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RULE §116.6Registration of Persons with Criminal Backgrounds

(a) An application for registration may be denied, or a registration may be revoked or suspended, if the Securities Commissioner finds that the person has been convicted of any felony, or of a misdemeanor offense that directly relates to its duties and responsibilities. In determining whether a misdemeanor conviction directly relates to such duties and responsibilities, the Securities Commissioner shall consider each of the following factors:

  (1) the nature and seriousness of the crime;

  (2) the relationship of the crime to the purposes for requiring registration of investment advisers and investment adviser representatives;

  (3) the extent to which the registration applied for might offer an opportunity to engage in further criminal activity of the same type as that in which the applicant previously had been involved;

  (4) the relationship of the crime to the ability or capacity required to perform the duties and discharge the responsibilities of a registered investment adviser or investment adviser representative; and

  (5) any correlation between the elements of the crime and its duties and responsibilities.

(b) After the Securities Commissioner has determined the criminal conviction directly relates to the duties and responsibilities of the license, the Securities Commissioner shall consider the following evidence in determining whether the person is eligible for a license issued by the Agency:

  (1) The extent and nature of the person's past criminal activity.

  (2) The age of the applicant at the time of the commission of the crime.

  (3) The amount of time that has elapsed since the applicant's last criminal activity.

  (4) The conduct and work activity of the applicant prior to and following the criminal activity.

  (5) Evidence of the applicant's rehabilitation or rehabilitative effort while incarcerated or following release.

  (6) Evidence of the person's compliance with any conditions of community supervision, parole, or mandatory supervision.

  (7) Other evidence of the applicant's present fitness, including letters of recommendation, may be provided and considered, including letters from prosecution, law enforcement, and correctional officers who prosecuted, arrested, or had custodial responsibility for the applicant; the sheriff and chief of police in the community where the applicant resides; and any other persons in contact with the applicant.

  (8) It shall be the responsibility of the applicant to the extent possible to secure and provide to the Securities Commissioner the letters of recommendation described by paragraph (7) of this subsection.

(c) The State Securities Board considers that the following crimes directly relate to the duties and responsibilities of investment advisers and investment adviser representatives:

  (1) any criminal violation of which fraud is an essential element or that involves wrongful taking or possession of property or services;

  (2) any criminal violation of the securities laws or regulations of this state, or of any other state in the United States, or of the United States, or any foreign jurisdiction;

  (3) any criminal violation of statutes designed to protect consumers against unlawful practices involving insurance, securities, commodities or commodity futures, real estate, franchises, business opportunities, consumer goods, or other goods and services; and

  (4) any criminal violation involving an assault on a person.

(d) Prior to filing an application, a person may request a preliminary evaluation of license eligibility from the State Securities Board by following the procedure set out in §104.7 of this title (relating to Preliminary Evaluation of License Eligibility) and paying the requisite fee.

(e) Prior to taking any action under subsection (a) of this section to deny any application for registration, the State Securities Board shall comply with the notification requirements of Texas Occupations Code, §53.0231 Notice of Pending Denial of License, and §53.051.

(f) Prior to taking any action under subsection (a) of this section to revoke or suspend any application for registration, the State Securities Board shall comply with the notification requirements of Texas Occupations Code, §53.051.

(g) State Auditor Applicant Best Practices Guide.

  (1) The State Securities Board shall post a link on its website to the Applicant Best Practices Guide, to be developed and published by the state auditor as required by Texas Occupations Code, §53.026. This guide, which shall be posted once it becomes available, shall set forth best practices for an applicant with a prior conviction to use when applying for a license.

  (2) In each notice to deny, revoke, or suspend a registration or to deny a person the opportunity be examined for a registration, the State Securities Board shall include a link to the guide as described in paragraph (1) of this subsection.

Source Note: The provisions of this §116.6 adopted to be effective August 12, 2001, 26 TexReg 5799; amended to be effective March 28, 2010, 35 TexReg 2549; amended to be effective November 12, 2019, 44 TexReg 6864

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