Thursday, January 20, 2011

Texas Proposes Form D Electronic Filing, Accredited Investor Definitions and IA Part 2 of Form ADV Requirement

The Electronic Form D (EFD) System being developed by the North American Securities Administrators Association (NASAA) for multi-state electronic filing of 2008-adopted Form D was proposed for use in Texas by the State Securities Board, along with new definitions for accredited investors, individual accredited investors and institutional accredited investors, and the use of new Part 2 of Form ADV by investment adviser applicants and registrants.

Rule 505 and 506 of federal Regulation D. Issuers making an offering under either Rule 505 or 506 of federal Regulation D would electronically submit Form D and the applicable fee through the EFD System when that system becomes available. "Form D," Notice of Exempt Offerings of Securities, would be the Form D that took effect on September 15, 2008. The "EFD System" would be the Electronic Form D system provided by the North American Securities Administrators Association (NASAA) to be used for electronic filing of Form D with the Texas Securities Commissioner. The consent to service of process requirement would be eliminated for Rule 506 offerings. Issuers would file a notice on Form D accompanied by the applicable fee. NOTE: The notice and fee payment, as well as any applicable notice and fee payment for excess sales, would be electronically submitted through the EFD system when that system becomes available.

Intrastate limited offering exemption. Issuers not registered as securities dealers and who do not sell securities by or through a registered securities dealer would file a sworn notice on Texas Form 133.29, Intrastate Exemption Notice for Sales Under Regulation 109.13(l), not less than 10 business days before any sale exempt under this exemption is consummated in whole or in part to individual accredited investors. The definition of an "individual accredited investor" for this intrastate limited offering exemption would be a natural person described in Rule 501(a)(5) and (6) as promulgated by the SEC under the Securities Act of 1933.

No notice would be required for sales made exclusively to institutional accredited investors. The definition of an "institutional accredited investor" for this intrastate limited offering exemption would be an entity described in Rule 501(a)(1) - (4), (7) and (8) as promulgated by the SEC under the Securities Act of 1933. An accredited investor would include any person who the issuer reasonably believes comes within the definition of an accredited investor at the time of the sale of the securities to that person. The definition of an "accredited investor" for this intrastate limited offering exemption would be a person who is either an individual accredited
investor or an institutional accredited investor.

Investment advisers. An initial investment adviser registration application would consist of items electronically submitted through the IARD including a Form ADV, Uniform Investment Adviser Registration Application, a Form U-4, Uniform Application for Securities Industry Registration or Transfer, for the designated officer and for each investment adviser representative or solicitor to be registered, a disclosure document or Part 2 of Form ADV, and the registration fee of $275 for the investment adviser and $235 for the designated officer and each investment adviser representative to be registered. The items filed in paper format directly with the Securities Commissioner would be a copy of the particular entity's articles, a prescribed balance sheet, a copy of the investment adviser's advisory contract, a fee schedule and any other information considered necessary for the Securities Commissioner to determine the investment adviser's financial responsibility and/or the investment adviser's or investment adviser representatives' business repute or qualification. NOTE: Uniform forms electronically filed with the IARD designating Texas as a jurisdiction where filing will be made are considered "filed" with the Securities Commissioner and constitute official Securities Board records.

For more information please see http://www.ssb.state.tx.us/

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