Texas Vernon's Texas Civil Statutes - Article 581-7. Permit Or Registration For Issue By Commissioner; Information For Issuance Of Permit Or Registration
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Art. 581-7. PERMIT OR REGISTRATION FOR ISSUE BY
COMMISSIONER; INFORMATION FOR ISSUANCE OF PERMIT OR
REGISTRATION. A. Qualification of Securities. (1) No dealer or
agent shall sell or offer for sale any securities issued after
September 6, 1955, except those which shall have been registered by
Notification under subsection B or by Coordination under subsection
C of this Section 7 and except those which come within the classes
enumerated in Section 5 or Section 6 of this Act, until the issuer
of such securities or a dealer registered under the provisions of
this Act shall have been granted a permit by the Commissioner; and
no such permit shall be granted by the Commissioner until the issuer
of such securities or a dealer registered under the provisions of
this Act shall have filed with the Commissioner a sworn statement
verified under the oath of an executive officer or partner of the
issuer, or of such registered dealer, and attested by the secretary
or partner thereof, setting forth the following information:
a. The names, residences and post office addresses of the
officers and directors of the company;
b. The location of its principal office and of all branch
offices in this State, if any;
c. A copy of its articles of incorporation or partnership or
association, as the case may be, and of any amendments thereto, if
any; if a corporation, a copy of all minutes of any proceedings of
its directors, stockholders or members relating to or affecting the
issue of said security; if a corporation, a copy of its bylaws and
of any amendments thereto; if a trustee, a copy of all instruments
by which the trust is created and in which it is accepted,
acknowledged or declared;
d. A statement showing the amount of capital stock, if any,
and if no capital stock, the amount of capital of the issuer that is
contemplated to be employed; the number of shares into which such
stock is divided, or if not divided into shares of stock, what
division is to be made or is contemplated; the par value of each
share, or if no par stock, the price at which such security is
proposed to be sold; the promotional fees or commissions to be paid
for the sale of same, including any and all compensations of every
nature that are in any way to be allowed the promoters or allowed
for the sale of same; and how such compensation is to be paid,
whether in cash, securities, service or otherwise, or partly of
either or both; also, the amount of cash to be paid, or securities
to be issued, given, transferred or sold to promoters for promotion
or organization services and expenses, and the amount of promotion
or organization services and expenses which will be assumed or in
any way paid by the issuer;
e. Copies of certificates of the stock and all other
securities to be sold, or offered for sale, together with
application blanks therefor; a copy of any contract it proposes to
make concerning such security; a copy of any prospectus or
advertisement or other description of security prepared by or for
it for distribution or publication;
f. 1. A detailed statement prepared in accordance with
generally accepted auditing standards and procedures and generally
accepted accounting principles, showing all the assets and all the
liabilities of the issuer, said statement to reflect the financial
condition of the issuer on a day not more than ninety (90) days
prior to the date such statement is filed. Such statement shall
list all assets in detail and shall show how the value of such
assets was determined, that is, whether the value set forth in said
statement represents the actual cost in money of such assets, or
whether such value represents their present market value, or some
other value than the actual cost in money, and shall show the
present actual value of said assets; also, whether the value set
forth in the statement is greater or less than the actual cost value
in money and greater or less than the present market value of such
assets. If any of the assets consist of real estate, then said
statement shall show the amount for which said real estate is
rendered for State and county taxes, or assessed for taxes. If any
such assets listed shall consist of anything other than cash and
real estate, same shall be set out in detail so as to give the
Commissioner the fullest possible information concerning same, and
the Commissioner shall have the power to require the filing of such
additional information as the Commissioner may deem necessary to
determine whether or not the true value of said assets are reflected
in the statement filed. Should any of the assets listed in said
statement be subject to any repurchase agreement, or any other
agreement of like character, by the terms of which the absolute
ownership of, or title to said assets is qualified or limited in any
way, then the terms and conditions of said agreement by which the
absolute ownership of, or title to said assets is qualified or
limited, as well as the amount and character of the assets subject
thereto shall be fully stated. Said statement shall list all
current liabilities, that is, all liabilities which will mature and
become due within one year from the date of such application, and
shall list separately from such current liabilities, all other
liabilities, contingent or otherwise, showing the amount of those
which are secured by mortgage or otherwise, the assets of the issuer
which are subject to such mortgage, and the dates of maturity of any
such mortgage indebtedness. Such application shall also include a
detailed income statement, prepared in accordance with generally
accepted auditing standards and procedures and generally accepted
accounting principles, which shall cover the last three (3) years'
operations of the issuer, if such issuer has been in operation for
three (3) years, but if not, said income statement shall cover the
time that said issuer has been operating. If said issuer has not
been operating, but is taking over a concern of any kind which has
been previously operating, an income statement showing the
operations of the concern thus taken over for a period of the last
three (3) years next preceding the taking over of said concern shall
be included in said statement; said income statement shall clearly
reflect the amount of net income or net loss incurred during each of
the years shown.
