The Securities board of the State of Texas has just issued their proposed ruling on an intrastate crowdfunding law. The goal of intrastate crowdfunding is to provide more capital for early stage companies at a reduced cost.
The key highlights are:
1. Unaccredited investors can invest up to $5K/year in a startup.
2. Startups raising $1M or less need only have the CEO certify their financial statements rather than provide audited statements.
3. Texas Crowdfunding portals need only fill out a form and pay a standard filing fee which basically provides a basic background check. The portal needs to track investor/issuer comments and all communications must take place on the portal. Portals do not need to sit for exams and must maintain records of transactions for five years.
The proposed ruling will be open for comment for 60 days and is expected to pass in final form in August, 2014.
John Morgan of the State Securities Board of Texas invites your comments on the proposed ruling. You can contact him at (512) 305-8302.
Here's the proposed ruling:
Intrastate Crowdfunding Exemption
The Texas State Securities Board proposes new <*>139.25,
concerning intrastate crowdfunding exemption. The new rule would
provide a registration exemption for securities offered in an
intrastate crowdfunding offering. The filing used to claim the
exemption is new Form 133.17, which is being concurrently
proposed. New <*>115.19, concerning Texas crowdfunding portal
registration and activities, is also being proposed to allow
offers and sales of the exempt securities to be made using a
Texas crowdfunding portal’s Internet website.
The new rule is proposed under Texas Civil Statutes,
Articles 581-5.T, 581-12.C, and 581-28-1. Section 5.T provides
that the Board may prescribe new exemptions by rule. Section
12.C provides the Board with the authority to prescribe new
dealer, agent, investment adviser, or investment adviser
representative registration exemptions by rule. Section 28-1
provides the Board with the authority to adopt rules and
regulations necessary to carry out and implement the provisions
of the Texas Securities Act, including rules and regulations
governing registration statements and applications; defining
terms; classifying securities, persons, and matters within its
jurisdiction; and prescribing different requirements for
different classes.
During the development of these proposals, the staff had
discussions with a number of firms and individuals who are
interested and have expertise in the area so their insight and
concerns could be considered. Federal crowdfunding proposals and
provisions in other states were also reviewed.
Under the proposal, the offering must comply with the federal
intrastate offering exemption and Securities and Exchange
Commission (“SEC”) Rule 147, so the securities do not have to be
registered at the federal level. Accordingly, the issuer must be
a Texas entity and the offers and sales limited to Texas
residents. Some Rule 147 requirements have been incorporated
into the proposed exemption to assist issuers in determining if
they qualify for the exemption. Rule 147 also places
restrictions on resale of the securities and requires certain
precautions against interstate offers. These are noted in
subsection (k) of the proposal.
The proposal is designed to assist small issuers conducting
offerings that are local in nature where many investors are
likely to be part of the company’s customer base or from the
surrounding community that will benefit from the growth of local
businesses and the jobs they provide. Accordingly, subsection
(b)(2) excludes certain issuers from the exemption, including:
(1) investment companies, which engage primarily in the business
of investing in other securities; (2) SEC reporting companies;
and (3) blind pool and blank check companies.
The offering amount would be capped at $1 million in a
12-month period. This cap would be reduced by the amount
received for sales of the issuer’s securities that occur within
six months before, during, or within six months after any offers
or sales made in reliance upon the exemption.
The issuer cannot accept more than $5,000 from a single
purchaser unless the purchaser is an accredited investor. Funds
raised must be placed in an escrow account until the minimum
target offering amount specified in the disclosure statement is
reached.
The proponents of crowdfunding argue that the hard work of
making investment decisions -- filtering out the best investments
and limiting fraud -- can be addressed in part by tapping the
“wisdom of the crowd” over the Internet. Individuals interested
in the crowdfunding campaign (members of the “crowd”) share
information about the project or business with each other and use
the information to decide whether to fund the campaign based on
the collective “wisdom of the crowd.” To facilitate this aspect
of crowdfunding, subsection (h) of the proposal requires that
information about the offering be posted on the Internet website
for a minimum of 21 days before the securities may be sold.
During this time, and for the course of the offering, all
communications between the issuer, prospective purchasers, or
investors must occur on the Internet website. The site must
provide channels for potential purchasers and investors to
communicate with each other, and those communications must be
visible to others on the site.
