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TITLE 7BANKING AND SECURITIES
PART 7STATE SECURITIES BOARD
CHAPTER 109TRANSACTIONS EXEMPT FROM REGISTRATION
RULE §109.13Limited Offering Exemptions

  (3) In view of the objective of this subsection and the purposes and policies underlying the Texas Securities Act, the exemption is not available to any issuer with respect to any transaction which, although in technical compliance with this subsection, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in this subsection.

  (4) Nothing in this subsection is intended to relieve registered dealers, or agents from the due diligence, suitability, or know your customer standards or any other requirements of law otherwise applicable to such registered persons.

  (5) The staff of the State Securities Board will review all notice filings made under this subsection to determine if the correct filing fee was submitted. If the staff determines that the fee paid was deficient, the staff will notify the filer through the EFD system or by email if the filing was not made through EFD. A filer who receives such a notice may correct the deficiency within 30 days of the date that the notice is sent by the staff. If a timely correction is made, the filing shall be deemed to be complete and in compliance with the filing requirements as of the date the original filing was received.

  (6) When an offering is made in compliance with Regulation D of the SEC and the offering will be made by or through a registered securities dealer, the issuer and its directors, officers, agents, and employees may make themselves available to answer questions from offerees, as required by Rule 502(b)(2)(v) of Regulation D, without being required to register as securities dealers or agents under the Act, §12.

(l) Intrastate limited offering exemption. In addition to sales made under the Texas Securities Act, §5.I, the State Securities Board, pursuant to the Act, §5.T, exempts from the registration requirements of the Act, §7, any offer or sale of any securities by the issuer itself, or by a registered dealer acting as agent for the issuer provided all offers and sales are made pursuant to an offering made and completed solely within this state and all the conditions in paragraphs (1) - (11) of this subsection are satisfied.

  (1) The sale is made, without the use of any public solicitation or advertisements, as set forth in subsection (a) and subsection (b) of this section to:

    (A) not more than 35 new security holders of the issuer who meet the criteria stated in subsection (a) of this section and who became security holders during the period of 12 months ending with the date of the sale in question (subject to paragraph (7) of this subsection); and

    (B) other well-informed investors who are "accredited investors" as defined in §107.2 of this title (relating to Definitions). (For purposes of this subsection, the term "well informed" shall have the same meaning as set out in subsection (a)(1) of this section, and the term "5.I" in such subsection shall include sales made pursuant to this subsection.)

  (2) Neither the issuer nor the registered dealer (as such terms are defined in paragraph (4) of this subsection):

    (A) is currently subject to any administrative order issued by state or federal authorities within five years of the expected offer and sale of securities in reliance upon this exemption, which order:

      (i) is based upon a finding that such person has engaged in fraudulent conduct; or

      (ii) has the effect of enjoining such person from activities subject to federal or state statutes designed to protect investors or consumers against unlawful or deceptive practices involving securities, insurance, commodities or commodity futures, real estate, franchises, business opportunities, consumer goods, or other goods and services;

    (B) has been convicted within five years prior to commencement of the offering of any felony or misdemeanor of which fraud is an essential element, or which is a violation of the securities laws or regulations of this state, or of any other state of the United States, or of the United States, or any foreign jurisdiction; or which is a crime involving moral turpitude; or which is a 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;

    (C) is subject to any order, judgment, or decree entered within five years prior to commencement of the offering by any court of competent jurisdiction which temporarily or permanently restrains or enjoins such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or involving any false filing with any state; or which restrains or enjoins such person from activities subject to federal or state statutes designed to protect consumers against unlawful or deceptive practices involving insurance, commodities or commodity futures, real estate, franchises, business opportunities, consumer goods, or other goods and services.

  (3) The prohibitions of subparagraphs (A) - (C) of paragraph (2) shall not apply if the party subject to the disqualifying order is duly licensed to conduct securities-related business in the state in which the administrative order or judgment was entered against such party or, if the order or judgment was entered by federal authorities, the prohibitions of subparagraphs (A) - (C) of paragraph (2) shall not apply if the party subject to the disqualifying order is duly licensed to conduct securities-related business by the Securities and Exchange Commission. Any disqualification caused by paragraph (2) is automatically waived if the state or federal authorities which created the basis for disqualification determine upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied.

