A meeting of the State Securities Board was held on September 19, 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; Cristi Ramón Ochoa, Deputy Commissioner; Tommy Green, Director, Inspections and Compliance Division; Derek Lauterjung, Director, Staff Services Division; Cheryn Netz, General Counsel; Joseph J. Rotunda, Director, Enforcement Division; Barbara Engle, Assistant Director, Inspections and Compliance Division; Jeramy Heintz, Assistant Director, Enforcement Division; Misty Smith, Assistant Director, Staff Services Division; Matthew Bacon, Staff Attorney, General Counsel Division; Sonia Fergerson, Executive Assistant; Kathryn Miner, Legal Assistant, Enforcement Division; Brian Shepherd, Staff Attorney, General Counsel Division; and Shaun Yarroll, Senior Investigator, Legal and Investigations Division. Also attending was Kim Lopez-Gonzales.
Chair Kinney indicated that Mr. Montgomery was delayed, but was expected to arrive soon, and called the meeting to order at 10:39 a.m.
Minutes of the May 9, 2024, meeting were approved.
The Audit Committee reported on the Agency’s Internal Audit Report for Fiscal Year 2024, prepared by Garza/Gonzalez & Associates, and the Board reviewed the report.
Upon the recommendation of the Audit Committee, the Board voted to retain Garza/Gonzalez & Associates as the internal auditor for Fiscal Year 2025.
The Board voted to adopt the following proposed rules:
- Amending §113.14(b), Statements of Policy to update the rule to reflect September 12, 2023, revisions to the NASAA SOPs for Impoundment of Proceeds; Options and Warrants; Promotional Shares; and Debt Securities.
- Amending §114.4, Filings and Fees, to add a new paragraph (b)(6) to specifically address federal covered securities offered pursuant to SEC Regulation Crowdfunding.
- Amending §133.33, Uniform Forms Accepted, Required, or Recommended, to add the Uniform Notice of Federal Crowdfunding Form (Form U-CF) and Form U-6 to the list of uniform forms accepted, and to cite to codified Act.
- Amending §111.2, Listed and Designated Securities.
- New Form 133.7, Securities Application, to remove a reference to a repealed form.
- Repeal of Form 133.7, Securities Application.
- Amending §139.1, Policies.
- Amending §139.2, Professional Associations.
- Amending §139.7, Sale of Securities to Nonresidents, to add the word “internet” to subsection (b).
- Amending §139.8, Sales to Underwriters.
- Amending §139.9, Bank Holding Companies.
- Amending §139.10, Exchange Offers.
- Amending §139.11, Transactions in United States Savings Bonds.
- Amending §139.12, Oil and Gas Auction Exemption.
- Amending §139.13, Resales under SEC Rule 144 and Rule 145(d).
- Amending §139.14, Non-Issuer sales.
- Amending §139.15, Credit Enhancements.
- Amending §139.16, Sales to Individual Accredited Investors, to use the updated SEC definition of “individual accredited investor” in limited use advertisement requirement found subsection (e).
- Amending §139.18, Dealer and Investment Adviser Use of the Internet to Disseminate Information on Products and Services, to remove obsolete terminology and conform to current terminology.
- Amending §139.19, Accredited Investor Exemption.
- Amending §139.20, Third Party Brokerage Arrangements on Financial Entity Premises.
- Amending §139.21, Dealer, Agent, and Securities exemptions for Canadian Accounts.
- Amending §139.22, Exemption for Investment Adviser to a High Net Worth Family Entity.
- Amending §139.23, Registration Exemption for Investment Advisers to Private Funds.
- Amending §139.24, Charitable Organizations Assisting Economically Disadvantaged Clients with Texas Qualified Tuition Program Plans.
- Amending §139.26, Intrastate Crowdfunding Exemption for SEC Rule 147A offerings.
- Amending §139.27, Mergers and Acquisitions Dealer Exemption.
Member Montgomery arrived at the meeting.
The Board voted to publish for public comment the following new rule proposals:
- Amending §115.1(a)(2), General Provisions, to add a new subparagraph to the list of locations excluded from the definition of branch office to incorporate and recognize FINRA rules on residential supervisory locations.
- Amending §115.10, Supervisory Requirements, to amend subsection (c), internal inspections, to incorporate and recognize the FINRA remote inspections pilot program.
- Amending §115.5, Minimum Records, to add new recordkeeping obligations in subsection (h) relating to conduct rules, and to add reference to certificate of formation in (e)(5) to improve accuracy.
- New §115.24, Adoption by Reference of Conduct Rules
- Amending §116.5, Minimum Records, to add new paragraph (a)(13) to require registered investment advisers to comply with SEC recordkeeping requirements of the SEC Marketing Rule.