To alert interested persons to an offering, an issuer may
distribute a limited notice stating the issuer is conducting an
offering, giving the name of the general dealer or Texas
crowdfunding portal and a link to the Internet website. To keep
the issuer from inadvertently converting an intrastate offering
to an interstate one, thereby losing the federal exemption, the
proposal restricts distribution of the notice to within Texas and
requires it to contain a disclaimer reflecting that the offering
is limited to Texas residents and that offers and sales on the
Internet website are made only to Texas residents. A similar
disclaimer is required on the Internet website for the same
reason. The site also must require evidence of Texas residency
before allowing a person to view securities offering materials.
As with securities, there is also an exclusion from federal
registration available to dealers whose business is exclusively
intrastate. The disclaimer, evidence of residency requirement,
and regulatory approach taken in the proposal appear adequate for
purposes of characterizing the dealer’s activities, as well as
the securities offering, as one conducted intrastate.
Subsection (i) requires that a disclosure statement be
provided to each prospective purchaser on the Internet website.
Material information and risk factors must be disclosed and
topics to be addressed in the document noted. Additional
guidance for content of the disclosure statement will be in a
document prepared by the staff and posted on the Agency’s website
with other small business and crowdfunding information. Required
disclosures, common to crowdfunding offerings generally, are in
subsection (i)(2). These disclosures also appear in concurrently
proposed <*>115.19, which requires a Texas crowdfunding portal to
obtain an affirmative acknowledgment from the investor regarding
the disclosures before investment is permitted.
Many proponents of small business incentives cite the
requirement to provide audited or reviewed financial statements
prepared in accordance with generally accepted auditing standards
and generally accepted accounting principals as too costly for
small businesses. Section (i)(3) allows the issuer’s financial
statements to be certified by its principal executive officer.
However, if the issuer has audited or reviewed financial
statements prepared within the last three years, such financial
statements must also be provided.
Payments to unregistered persons are prohibited by
subsection (l), which also prohibits certain compensation
arrangements and affiliations between an issuer and the general
dealer or Texas crowdfunding portal operating the website on
which its offering appears.
To ensure that the exemption is not misused, subsection (m)
contains two types of disqualifications. Bad actor
disqualifications are addressed in subsections (m)(2) and (m)(3).
Issuers should be aware that, although a prior incident may not
be a disqualification under this proposal, it may still need to
be disclosed to potential purchasers and investors if it is
material information under subsection (i)(1). Subsection (m)(4)
prohibits offerings with a 12-month period by different issuers
with common control persons or where the proceeds of offerings by
different issuers will be combined in a single plan of financing.
Offerings made pursuant to the proposed exemption will not
have to meet the filing requirements in the Texas Securities Act,
<*>22.A, and Chapter 137 of the Board Rules (relating to
Administrative Guidelines for Regulation of Offers) since those
provisions do not apply to transactions exempt under <*>5, but a
notice on new Form 133.17 must be filed with the Securities
Commissioner along with a copy of the issuer’s disclosure
statement and the summary of the offering that appear on the
Internet website.
<
The new rule is proposed under Texas Civil Statutes,
Articles 581-5.T, 581-12.C, and 581-28-1. Section 5.T provides
that the Board may prescribe new exemptions by rule. Section
12.C provides the Board with the authority to prescribe new
dealer, agent, investment adviser, or investment adviser
representative registration exemptions by rule. Section 28-1
provides the Board with the authority to adopt rules and
regulations necessary to carry out and implement the provisions
of the Texas Securities Act, including rules and regulations
governing registration statements and applications; defining
terms; classifying securities, persons, and matters within its
jurisdiction; and prescribing different requirements for
different classes.
The proposal affects Texas Civil Statutes, Articles 581-7,
581-12, 581-13, 581-14, 581-15, and 581-18.
<*>139.25. Intrastate Crowdfunding Exemption.
(a) General. The State Securities Board, pursuant to the Texas
Securities Act (Act), <*>5.T, exempts from the securities
registration requirements of the Act, any offer or sale of
securities of an issuer through a registered general dealer or a
registered Texas crowdfunding portal, provided that all offers
and sales made pursuant to the offering are made to Texas
residents, completed solely within this state, and all the
requirements of this section are satisfied.
(b) Issuer.