2. The financial statements required in subparagraph (1) of
this paragraph for a small business issuer, as defined by Board
rule, may be reviewed by an independent certified public accountant
in accordance with the Statements on Standards for Accounting and
Review Services promulgated by the American Institute of Certified
Public Accountants in lieu of being audited and certified, provided
that the small business issuer otherwise meets all of the
requirements that the Board by rule, regulation, or order may
prescribe, conditionally or unconditionally.
Subsec. A(1) amended by Acts 1977, 65th Leg., p. 870, ch. 327, Sec.
2, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 356, ch. 160, Sec.
4, eff. May 15, 1979; Subsec. A amended by Acts 1995, 74th Leg., ch.
228, Sec. 5, eff. Sept. 1, 1995; Subsec. A amended by Acts 2001,
77th Leg., ch. 1091, Sec. 2.04, eff. Sept. 1, 2001.
B. Registration by Notification.
(1) Securities may be registered by notification under this
subsection B if they are issued by an issuer which has been in
continuous operation for not less than three (3) years and which has
shown, during the period of not less than three (3) years next prior
to the date of registration under this section, average annual net
earnings after deducting all prior charges including income taxes
except charges upon securities to be retired out of the proceeds of
sale, as follows:
a. In the case of interest-bearing securities, not less than
one and one-half times the annual interest charges on such
securities and on all other outstanding interest-bearing
securities of equal rank;
b. In the case of securities having a specified dividend
rate, not less than one and one-half times the annual dividend
requirements on such securities and on all outstanding securities
of equal rank;
c. In the case of securities wherein no dividend rate is
specified, not less than five percent (5%) on all outstanding
securities of equal rank, together with the amount of such
securities then offered for sale, based upon the maximum price at
which such securities are to be offered for sale. The ownership by
an issuer of more than fifty percent (50%) of the outstanding voting
stock of a corporation shall be construed as the proportionate
ownership of such corporation and shall permit the inclusion of the
earnings of such corporation applicable to the payment of dividends
upon the stock so owned in the earnings of the issuer of the
securities being registered by notification.
(2) Securities entitled to registration by notification
shall be registered by the filing with the Commissioner by the
issuer or by a registered dealer of a registration statement as
required by paragraph a of this subdivision, and completion of the
procedures outlined in paragraph b of this subdivision:
a. A registration statement in a form prescribed by the
Commissioner signed by the applicant filing such statement and
containing the following information:
1. Name and business address of main office of issuer and
address of issuer's principal office, if any, in this state;
2. Title of securities being registered and total amount of
securities to be offered;
3. Price at which securities are to be offered for sale to the
public, amount of securities to be offered in this state, and amount
of registration fee, computed as hereinafter provided;
4. A brief statement of the facts which show that the
securities are entitled to be registered by notification;
5. Name and business address of the applicant filing the
statement;
6. Financial statements to include a certified income
statement, a certified balance sheet, and a certified statement of
stockholders' equity, each to be for a period of not less than three
(3) years prior to the date of registration. These financial
statements shall reflect the financial condition of the issuer as
of a date not more than ninety (90) days prior to the date of such
filing with the Commissioner;
7. A copy of the prospectus, if any, describing such
securities;
8. Filing of a consent to service of process conforming to the
requirements of Section 8 of this Act, if the issuer is registering
the securities and is not a resident of this state or is not
incorporated under the laws of this state.
