes amendments to the Act that would
subject investment advisers to civil liability for (1) violating
the registration provisions of the Act or (2) engaging in
fraudulent conduct in connection with rendering investment advice.
3. Sales of Excess Securities: Item 11 of the package (p.
32) proposes that Section 35-1 of the Act, relating to fees for the
sale of excess securities, be amended to clarify that its
provisions also apply to sales of securities after the expiration
of a registration.
4. Consent to Service of Process: Item 12 of the package
(p. 34) would amend Section 8 of the Act to permit the Board to
adopt a rule that provides that the consent to service of process,
which must be filed by issuers of securities, does not need to be
accompanied by the resolution of the company's board of directors,
as is currently required. This amendment is necessary to
accommodate filings of registration statements through the
Securities Registration Depository ("SRD"), since the SRD will not
accept a Form U-2A, Uniform Corporate Resolution, which is
currently required in order to obtain registration in Texas.
5. Registration by Coordination: Item 14 of the package
(pp. 40-43) would amend the provisions of the Act relating to
registration by coordination to: (1) provide that only one copy of
the prospectus need be filed along with the issuer's registration
statement, rather than the three copies currently required; and (2)
adopt the uniform registration/renewal dates from the NASAA "Model
Registration and Reporting Procedures for Investment Companies" for
mutual funds and unit investment trusts.
6. Provisions relating to Dealers, Agents and Salesmen: The
Board has recommended that the grounds for denying licensure to
Dealers, Agents, and Salesmen be expanded to include failing to pay
administrative fines assessed by the Commissioner, and being the
subject of any order that either resulted from fraudulent conduct
or that restrains or enjoins conduct in connection with the
purchase or sale of securities. (See Item 1 pp. 1-3.)
Additionally, provisions governing the renewal of expired
registrations have been clarified. (See Item 9 p. 28.)
* * * * *
A copy of the proposed legislative package is attached. The
Texas Securities Board has requested that any comments on it be
filed by May 30, 1994. If you have any comments that you would
like to have included in the Institute's comment letter, please
provide them to me by phone (202/326-5825) or fax (202/326-5828) no
later than Friday, May 20, 1994.
Tamara K. Cain
Assistant Counsel
Attachment