(1) The issuer is an entity that has filed a certificate of
formation with the Texas Secretary of State, is organized under
the laws of Texas, and is authorized to do business in Texas and:
(A) At least 80% of the issuer’s gross revenues during its most
recent fiscal year prior to the offering are derived from the
operation of a business in Texas;
(B) At least 80% of the issuer’s assets at the end of its most
recent semiannual period prior to the offering are located in
Texas;
(C) The issuer will use at least 80% of the net proceeds of this
offering in connection with the operation of its business within
Texas; and
(D) The principal office of the issuer is located in Texas.
(2) The issuer is not, either before or because of the offering:
(A) A company, that engaged or proposes to engage in the business
of investing, reinvesting, owning, holding, or trading in
securities;
(B) Subject to the reporting requirements of the Securities and
Exchange Act of 1934, <*>13 or <*>15(d), 15 U.S.C. <*>78m and
<*>78o(d); or
(C) a company that has not yet defined its business operations,
has no business plan, has no stated investment goal for the funds
being raised, or that plans to engage in a merger or acquisition
with an unspecified business entity.
(c) Coordination with federal securities laws. The transaction
meets the requirements of the federal exemption for intrastate
offerings in the Securities Act of 1933, <*>3(a)(11), 15 U.S.C.
<*>77c(a)(11), and Securities and Exchange Commission Rule 147,
17 CFR <*>230.147.
(d) Offering. The offering must be made exclusively through an
Internet website operated by a registered general dealer or
registered Texas crowdfunding portal. All consideration received
for all sales of the securities in reliance on this exemption
shall not exceed $1 million in a 12-month period. This amount is
reduced by the aggregate amount received for all sales of
securities by the issuer in another offering that does not take
place prior to the six month period immediately preceding or
after the six month period immediately following any offers or
sales made in reliance upon this section.
(e) Individual investments. The issuer will not accept more than
$5,000 from any single purchaser unless the purchaser is an
accredited investor as defined in <*>107.2 of this title
(relating to Definitions). The issuer must have a reasonable
basis for believing that the purchaser of a security under this
section is a Texas resident and, if applicable, an accredited
investor.
(f) Escrow. All payments for purchase of securities offered under
this section are directed to and deposited in an escrow account
with a bank or other depository institution located in Texas and
organized and subject to regulation under the laws of the United
States or under the laws of Texas, and will be held in escrow
until the aggregate capital raised from all purchasers is equal
to or greater than the minimum target offering amount specified
in the disclosure statement as necessary to implement the
business plan. Investors will receive a return of all their
subscription funds if the target offering amount is not raised by
the time stated in the disclosure statement.
(g) Communications.
(1) All communications between the issuer, prospective
purchasers, or investors taking place during the offer of
securities pursuant to this section must occur on the Internet
website of the registered general dealer or Texas crowdfunding
portal. During the time the offering appears on the Internet
website, the website must provide channels through which
potential purchasers and investors can communicate with one
another and with representatives of the issuer about the
offering. These communications must be visible to all those with
access to the offering materials on the Internet website.
(2) Notwithstanding the foregoing, the issuer may distribute a
notice within Texas limited to a statement that the issuer is
conducting an offering, the name of the registered general dealer
or portal through which the offering is being conducted and a
link directing the potential investor to the dealer or portal’s
Internet website. The notice must contain a disclaimer that
reflects that the offering is limited to Texas residents and
offers and sales of the securities appearing on the Internet
website are limited to persons that are Texas residents.
(h) Internet website.
(1) The Internet website operated by a registered general dealer
or the Texas crowdfunding portal must meet the following
requirements:
(A) the website must contain a disclaimer that reflects that
access to securities offerings on the website is limited to Texas
residents and offers and sales of the securities appearing on the
website are limited to persons that are Texas residents;
(B) evidence of residency within Texas is required as a condition
of entry before viewing securities-related offering materials on
the website and before sale is made to a prospective purchaser.
An affirmative representation made by a prospective purchaser
that the prospective purchaser is a Texas resident and proof of
at least one of the following would be considered sufficient
evidence that the individual is a resident of this state:
(i) a valid Texas driver license or official personal
identification card issued by the State of Texas;
(ii) a current Texas voter registration; or
(iii) general property tax records showing the individual owns
and occupies property in this state as his or her principal
residence; and
(C) prior to offering an investment opportunity to residents of
Texas and throughout the term of the offering, the registered
general dealer or registered portal shall give the Securities
Commissioner access to the Internet website.
