Minutes - February 22, 2024

A meeting of the State Securities Board was held on February 22, 2024, in Room 320, Thomas Jefferson Rusk State Office Building, at 10:00 a.m. Those present were: E. Wally Kinney, Chair; Robert Belt, Member; Melissa Tyroch, Member; Ejike E. Opka II, Member; David B. Montgomery, Member; Travis J. Iles, Securities Commissioner; Clinton Edgar, Deputy Commissioner; Tommy Green, Director, Inspections and Compliance Division; Derek Lauterjung, Director, Staff Services Division; Joseph J. Rotunda, Director, Enforcement Division; Cheryn Netz, General Counsel; Emily Diaz, Assistant Director, Registration Division; Misty Smith, Assistant Director, Staff Services Division; Shaun Yarroll, Assistant Director, Registration Division; Barbara Engle, Assistant Director, Inspections and Compliance Division;  Cristi Ochoa, Attorney, Inspections and Compliance Division; Brian Shepherd, Staff Attorney, General Counsel Division; Kristen McCourt, Attorney, Enforcement Division; Kathryn Miner, Legal Assistant, Enforcement Division; and Sonia Fergerson, Executive Assistant. Also attending was Marlene K. Sparkman.

Chair Kinney called the meeting to order at 10:09 a.m.

Mr. Montgomery was welcomed as a new member of the State Securities Board.

Minutes of the September 21, 2023, meeting were approved.

The Board voted to retain Robert Belt as a member and the Chair of the Audit Committee and to select Melissa Tyroch to serve on the committee to work with the Board’s Internal Auditor.

The Board reviewed and voted to re-adopt the following rule chapters pursuant to the Agency's rule review plan:

  • Chapter 109. Transactions Exempt from Registration.
  • Chapter 111. Securities Exempt from Registration.
  • Chapter 139. Exemptions by Rule or Order.
  • Chapter 133. Forms.

The Board voted to adopt the following proposed rules:

  • Amending §115.18(b), (d), (e), and (h), concerning special provisions relating to military applicants, to implement changes to Chapter 55 of the Occupations Code; make nonsubstantive changes to update and conform references and terminology; update citations to reference the codified Texas Securities Act; and add subsection (i) to state the purpose of the section.
  • Amending §116.18(b), (d), (e), and (h), concerning special provisions relating to military applicants, to implement changes to Chapter 55 of the Occupations Code; make nonsubstantive changes to update and conform references and terminology; update citations to reference the codified Texas Securities Act; and add subsection (i) to state the purpose of the section.
  • 3.    New Form 133.22, Waiver or Refund Request by a Military Service Member or Military Spouse for a Renewal Fee, and new Form 133.23, Request for Recognition of Out-Of-State License or Registration Pursuant to Occupations Code §55.0041.
  • Repeal of Form 133.22, Waiver or Refund Request by a Military Spouse for a Renewal Fee, and Form 133.23, Request for Recognition of Out-Of-State License or Registration by a Military Spouse.
  • Amending §106.1, concerning guidelines for the assessment of administrative fines.
  • Amending §107.1, concerning general.
  • Amending §107.2, concerning definitions, to relocate provisions within the rule, remove obsolete terminology and conform to current terminology, and add new definitions for “NASAA” and “CFR.”
  • Repealing §113.1, concerning qualification of securities.
  • Adding new §113.1, concerning definitions.
  • Amending §113.2, registration by coordination, to rename the section and incorporate the qualification of securities provisions from §113.1, which is being proposed for repeal.
  • Amending §113.3(1), concerning fair, just, and equitable standards.
  • Amending §113.4(d)(2) and (e), application for registration, to provide alternative means for notification of abandonment of an application.
  • Amending §113.5(a) and (c), concerning financial statements.
  • Amending §113.6, concerning renewal update.
  • Amending §113.8, concerning notification of status in other states.
  • Amending §113.9, concerning securities underlying transferable warrants and employee stock options.
  • Amending §113.11(a)(1) and (b)(1), concerning shelf registration of securities.
  • Amending §113.12, concerning applicability of statements of policy to exempt offerings.
  • Amending §113.13(a)-(c) and (e), concerning multijurisdictional disclosure system–MJDS offerings, to remove references to an obsolete federal form.
  • Amending §113.14(a) and (c), concerning statements of policy.
  • Amending §114.1(b), concerning introduction, to add a newly defined term appearing in §114.2.
  • Amending §114.2(1) and (4), concerning definitions, to add a new term “Exemptions Sections” and remove definitions that duplicate those already appearing in §107.2.
  • Amending §114.4(a)-(b), (d), and (f), concerning filings and fees, to remove duplicate definitions; and replace quotations of statutory language concerning fees with references to the appropriate statutory provision.
  • Amending §123.3(a)-(e), and (g)-(i), concerning conditional exemption for money market funds.
  • Amending §127.1, concerning enforcement, to remove quotations of statutory language that has changed.
  • Amending §127.3, concerning seal of the state.
  • Amending §127.4(a)-(b), concerning prosecutorial assistance to county or district attorneys.
  • Amending §131.1(a), concerning information sharing.
  • Amending §135.1, concerning exemption.
  • Amending §137.1, concerning application.
  • Amending §137.2, concerning filing requirements, to fix an incorrect reference.
  • Amending §137.3, concerning preliminary prospectus.
  • Amending §137.6(a) and (e), concerning standards for supplemental advertising, to update terminology.