b. Such filing with the Commissioner shall constitute the
registration of securities by notification and such registration
shall become effective five (5) days after receipt of the
registration statement and all accompanying papers by the
Commissioner; provided that the Commissioner may in his discretion
waive or reduce the five (5) days waiting period in any case where
he finds no injury to the public will result therefrom. Upon such
registration by notification, securities may be sold in this state
by registered dealers and registered salesmen. Upon the receipt of
a registration statement, prospectus, if any, payment of the filing
fee and registration fee, and, if required, a consent to service of
process, the Commissioner shall record the registration by
notification of the securities described. Such registration shall
be effective for a period of one (1) year and may be renewed for
additional periods of one (1) year, if the securities are entitled
to registration under this subsection at the time of renewal, by a
new filing under this section together with the payment of the
renewal fee of Ten Dollars ($10.00).
c. If at any time, before or after registration of securities
under this section, in the opinion of the Commissioner the
information in a registration statement filed with him is
insufficient to establish the fact that the securities described
therein are, or were, entitled to registration by notification
under this section, or that the registration information contains,
or contained, false, misleading or fraudulent facts, he may order
the applicant who filed such statement to cease and desist from
selling, or offering for sale, such securities registered, or
proposed to be registered, under provisions of this section, until
there is filed with the Commissioner such further information as
may in his judgment be necessary to establish the fact that such
securities are, or were, entitled to registration under this
section. The provisions of Section 24 of this Act as to hearing
shall be applicable to an order issued hereunder.
Subsec. B(2) amended by Acts 1977, 65th Leg., p. 871, ch. 327, Sec.
3, eff. Aug. 29, 1977; Subsec. B amended by Acts 1995, 74th Leg.,
ch. 228, Sec. 5, eff. Sept. 1, 1995.
C. Registration by Coordination.
(1) Any security for which a registration statement has been
filed under the federal Securities Act of 1933, as amended, in
connection with the same offering, may be registered by
coordination. A registration statement under this section shall be
filed with the Commissioner by the issuer or any registered dealer,
shall contain the following information, and shall be accompanied
by the following documents:
a. One copy of the prospectus filed under the Securities Act
of 1933 together with all amendments thereto;
b. The amount of securities to be offered in this state;
c. The states in which a registration statement or similar
document in connection with the offering has been or is expected to
be filed;
d. Any adverse order, judgment or decree previously entered
in connection with the offering by any court or the Securities and
Exchange Commission;
e. A copy of the articles of incorporation and by-laws (or
their substantial equivalents) currently in effect, a copy of any
agreements with or among underwriters, a copy of any indenture or
other instrument governing the issuance of the security to be
registered, and a specimen or copy of the security;
f. If the Commissioner requests any other information, or
copies of any other documents, filed under the Federal Securities
Act of 1933;
g. An undertaking to forward promptly all amendments to the
federal registration statement, other than an amendment which
merely delays the effective date; and
h. If the registration statement is filed by the issuer, or by
a dealer who will offer such securities for sale as the agent of the
issuer, and the issuer is not a resident of this state or is not
incorporated under the laws of this state, a consent to service of
process conforming to the requirements of Section 8.
(2) Upon receipt of a registration statement under this
section the Commissioner shall examine such registration statement
and he may enter an order denying registration of the securities
described therein if he finds that the registrant has not proven the
proposed plan of business of the issuer to be fair, just and
equitable, and also that any consideration paid, or to be paid, for
such securities by promoters is fair, just and equitable when such
consideration for such securities is less than the proposed
offering price to the public, and that the securities which it
proposes to issue and the methods to be used by it in issuing and
disposing of the same will be such as will not work a fraud upon the
purchaser thereof. If the Commissioner enters an order denying the
registration of securities under this section, he shall notify the
registrant immediately. The provisions of Section 24 of this Act as
to hearing shall be applicable to an order issued hereunder. A
registration statement under this section automatically becomes
effective at the moment the federal registration statement becomes
effective if all the following conditions are satisfied:
a. No order has been entered by the Commissioner denying
registration of the securities;
b. The registration statement has been on file with the
Commissioner for at least ten (10) days; and
c. A statement of the maximum and minimum proposed offering
prices and the maximum underwriting discounts and commissions has
been on file for two full business days or such shorter period as
the Commissioner expressly permits and the offering is made within
those limitations. The registrant shall promptly notify the
Commissioner by telephone or telegram of the date and time when the
federal registration statement became effective and the content of
the price amendment, if any, and shall promptly file a
post-effective amendment containing the information and documents
in the price amendment. "Price amendment" means the final federal
amendment which includes a statement of the offering price,
underwriting and selling discounts or commissions, amount of
proceeds, conversion rates, call prices, and other matters
dependent upon the offering price.