(2) Information about the issuer and the offering posted on the
Internet website, entry onto which is conditioned upon evidence
of Texas residency, operated by the registered general dealer or
registered portal consists of:
(A) a copy of the disclosure statement required by subsection (i)
of this section;
(B) a summary of the offering, including:
(i) a description of the entity, its form of business; principal
office, history, business plan, and the intended use of the
offering proceeds, including compensation paid to any owner,
executive officer, director, or manager;
(ii) the identity of the executive officers, directors, and
managers, including their titles and their prior experience and
the identity of all persons owning more than 20% of the ownership
interests of any class of securities of the company; and
(iii) a description of the securities being offered and of any
outstanding securities of the company, the amount of the
offering, and the percentage ownership of the company represented
by the offered securities.
(3) The information required by paragraph (2) of this subsection
must be made available on the Internet website to the
Commissioner and potential investors for a minimum of 21 days
before any securities are sold in the offering.
(i) Disclosure statement. A disclosure statement must be made
readily available and accessible to each prospective purchaser at
the time the offer of securities is made to the prospective
purchaser on the Internet website. The disclosure statement must
contain all of the following:
(1) Material information and risk factors. All information
material to the offering, including, where appropriate, a
discussion of significant factors that make the offering
speculative or risky. Guidance on the categories of information
to include can be found by reviewing the small business offering
information provided by the Texas State Securities Board on its
Internet website. Topics to be addressed include, but are not
limited to:
(A) general description of the issuer’s business;
(B) history of the issuer’s operations and organization;
(C) management of the company and principal stockholders;
(D) how the proceeds from the offering will be used;
(E) financial information about the issuer;
(F) description of the securities being offered; and
(G) litigation and legal proceedings.
(2) Disclosures. The issuer shall inform all prospective
purchasers and investors of the following:
(A) There is no ready market for the sale of the securities
acquired from this offering; it may be difficult or impossible
for an investor to sell or otherwise dispose of this investment.
An investor may be required to hold and bear the financial risks
of this investment indefinitely;
(B) The securities have not been registered under federal or
state securities laws and, therefore, cannot be resold unless the
securities are registered or qualify for an exemption from
registration under federal and state law.
(C) In making an investment decision, investors must rely on
their own examination of the issuer and the terms of the
offering, including the merits and risks involved; and
(D) No federal or state securities commission or regulatory
authority has confirmed the accuracy or determined the adequacy
of the disclosure statement or any other information on this
Internet website.
(3) Financial statements. Issuers must provide current financial
statements certified by the principal executive officer to be
true and complete in all material respects. If the issuer has
audited or reviewed financial statements prepared within the last
three years, such financial statements must also be provided to
investors.
(j) Notice filing. At least 21 days before an offer of securities
is made in reliance on this section or use of any publicly
available Internet website in an offering of securities in
reliance on this section, the issuer shall file with the
Securities Commissioner:
(1) Form 133.17, Crowdfunding Exemption Notice;
(2) the disclosure statement, required by subsection (i) of this
section; and
(3) the summary of the offering, required by subsection (h)(2)(B)
of this section.
(k) Resales of securities. The issuer and all its officers,
directors, and employees shall make the disclosures required by
SEC Rule 147(e) and (f), 17 CFR <*>230.147(e) and (f). The issuer
must place a legend on the certificate or other document
evidencing that the securities have not been registered and
setting forth the limitations on resale contained in SEC Rule
147(e), including that for a period of nine months from the date
of last sale by the issuer of the securities in the offering, all
resales by any person, shall be made only to Texas residents.
(l) Commissions and remuneration. A commission or other
remuneration shall not be paid or given, directly or indirectly,
for the offer or sale of the securities unless the person
receiving such compensation is registered in Texas as a dealer or
agent or as a Texas crowdfunding portal. The issuer may not list
its securities on the Internet website of a general dealer or
portal that holds an interest in the issuer. The issuer may not
compensate a general dealer or a portal by providing a financial
interest in the issuer as compensation for services provided to
or on behalf of the issuer. A general dealer or portal may not be
affiliated with or under common control with an issuer whose
securities appear on its Internet website.
(m) Disqualifications.
(1) For purposes of this subsection, “control person” means an
officer; director; other person having the power, directly or
indirectly, to direct the management or policies of the issuer,
whether by contract or otherwise; or a person that owns 20% or
more of any class of the outstanding securities of the issuer.