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

  • Amending §109.1, concerning transactions involving existing security holders, to conform to current terminology.
  • Amending §109.2, concerning parent subsidiary transactions.
  • Amending §109.3, concerning financial institutions under the Texas Securities Act, §5.H, to rename the section.
  • Amending §109.4, concerning securities registration exemption for sales to financial institutions and certain institutional investors.
  • Amending §109.5, concerning dealer registration exemption for sales to financial institutions and certain institutional investors.
  • Amending §109.6, concerning investment adviser registration exemption for investment advice to financial institutions and certain institutional investors.
  • Amending §109.7, concerning secondary trading exemption under the Texas Securities Act, §5.O, to rename the section and to adjust quotation in (b) to be consistent with the codified Act.
  • Amending §109.8, concerning initial offering completed, to adjust quotations to be consistent with the codified Act.
  • Amending §109.11(d), concerning guarantee of options, to update terminology.
  • Amending §109.13, concerning limited offering exemptions, to add new defined terms to subsection (a) to be used in this section and reorganize subsection (a) into multiple paragraphs to incorporate the added defined terms; to adjust the quotation in (e) to be consistent with the codified Act; to rename (f),(g), and (h); to conform to current terminology in (f)(1) and (l)(3); to amend subsection (l) to add “of this subsection” to paragraphs (3),(4), and (5) of that subsection; and to correct and conform cross references in paragraphs (1) and (6) of subsection (l) to the proposed changes to subsection (a) in this section.
  • Amending §109.14, concerning oil, gas, and other mineral interests.
  • Amending §109.17, concerning banks under the Securities Act, §5.L, to rename the section and to adjust quotations to be consistent with the codified Act.

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

The Commissioner gave a general update on Agency operations.

The Commissioner provided an update on the implementation of legislation of interest that was adopted during the 88th Legislative Session, including the creation of a business court and the creation of the AI Advisory Council.

A draft resolution honoring Kenneth R. Koncaba, Jr., former Board member, was provided to the Board. The Board voted to adopt the resolution and directed that the resolution be included in the Minutes. The resolution reads as follows:

WHEREAS, THE HONORABLE KENNETH R. KONCABA, JR., of Friendswood, Texas, served the public of Texas with honor and distinction as a Member of the Texas State Securities Board from May 20, 2019, until his retirement on October 31, 2023; and

WHEREAS, Mr. Koncaba, an outstanding citizen of the State of Texas, served with dedication, honesty, and integrity in such office, and brought to it sound knowledge and sympathetic understanding of the myriad problems facing both investors and the business community; and

WHEREAS, Mr. Koncaba, has unselfishly contributed his time and talent and has given direction of the highest quality to this Agency, applying his extensive business knowledge and discharging well the duties of his position of public trust; and

WHEREAS, Mr. Koncaba has left an indelible impression upon the Board and Agency Staff through his insistence upon integrity and transparency at the Agency and his regard for fundamental fairness and the rights of all persons with whom the Agency comes in contact; and

WHEREAS, All who have known Mr. Koncaba at the Texas State Securities Board know him as a person of keen insight and compassion; and

WHEREAS, Texas is a better place for both investors and entrepreneurs as a result of Mr. Koncaba’s services; and

NOW, THEREFORE, BE IT RESOLVED That the Board Members and all personnel of the Texas State Securities Board hereby acknowledge their respect and admiration for Kenneth R. Koncaba, Jr., and acknowledge the contribution made by him to all citizens of Texas through his service to the State of Texas as a Member of this Board.

AND BE IT FURTHER RESOLVED that this Resolution be included in the official minutes of the February 22, 2024, meeting of the State Securities Board.

The meeting was then adjourned at 12:06 p.m.