Summaries of Rules Proposed at the September 19, 2024, Board Meeting

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Notice of Proposed Rule Changes to be published in the October 28, 2024, issue of the Texas Register: 

 

Chapter 115 and Chapter 116 Rulemaking. The rule changes below incorporate and recognize certain FINRA rules on branch offices and internal inspections; adopt by reference certain conduct and marketing rules and related recordkeeping requirements; coordinate examination waivers with NASAA model rules, FINRA rules, and FINRA waivers; and would require registered persons to report certain misdemeanor actions and changes in legal status to the Commissioner.

 

Chapter 115, Securities Dealers and Agents. Rulemaking in connection with incorporating and recognizing FINRA rules on residential supervisory locations and remote inspections pilot program:

  • Amend §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
  • Amend §115.10, Supervisory Requirements, to amend subsection (c), internal inspections, to incorporate and recognize the FINRA remote inspections pilot program

Chapter 115, Securities Dealers and Agents. Rulemaking adopting recent SEC conduct rule (Regulation Best Interest) and other conduct rules:

 

  • Amend §115.5, Minimum Records, to add new recordkeeping obligations in subsection (h) relating to conduct rules

  • Add new §115.24, Adoption by Reference of Conduct Rules

Chapter 116, Investment Advisers and Investment Adviser Representatives. Rulemaking adopting recent SEC Marketing Rule:

 

  • Amend §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 

  • Amend §116.15, Advertising Restrictions, to rename section and to adopt by reference the SEC Marketing Rule

Amendments Concerning Examination Requirements:

 

  • Amend §115.3, Examination:

    • 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

  • Amend §116.3, Examination:

    • 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

Post-Registration Reporting Requirement Amendments.

 

  • Amending §115.9, Post-Registration Reporting Requirement:

    • 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 Requirement:

    • 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

 

Other Amendments to Chapters 115 and 116 in connection with rule review. The nonsubstantive and other rule changes below generally would involve updating citations to reference the codified Texas Securities Act; updating other outdated quotations, references or citations; removing outdated, obsolete or redundant language or terminology; abbreviating citations; using defined terms; and/or edits to improve accuracy, consistency, and readability. Other changes specific to a rule are described below:

 

Chapter 115. Securities Dealers and Agents.

 

  • 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 §115.3, Examination

  • Amending §115.4, Evidences of Registration

  • Amending §115.5, Minimum Records, to add reference to certificate of formation in (e)(5) to improve accuracy

  • Amending §115.6, Registration of Persons with Criminal Backgrounds

  • 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

     

Chapter 116 Investment Advisers and Investment Adviser Representatives.

 

  • 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