- Amending §116.15, Advertising Restrictions, to rename section and to adopt by reference the SEC Marketing Rule
- Amending §115.3, Examinations:
- to add subparagraphs (c)(5)(A) and (B) to recognize and grant waivers of reexamination requirements for certain classes of applicants who participate in recognized NASAA or FINRA continuing education programs (EVEP or MQP) and meet other requirements
- to add subparagraph (c)(5)(C) to recognize and grant waivers of examination requirements to applicants who have received an examination waiver from FINRA; and
- to amend subsection (d) to impose a waiting period for retaking the securities law examination and to add references to other sources of information concerning the Texas securities law examination process
- Amending §116.3, Examinations:
- to replace a discontinued professional designation in (c)(2)(E) with a new professional designation that is eligible for an examination waiver;
- to remove an unneeded requirement in (c)(3) and add new subparagraphs (c)(3)(A) and (B) to recognize and grant waivers of reexamination requirements for certain classes of applicants who participate in recognized NASAA or FINRA continuing education programs (EVEP or MQP) and meet other requirements
- to add subparagraph (c)(3)(C) to recognize and grant waivers of examination requirements to applicants who have received an examination waiver from FINRA; and
- to amend subsection (d) to impose a waiting period for retaking the securities law examination and to add references to other sources of information concerning the Texas securities law examination process.
- Amending §115.9, Post-Registration Reporting Requirements:
- to amend subparagraph (a)(3) to require registered dealers and agents to report misdemeanor offense actions that are listed in §115.6(c), Registration of Persons with Criminal Backgrounds; and
- to amend subparagraph (a)(6) to clarify that registered persons must notify the Commissioner of changes of legal status.
- Amending §116.9, Post-Registration Reporting Requirements:
- to amend subparagraph (a)(3) to require registered investment advisers and investment adviser representatives to report misdemeanor offense actions that are listed in §116.6(c), Registration of Persons with Criminal Backgrounds; and
- to amend subparagraph (a)(6) to clarify that registered persons must notify the Commissioner of changes of legal status.
- Amending §115.1, General Provisions, to adjust quotations in subsection (a) to be consistent with the codified Act, and to remove redundant language in (b)(2)(D).
- Amending §115.2, Application Requirements, to reorganize subsections (a) and (e) and to add cross reference to §115.22 in (a) to improve consistency and readability; to add reference to certificate of formation in (a)(2)(A) to improve accuracy; and to amend (d) to allow option to notify applicants by email of automatic withdrawal of applications
- Amending §115.4, Evidences of Registration.
- Amending §115.6, Registration of Persons with Criminal Background.
- Amending §115.8, Fee Requirements.
- Amending §115.11(a), Finder Registration and Activities, to inform finder applicants that finders by definition are not permitted to register in other capacities.
- Amending §115.16, Use of Senior-Specific Certifications and Professional Designations.
- Amending §115.21, System Addressing Suspected Financial Exploitation of Vulnerable Customers Pursuant to the Texas Securities Act, Section 45, to rename the section.
- Amending §115.22, Electronic Submission of Forms and Fees.
- Amending §116.1, General Provisions, to remove redundant language in (b)(2)(D).
- Amending §116.2, Application Requirements, to add cross reference to §116.22 in (a) to improve consistency and readability, to add reference to certificate of formation in (a)(2)(A) to improve accuracy; and to amend (d) to allow option to notify applicants by email of automatic withdrawal of applications.
- Amending §116.3, Examination.
- Amending §116.4, Evidences of Registration.
- Amending §116.5, Minimum Records, to add reference to certificate of formation in (b)(3) to improve accuracy.
- Amending §116.6, Registration of Persons with Criminal Backgrounds.
- Amending §116.8, Fee Requirements.
- Amending §116.16, Use of Senior-Specific Certifications and Professional Designations.
- Amending §116.21, System Addressing Suspected Financial Exploitation of Vulnerable Customers Pursuant to the Texas Securities Act, Section 45, to rename the section.
The Commissioner gave a report on the Agency’s budget and performance measures.
The Commissioner gave a general update on Agency operations and announced the name of the new agency conference room as the Kinney Conference Room.
The Commissioner gave a general update on legislative matters related to the Agency.
The Board retired to executive session at 12:20 p.m., to discuss the performance review of the Securities Commissioner pursuant to the exception granted by Section 551.074 of the Texas Government Code, Open Meetings Act.
Following the executive session, the Board reconvened the open meeting at 1:00 p.m. and noted their approval of the Commissioner’s job performance.
The Board discussed possible times and dates for future Board Meetings and selected: February 20, 2025, May 15, 2025, and September 18, 2025.
The meeting was then adjourned at 1:07 p.m.