(2) This exemption is not available if the issuer, the issuer’s
predecessors, any affiliated issuer, or any control person of the
issuer:
(A) within the last five years, has filed a registration
statement which is the subject of a currently effective
registration stop order entered by any state securities
administrator or the United States Securities and Exchange
Commission;
(B) within the last five years, has been convicted of any
criminal offense in connection with the offer, purchase, or sale
of any security, or involving fraud or deceit;
(C) is currently subject to any state or federal administrative
enforcement order or judgment, entered within the last five
years, finding fraud or deceit in connection with the purchase or
sale of any security; or
(D) is currently subject to any order, judgment, or decree of any
court of competent jurisdiction, entered within the last five
years, temporarily, preliminarily, or permanently restraining or
enjoining such party from engaging in or continuing to engage in
any conduct or practice involving fraud or deceit in connection
with the purchase or sale of any security.
(3) Paragraph (2) of this subsection shall not apply if:
(A) the party subject to the disqualification is licensed or
registered to conduct securities-related business in the state in
which the order, judgment, or decree creating the
disqualification was entered against such party;
(B) before the first offer under this exemption, the state
securities administrator, or the court or regulatory authority
that entered the order, judgment, or decree, waives the
disqualification; or
(C) the issuer establishes it did not know and exercising
reasonable care, based on a factual inquiry, could not have known
that a disqualification existed under this subsection.
(4) This exemption is not available to an issuer if:
(A) a control person of the issuer is also a control person of
another issuer that has made a securities offering in Texas
within the previous 12-month period;
(B) a control person of the issuer is also a control person of
another issuer that is concurrently conducting a securities
offering in Texas; or
(C) the proceeds of the offering will be combined with the
proceeds of a securities offering by another issuer as part of a
single plan of financing.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency’s
legal authority to adopt.
Texas Crowdfunding Portal
The Texas State Securities Board proposes amendments to
<*>115.1, concerning general provisions; and <*>115.3, concerning
examination. New <*>115.19, concerning Texas crowdfunding portal
registration and activities, is also proposed.
The amendment to <*>115.1 would add a definition for “Texas
crowdfunding portal” and provide a restricted dealer registration
category as such.
The amendment to <*>115.3 would provide an examination
waiver to an applicant applying for restricted dealer
registration as a Texas crowdfunding portal.
New <*>115.19 would set out the registration process and
permitted activities of a dealer registered as a Texas
crowdfunding portal.
A Texas crowdfunding portal would be a Texas-only dealer,
able to utilize the exclusion from federal registration available
to dealers whose business is exclusively intrastate. The
portal’s activities would be limited to operating an Internet
website for <*>139.25 exempt offerings. It could not participate
in secondary market transactions or engage in the activities in
subsection (c).
To preserve the intrastate character of the dealer’s
activities and the offering, the Internet website must contain
appropriate disclaimers and obtain evidence of Texas residency
before allowing access to the offering materials or permitting a
sale to be made.
Prior to offering securities on the Internet website, the
portal conducts background and regulatory checks on the issuer
and each of the issuer’s control persons. Additionally, the
portal must obtain affirmative acknowledgments of certain
disclosures common to all crowdfunding offerings from investors
before a sale can be made.
Records required to be kept by the portal are specified in
subsection (e), rather than the more extensive, and mostly
inapplicable, list of records required of other securities
dealers. A portal is also not required to maintain a supervisory
system. A portal’s records are subject to inspection and must be
furnished on request of the Securities Commissioner.
A Texas crowdfunding portal would apply for registration by
filing new Form 133.15, which is being concurrently proposed. It
would also provide its organizational documents to establish its
status as a Texas entity. It would be subject to the same
registration fee as other dealers registered in Texas. New Form
133.15 would also be used for filing amendments. The portal is
subject to the post-registration reporting requirements in
<*>115.9. When the portal withdraws its registration, it would
use new Form 133.16, which is also being proposed.
<*>115.19. Texas Crowdfunding Portal Registration and
Activities.
(a) Intrastate portal. A Texas crowdfunding portal:
(1) must be an entity incorporated or organized under the laws of
Texas, authorized to do business in Texas, and engaged
exclusively in intrastate offers and sales of securities in
Texas;
(2) must limit its activities to operating an Internet website
utilized to offer and sell securities exempt from registration
pursuant to <*>139.25 of this title (relating to Intrastate
Crowdfunding Exemption); and
(3) does not operate or facilitate a secondary market in
securities.