Upon failure to receive the required notification and
post-effective amendment with respect to the price amendment, the
Commissioner may enter a stop order, without notice or hearing,
retroactively denying effectiveness to the registration statement
or suspending its effectiveness until compliance with this
subsection, if he promptly notifies the registrant by telephone or
telegram (and promptly confirms by letter or telegram when he
notifies by telephone) of the issuance of the order. If the
registrant proves compliance with the requirements of this
subsection as to notice and post-effective amendment, the stop
order is void as of the time of its entry. The Commissioner may
waive either or both of the conditions specified in clauses b and c.
If the federal registration statement becomes effective before all
these conditions are satisfied and they are not waived, the
registration statement automatically becomes effective as soon as
all the conditions are satisfied. If the registrant advises the
Commissioner of the date when the federal registration statement is
expected to become effective the Commissioner shall promptly advise
the registrant by telephone or telegram, at the registrant's
expense, whether all the conditions are satisfied and whether he
then contemplates the issuance of an order denying registration;
but this advice by the Commissioner does not preclude the issuance
of such an order at any time.
(3) Registration of securities under this subsection shall
be effective for the following periods:
a. The initial registration of securities of an open-end
investment company, as defined in the Investment Company Act of
1940, shall be effective until two (2) months after the end of the
issuer's fiscal year. After the initial registration, the issuer
or its agent may renew the registration by submitting the
appropriate registration forms and renewal fees within two (2)
months after the end of the issuer's fiscal year.
b. The registration of securities of a unit investment trust,
as defined in the Investment Company Act of 1940, shall be effective
until one (1) year from the date of effectiveness granted by the
federal Securities and Exchange Commission.
c. Any other registration of securities shall be effective
for a period of one (1) year from the date the registration is
declared effective by the Commissioner.
(4) Registrations of securities under subdivision (3) may
be renewed for additional periods of one (1) year if the appropriate
registration forms and renewal fees are received prior to the
expiration date. The same standards of fairness, justice and
equity as prescribed by this subsection for original approval will
apply to the renewal of all registrations.
Subsec. C(1) amended by Acts 1977, 65th Leg., p. 873, ch. 327, Sec.
4, eff. Aug. 29, 1977; Subsec. C amended by Acts 1995, 74th Leg.,
ch. 228, Sec. 5, eff. Sept. 1, 1995.
D. Termination Of Fiscal Year; Certification Of Statements.
If the fiscal year of the issuer terminated on a date more
than 90 days prior to the date of the filing, then the financial
statements required in Subsections A and B of this Section 7, which
must be as of a date not more than 90 days prior to the date of
filing, need not be certified by an independent certified public or
independent public accountant if there are filed in addition
thereto financial statements containing the information required
by the applicable subdivision which are certified by an independent
certified public or independent public accountant as of the end of
the preceding fiscal year of the issuer.
Acts 1957, 55th Leg., p. 575, ch. 269, Sec. 7. Amended by Acts 1963,
58th Leg., p. 473, ch. 170, Sec. 7, 12a; Acts 1977, 65th Leg., p.
870, ch. 327, Sec. 2 to 4, eff. Aug. 29, 1977; Acts 1979, 66th Leg.,
p. 356, ch. 160, Sec. 4, eff. May 15, 1979.
Effect of 1963 amendment of this article on all suits, actions,
proceedings, rights, liabilities and causes of action pending or
accruing before the effective date of the amendatory act, see note
under art. 581-5.
Article: 581-2-7 581-2-8 581-3 581-3-1 581-4 581-5 581-6 581-7 581-8 581-9 581-10 581-10-1 581-11 581-12 581-12-1
Last modified: August 10, 2007
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