Texas Register, Volume 38, Number 40, Pages 6747-6996, October 4, 2013 Page: 6,778
6747-6996 p. ; 28 cm.View a full description of this periodical.
Extracted Text
The following text was automatically extracted from the image on this page using optical character recognition software:
Gene Snelson
General Counsel
Texas Animal Health Commission
Earliest possible date of adoption: November 3, 2013
For further information, please call: (512) 719-0724
TITLE 7. BANKING AND SECURITIES
PART 7. STATE SECURITIES BOARD
CHAPTER 109. TRANSACTIONS EXEMPT
FROM REGISTRATION
7 TAC 109.6
The Texas State Securities Board proposes an amendment to
109.6, concerning investment adviser registration exemption
for investment advice to financial institutions and certain insti-
tutional investors. The amendment would coordinate with new
139.23, a registration exemption for investment advisers to pri-
vate funds, which is being concurrently proposed. The exclu-
sion from the exemption in subsection (c) for advisers to "private
funds" would be removed and language would be added to ref-
erence the new 139.23 exemption for private fund advisers. A
grandfathering provision would be added as new subsection (e)
to allow an investment adviser currently relying on 109.6 as
it now exists for advisory services rendered to a "private fund"
(as defined in new 139.23) to continue using the exemption in
certain circumstances--if the private fund was in existence when
139.23 is adopted and the private fund ceases to accept new
beneficial owners. The text in subsection (e), referencing an ef-
fective date for 139.23, would be replaced by a date certain
at the time the amendment is adopted and these changes and
139.23 become effective.
This is a new version of the rule that was published in November
2012 and withdrawn at the January 2013 Board meeting. Un-
like the previous proposal, subsection (a) now specifies that the
"private fund" reference in 109.6(a) ties to the definition in new
139.23. The change in the prior proposal to the "accredited in-
vestor" definition is not included in the new proposal. Finally, the
word "new" has been added before "beneficial owners" in the
grandfather provision located in subsection (e) to acknowledge
that certain transfers would not be considered to be a change
in beneficial ownership. For example, the following would not
be considered "new beneficial owners": donees of gifts (where
the donor is a natural person, and the donee is either a natural
person family member of donor (or an entity composed only of
such family members, i.e., trusts, etc.) or is an IRC 501(c)(3)
charitable organization); a successor who received the interest
due to an involuntary transfer (examples would be legal sepa-
ration, divorce, death, devise, bankruptcy, or receivership); or a
"knowledgeable employee" of the issuer or adviser who replaces
a departing knowledgeable employee.
Ronak V. Patel, Deputy Securities Commissioner, Tommy
Green, Director, Inspections and Compliance Division, and
Patricia Loutherback, Director, Registration Division, have
determined that there will be fiscal implications as a result
of enforcing or administering the rule on state, but not local
government.
The effect on state government for the first five-year period the
rule will be in effect would be increased revenue in the form offees paid by the small number of investment advisers who are
unable to continue to utilize the exemption pursuant to the grand-
father provision in subsection (e) or the new exemption provided
by proposed 139.23 and will be required to register or notice
file in Texas. The increase in state revenue from each adviser
in this small group would be $275 for the firm and $285 for each
officer or investment adviser representative that is registered or
notice filed in Texas and thereafter would be $270 and $275, re-
spectively, for each annual renewal.
Mr. Patel, Mr. Green, and Ms. Loutherback also have deter-
mined that for each year of the first five years the rule is in effect
the public benefit anticipated as a result of enforcing the rule will
be to preserve the exemption for investment advisers who cur-
rently come within its provisions.
ECONOMIC IMPACT STATEMENT AND REGULATORY FLEX-
IBILITY ANALYSIS FOR SMALL AND MICRO-BUSINESS
The Agency estimates that there are approximately 1,660 invest-
ment adviser firms registered and approximately 4,559 notice
filed in Texas. Among the total of 6,219 firms, approximately
89% are small businesses and 75% are micro-businesses, al-
though among those registered, approximately 99% are small
businesses and 95% are micro-businesses. Many of the no-
tice-filed firms are located outside of Texas. The projected eco-
nomic impact of the proposed amendment is expected to affect
only a few investment advisers. Investment advisers who will
not incur any additional costs are those who meet the grandfa-
ther provisions in subsection (e) because they can continue to
claim the exemption as it existed prior to the amendment. Many
investment advisers that can no longer claim the exemption in
109.6 after the rule is amended would be able to claim the new
exemption provided in 139.23 and may incur the costs, if any,
associated with that rule.
A small number of investment advisers will be required to register
or notice file because they will not be grandfathered into 109.6
or able to transition to the exemption in new 139.23. Examples
of investment advisers in this group are those who are "bad ac-
tors" or who have associated persons who are "bad actors," and
advisers who have assets under management of $150 million or
more. An investment adviser who registers or makes a notice
filing in Texas will incur filing fees for the firm and for each officer
or investment adviser representative that is registered or notice
filed in Texas and thereafter would also pay fees for each annual
renewal. Registering and notice-filing advisers also will be re-
quired to complete the Form ADV and would incur the expense
of preparing that form. However, notice-filing advisers who are
registered with the Securities and Exchange Commission have
already prepared Form ADV in connection with their federal reg-
istration and therefore would incur no additional preparation cost
for the submission in Texas as a result of this proposed rule.
There will also be filing fees imposed by third parties for invest-
ment advisers and their representatives submitting the initial and
annual filings through the Investment Adviser Registration De-
pository ("IARD").
Investment advisers who must register in Texas, rather than no-
tice-file, would also face costs to bring their business operations
into compliance with the Texas Securities Act and the Board
rules. However, these costs are expected to vary significantly
depending on the adviser's size, the scope and nature of its
business, and the sophistication of its compliance infrastructure.
Some advisers, whether registered or not, may have already es-
tablished compliance infrastructures to fulfill their fiduciary duties
towards their clients. Costs will likely be less for new registrants38 TexReg 6778 October 4, 2013 Texas Register
Upcoming Pages
Here’s what’s next.
Search Inside
This issue can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Periodical.
Texas. Secretary of State. Texas Register, Volume 38, Number 40, Pages 6747-6996, October 4, 2013, periodical, October 4, 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth342082/m1/32/: accessed April 26, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.