Minutes - May 24, 2016

A meeting of the State Securities Board was held on May 24, 2016, in Room 320, Thomas Jefferson Rusk State Office Building, at 10:30 a.m. Those present were: E.Wally Kinney, Member; G. Alan Waldrop, Member; Miguel Romano, Jr., Member; John Morgan, Securities Commissioner; Ronak V. Patel, Deputy Securities Commissioner; Tommy Green, Director, Inspections and Compliance Division; Derek Lauterjung, Director, Staff Services Division; Clinton Edgar, Director, Registration Division; Joseph J. Rotunda, Director, Enforcement Division; Marlene K. Sparkman, General Counsel; Emily Diaz, Assistant Director, Registration Division; Stephanie Tourk, Assistant General Counsel; Robert Elder, Communications; and Sonia Fergerson, Executive Assistant. Also attending were Jared Staples, Nathan Roach, Monday Rufus, Brent Wistrom, and Amy Kofron.

Acting Chair Kinney called the meeting to order at 10:30 a.m.

Minutes of the January 27, 2016, meeting were approved.

The Board voted to adopt the following proposed rules:

1. Amending §123.3(b), concerning conditional exemption for money market funds, to align the rule to SEC Rule 2a-7 as revised by SEC Release IC-31166;

2. Creating new §115.20, concerning Texas crowdfunding portal registration and activities of small business development entities;

3. Amending §139.25(l), concerning intrastate crowdfunding exemption, to implement Section 44, added to the Texas Securities Act by House Bill 1629, permitting certain small business development entities registered as Texas intrastate crowdfunding portals pursuant to new §115.20 to have a financial interest in an issuer listed on its Internet web portal; and

4. Creating new Form 133.20, Texas crowdfunding portal registration by an authorized small business development entity.

The Board voted to publish for public comment the following new rule proposals:

1. Amending §115.19(c) and (e), concerning Texas crowdfunding portal registration and activities, to allow a registered Texas crowdfunding portal to establish a segregated account in lieu of an escrow account when the maximum offering amount is $100,000 or less; and

2. Amending §139.25(f) and (j), concerning intrastate crowdfunding exemption, to allow a segregated account to be used in lieu of an escrow account when the maximum offering amount is $100,000 or less.

The Board voted to re-adopt the following rule chapters:

1. Chapter 115. Securities Dealers and Agents.

2. Chapter 116. Investment Advisers and Investment Adviser Representatives.

The Board acknowledged and accepted two grants from the Investor Protection Trust for investor education purposes as set forth in the grant proposals. The first was for $2,500 (to purchase a license from Lightbulb Press, Inc. for its “Online Dictionary of Financial Terms” for the period of February 1, 2016 through January 31, 2018) and the second was for $6,125 (to print 500 copies of It's Your Financial Life and 500 copies of A Salute to Smart Investing).

The Board’s Audit Committee gave a report on the plan prepared by Monday Rufus for the fiscal year 2016 internal audit, and the Board voted to approve the Internal Audit Plan for Fiscal Year 2016.

The Commissioner and Senior Staff gave an update on intrastate crowdfunding in Texas.

The Commissioner and Senior Staff discussed issues relating to inspection performance targets and gave an update on employee turnover and steps being taken to achieve the performance targets.

The Commissioner and the Director of Registration gave an update on the status of Form D filings made through the Electronic Filing Depository (“EFD”) System and plans to phase out paper filings by the end of the calendar year.

The Board considered and voted to adopt a proposed resolution honoring former Board member Derrick Mitchell.

The Commissioner gave a report on the Agency’s budget and performance measures.

The Commissioner gave a general update on Agency operations.

The meeting was then adjourned.