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RULE §109.1Transactions Involving Existing Security Holders

(a) Section 5.E of the Act includes any offer and any transaction pursuant to any offer by the issuer of its "securities" to any one or more of its "existing security holders" even though such offer or transaction does not relate to all existing holders of such securities or to all existing holders of a class or series thereof.

(b) "Existing security holder" within the context of section 5.E does not include the following:

  (1) the holder of an option, whether transferable or nontransferable, issued by an entity other than the issuer of the security underlying the option;

  (2) the holder of an account which is devoid of securities.

(c) An employee's activities such as mailing reports, dividend notices, and revised prospectuses do not constitute "soliciting" within the context of §5.E. Furthermore, if an employee's job is fully justifiable even without soliciting existing security holders, occasional solicitations of existing security holders in this state will not affect the availability of §5.E. However, if an employee's primary job is to solicit existing security holders in this state either on a full-time or part-time basis, §5.E is not available.

(d) Where an open-end investment company adopts a plan pursuant to Securities and Exchange Commission Rule 12b-1 (17 Code of Federal Regulations §270.12b-1) and funds are used to pay commissions or other remuneration for soliciting existing security holders in this state, §5.E is not available.

(e) Where an offering provides for a minimum investment and only a portion of such minimum is paid initially, §5.E is not available for payments made subsequently to meet the required minimum investment.

Source Note: The provisions of this §109.1 adopted to be effective January 1, 1976; amended to be effective May 17, 1976, 1 TexReg 1180; amended to be effective January 7, 1985, 9 TexReg 6472.

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