| (a) General. The State Securities Board, pursuant to
the Texas Securities Act (Act), Section 5.T, exempts from the securities
registration requirements of the Act, any offer or sale of securities
of an issuer made in compliance with Securities and Exchange Commission
(SEC) Rule 147A, 17 CFR §230.147A, through a registered general
dealer or a registered Texas crowdfunding portal, provided that all
the requirements of this section are satisfied.
(b) Issuer. The issuer is not, either before or because
of the offering:
(1) A company, that engaged or proposes to engage in
the business of investing, reinvesting, owning, holding, or trading
in securities;
(2) Subject to the reporting requirements of the Securities
and Exchange Act of 1934, Section 13 or Section 15(d), 15 U.S.C. §78m
and §78o(d); or
(3) 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) 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.
(d) 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.
(e) Escrow or segregated account to safeguard investor
and issuer funds.
(1) All payments for purchases of securities offered
under this section are directed to and deposited in an escrow account
or a segregated account, if a segregated account is permitted under
paragraph (2) of this subsection. The payments must be held in an
escrow account or a segregated account 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.
(2) A segregated account may be used in lieu of an
escrow account if the maximum offering amount is $1 million or less.
(3) For purposes of this subsection:
(A) An "escrow account" is one administered by an independent
escrow agent who is a bank or other depository institution.
(B) A "segregated account" is one established by a
registered general dealer or a Texas crowdfunding portal pursuant
to a written agreement ("Account Agreement") with the issuer and provides
that the registered general dealer or portal will act on behalf of
the issuer and investors to hold funds raised from investors in a
specific securities offering until such time as those funds can be
disbursed in accordance with paragraph (1) of this subsection. The
Account Agreement must identify the bank or other depository institution
and account number where the funds will be held. All signatories on
the segregated account must be persons registered with the Securities
Commissioner.
(4) The escrow account or segregated account must be
in 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.
(5) A separate account must be set up for each securities
offering in which a segregated account is used in lieu of an escrow
account. The Account Agreement entered into in connection with a segregated
account, shall include requirements that the dealer or portal must,
and the account shall be, administered in accordance with the following
principles requiring the dealer or portal to:
(A) be responsible for prudent processing, safeguarding,
and accounting for funds entrusted to it by investors and the issuer;
(B) act to the advantage of and in the best interests
of the investors and the issuer; and
(C) ensure that all requirements of the Account Agreement
between the portal and issuer are met before funds are disbursed from
the segregated account.
(6) The issuer shall inform all prospective purchasers
and investors if a segregated account is to be used to hold investor
payments. Additionally, a portal must make the disclosures mandated
by §115.19(c)(3) of this title (relating to Texas Crowdfunding
Portal Registration and Activities).
(f) Communications.
(1) All communications between the issuer, prospective
purchasers, or investors taking place during the offer of securities
pursuant to this section must occur through 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 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.
(g) Internet website.
(1) The registered general dealer or registered portal
shall give the Securities Commissioner access to the Internet website
operated by the dealer or portal prior to offering an investment opportunity
to residents of Texas and the website must remain accessible to the
Commissioner throughout the term of the offering.
(2) Information about the issuer and the offering posted
on the Internet website operated by the registered general dealer
or registered portal consists of:
(A) a copy of the disclosure statement required by
subsection (h) 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 on the Internet website required
by paragraph (2) of this subsection must be made available to the
Commissioner and potential investors for a minimum of 21 days before
any securities are sold in the offering.
(h) 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.
(i) Notice filing. Before using 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 133.21, Crowdfunding Exemption Notice;
(2) the disclosure statement, required by subsection
(h) of this section;
(3) the summary of the offering, required by subsection
(g)(2)(B) of this section; and
(4) if investor funds are to be deposited into a segregated
account as permitted by subsection (e) of this section, a copy of
the written Account Agreement entered into between the issuer and
the registered general dealer or Texas crowdfunding portal that will
hold investor funds in the securities offering.
(j) 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. Nothwithstanding
the foregoing, a Registered Small Business Development Entity, as
defined in §115.20 of this title (relating to Texas Crowdfunding
Portal Registration and Activities of Small Business Development Entities),
may have a financial interest in an issuer listed on its Crowdfunding
Web Portal, as defined in §115.20.
(k) 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:
Cont'd... |