(b) Internet website. The Internet website operated by the Texas
crowdfunding portal must meet the following requirements:
(1) the website must contain a disclaimer that reflects that
access to securities offerings on the website is limited to Texas
residents and offers and sales of the securities appearing on the
website are limited to persons that are Texas residents;
(2) evidence of residency within Texas is required as a condition
of entry before viewing securities-related offering materials on
the website and before sale is made to a prospective purchaser.
An affirmative representation made by a prospective purchaser
that the prospective purchaser is a Texas resident and proof of
at least one of the following would be considered sufficient
evidence that the individual is a resident of this state:
(A) a valid Texas driver license or official personal
identification card issued by the State of Texas;
(B) a current Texas voter registration; or
(C) general property tax records showing the individual owns and
occupies property in this state as his or her principal
residence;
(3) prior to offering an investment opportunity to residents of
Texas and throughout the term of the offering, the portal shall
give the Securities Commissioner access to the Internet website;
and
(4) prior to permitting an investment in any securities listed on
the Internet website, the portal shall obtain an affirmative
acknowledgment from the investor of the following:
(A) There is no ready market for the sale of the securities
acquired from this offering; it may be difficult or impossible
for an investor to sell or otherwise dispose of this investment.
An investor may be required to hold and bear the financial risks
of this investment indefinitely;
(B) The securities have not been registered under federal or
state securities laws and, therefore, cannot be resold unless the
securities are registered or qualify for an exemption from
registration under federal and state law.
(C) In making an investment decision, investors must rely on
their own examination of the issuer and the terms of the
offering, including the merits and risks involved; and
(D) No federal or state securities commission or regulatory
authority has confirmed the accuracy or determined the adequacy
of the disclosure statement or any other information on this
Internet website.
(c) Prohibited activities. A Texas crowdfunding portal shall not:
(1) offer investment advice or recommendations;
(2) compensate employees, agents, or other persons not registered
with the Securities Commissioner for soliciting offers or sales
of securities displayed or referenced on its platform or portal;
(3) hold, manage, possess or otherwise handle investor funds or
securities;
(4) be affiliated with or under common control with an issuer
whose securities appear on the Internet website;
(5) hold a financial interest in any issuer offering securities
on the portal’s Internet website; or
(6) receive a financial interest in an issuer as compensation for
services provided to or on behalf of an issuer.
(d) Background and regulatory checks.
Prior to offering securities to residents of Texas, the Texas crowdfunding portal
shall conduct a reasonable investigation of the background and
regulatory history of each issuer whose securities are offered on
the portal’s Internet website, and of each of the issuer’s
control persons. “Control persons” for purposes of this
subsection means the issuer’s officers; directors; or other
persons having the power, directly or indirectly, to direct the
management or policies of the issuer, whether by contract or
otherwise; and persons holding more than 20% of the outstanding
equity of the issuer. The portal must deny an issuer access to
its Internet website if the portal has a reasonable basis for
believing that:
(1) the issuer or any of its control persons is subject to a
disqualification under <*>139.25 of this title (relating to
Intrastate Crowdfunding Exemption);
(2) the issuer has engaged in, is engaging in, or the offering
involves any act, practice, or course of business that will,
directly or indirectly, operate as a fraud or deceit upon any
person; or
(3) it cannot adequately or effectively assess the risk of fraud
by the issuer or its potential offering.
(e) Recordkeeping.
(1) A Texas crowdfunding portal is not required to maintain the
records listed in <*>115.5 of this title (relating to Minimum
Records) or to maintain a supervisory system under <*>115.10 of
this title (relating to Supervisory Requirements).