  (4) For purposes of paragraphs (2) and (3) only, "issuer" includes any directors, executive officers, general partners, or beneficial owners of 10% or more of any class of its equity securities (beneficial ownership meaning the power to vote or direct the vote and/or the power to dispose or direct the disposition of such securities), and "registered dealer" shall include any partners, directors, executive officers, or beneficial owner of 10% or more of any class of the equity securities of the registered dealer (beneficial ownership meaning the power to vote or direct the vote and/or the power to dispose or direct the disposition of such securities).

  (5) Upon application, and for good cause shown, the Commissioner may waive a disqualification contained in paragraph (2).

  (6) The offering complies with subsections (a) - (d) and (j) of this section. However, persons who are "accredited investors" as defined in §107.2 of this title are deemed to be "sophisticated" as defined in subsection (a)(2) of this section.

  (7) This subsection may not be combined with the Securities Act, §5.I(a) or §5.I(c), or subsection (k) of this section to make sales to more than 35 unaccredited security holders during a 12-month period. Except for accredited investors who became security holders pursuant to this subsection, security holders who purchase in sales made in compliance with this subsection are included in the count of security holders under §5.I(a) or purchasers under §5.I(c), but this subsection may be used to exceed the numbers of security holders or purchasers allowed by such sections over an extended period of time.

  (8) Issuers who offer and sell securities under this subsection only through a securities dealer registered in Texas may do so without filing any notice with the State Securities Board.

  (9) Notice filing requirements.

    (A) An issuer who is not a registered securities dealer and who does not sell securities by or through a registered securities dealer shall file a notice on Form 133.29 not less than 10 business days before any sale claimed to be exempt under this subsection may be consummated for sales under paragraph (1)(B) of this subsection, in whole or in part to individual accredited investors, as defined in §107.2 of this title.

    (B) For the purpose of filing Form 133.29, "business days" means ordinary business days and does not include Saturdays, Sundays, or state holidays.

    (C) No notice is required for sales made under paragraph (1)(A) of this subsection or under paragraph (1)(B) of this subsection where the sales are made exclusively to institutional accredited investors as defined in §107.2 of this title.

    (D) The issuer may be required by the Securities Commissioner to give details concerning any information requested in Form 133.29 and may be required to furnish any additional information deemed necessary by the Securities Commissioner to determine the issuer's business repute and qualifications.

    (E) Every issuer filing a notice on Form 133.29 shall pay a filing fee of 1/10 of 1.0% of the aggregate amount of securities described as being offered for sale, but in no case more than $500.

  (10) Accredited investor security holders who purchase in sales made under this exemption are not counted as security holders under §5.I(a) or purchasers under §5.I(c) in determining whether any other sales to other security holders or purchasers are exempt under §5.I. That is to say, this exemption for sales to accredited investors is cumulative with and in addition to the exemptions contained in §5.I, and sales made under paragraph (1)(B) of this subsection are not considered in determining whether sales made in reliance on the exemptions contained in §5.I would be within the numerical limits on the number of security holders or purchasers contained in §5.I.

  (11) "Accredited investor" is defined in §107.2 of this title and for purposes of this subsection, includes any person who the issuer reasonably believes comes within that definition at the time of the sale of the securities to that person.


Source Note: The provisions of this §109.13 adopted to be effective March 1, 1985, 10 TexReg 569; amended to be effective August 29, 1985, 10 TexReg 2999; amended to be effective April 8, 1986, 11 TexReg 1508; amended to be effective March 10, 1987, 12 TexReg 601; amended to be effective January 1, 1988, TexReg 4470; amended to be effective October 31, 1988, 13 TexReg 4851; amended to be effective November 29, 1989, 14 TexReg 6076; amended to be effective November 15, 1990, 15 TexReg 6290; amended to be effective June 8, 1994, 19 TexReg 4195; amended to be effective August 3, 1995, 20 TexReg 5381; amended to be effective April 8, 1997, 22 TexReg 3218; amended to beeffective March 14, 1999, 24 TexReg 1769; amended to be effective August 12, 2001, 26 TexReg 5788; amended to be effective June 12, 2002, 27 TexReg 4934; amended to be effective June 21, 2011, 36 TexReg 3715; amended to be effective February 5, 2014, 39 TexReg 492; amended to be effective December 23, 2018, 43 TexReg 8088; amended to be effective November 12, 2019, 44 TexReg 6858

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