(2) A portal shall maintain and preserve for a period of five (5)
years from either the date of the document or communication or
the date of the closing or termination of the securities
offering, whichever is later, the following records related to
offers and sales made through the Internet website and to
transactions where the portal receives compensation:
(A) records of compensation received for acting as a portal,
including the name of the payor, the date of payment, name of the
issuer, and name of the investor;
(B) copies of information provided by the portal to issuers
offering securities through the portal, prospective purchasers,
and investors;
(C) any agreements and/or contracts between the portal and an
issuer, prospective purchaser, or investor;
(D) any information used to establish that an issuer, prospective
purchaser, or investor is a Texas resident;
(E) any information used to establish that a prospective
purchaser or investor is an accredited investor as defined in
<*>107.2 of this title (relating to Definitions);
(F) any correspondence or other communications with issuers,
prospective investors, and/or investors;
(G) any information made available through the portal’s Internet
website relating to an offering;
(H) ledgers (or other records) that reflect all assets and
liabilities, income and expense, and capital accounts; and
(I) any other records relating to the offers and/or sales of
securities made through the Internet website.
(3) A portal shall maintain and preserve a copy of the Form
133.15 (relating to Texas Crowdfunding Portal Registration), Form
133.16 (relating to Texas Crowdfunding Portal Withdrawal of
Registration), and the Form U-4 (Uniform Application for
Securities Industry Registration or Transfer) used to register
the portal and its designated officer, and any amendments
thereto, for a period of five (5) years from the termination of
the portal’s registration.
(4) The records required to be maintained and preserved under
this subsection may be archived if they are over two years old.
(5) A portal shall, upon written request of the Securities
Commissioner, furnish to the Commissioner any records required to
be maintained and preserved under this subsection.
(6) The portal shall provide to the Commissioner access,
inspection, and review of any Internet website operated by a
portal and records maintained by the portal; and
(7) The records required to be kept and preserved under this
subsection must be maintained in a manner, including by any
electronic storage media, that will permit the immediate location
of any particular document so long as such records are available
for immediate and complete access by representatives of the
Commissioner. Any electronic storage system must preserve the
records exclusively in a non-rewriteable, non-erasable format;
verify automatically the quality and accuracy of the storage
media recording process; serialize the original and, if
applicable, duplicate units of storage media, and time-date for
the required period of retention the information placed on such
electronic storage media; and can download indexes and records
preserved on electronic storage media to an acceptable medium. In
the event that a records retention system commingles records
required to be kept under this subsection with records not
required to be kept, representatives of the Commissioner may
review all commingled records.
(f) Filings.
(1) Application. In lieu of the application requirements in
<*>115.2 of this title (relating to Application Requirements), a
complete application for a Texas crowdfunding portal consists of
the following and must be filed with the Securities Commissioner:
(A) Form 133.15, including all applicable schedules and
supplemental information;
(B) Form U-4, for the designated officer and a Form U-4 for each
agent to be registered (officers of a corporation or partners of
a partnership shall not be deemed agents solely because of their
status as officers or partners);
(C) a copy of the articles of incorporation or other documents
which indicate the form of organization, certified by the Texas
Secretary of State or by an officer or partner of the applicant;
(D) any other information deemed necessary by the Commissioner to
determine the financial responsibility, business repute, or
qualifications of the portal; and
(E) the appropriate registration fee(s).
(2) Post-reporting requirements. A portal is subject to the
dealer and agent requirements in <*>115.9 of this title (relating
to Post-Registration Reporting Requirements).
(3) Renewal. Registration as a portal expires at the close of the
calendar year, but subsequent registration for the succeeding
year shall be issued upon written application and upon payment of
the appropriate renewal fee(s), without filing of further
statements or furnishing any further information unless
specifically requested by the Commissioner.
Forms
The Texas State Securities Board proposes three new rules,
concerning forms adopted by reference. Specifically, <*>133.15,
which would adopt by reference the Texas Crowdfunding Portal
Registration form; <*>133.16, which would adopt by reference the
Texas Crowdfunding Portal Withdrawal of Registration form; and
<*>133.17, which would adopt by reference the Crowdfunding
Exemption Notice form. The portal forms are tailored to the
limited activities performed by a portal and eliminate the need
for a portal to use the more comprehensive dealer forms.
<*>133.15. Texas Crowdfunding Portal Registration. This
form is available from the State Securities Board, P.O. Box
13167, Austin, Texas 78711-3167 and at www.ssb.state.tx.us.
<*>133.16. Texas Crowdfunding Portal Withdrawal of
Registration. This form is available from the State Securities
Board, P.O. Box 13167, Austin, Texas 78711-3167 and at
www.ssb.state.tx.us.
<*>133.17. Crowdfunding Exemption Notice. This form is
available from the State Securities Board, P.O. Box 13167,
Austin, Texas 78711-3167 and at www.ssb.state.tx.us.
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