Texas Vernon's Texas Civil Statutes - Article 581-9. Protection To Purchasers Of Securities

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Art. 581-9. PROTECTION TO PURCHASERS OF SECURITIES.  A. In 
the event any company, as defined herein, shall sell, or offer for 
sale, any securities, as defined in this Act, the Commissioner, if 
he deems it necessary to protect the interests of prospective 
purchasers of such securities, may require the company so offering 
such securities for sale to deposit all, or any part, of the 
proposed securities, or all, or any part, of the moneys and funds 
received from the sale thereof, except such amounts thereof as the 
Commissioner deems necessary to be used, and not to exceed the 
amount allowed as expenses and commissions for the sale of such 
securities, to be deposited in a trust account in some bank or trust 
company approved by the Commissioner and doing business in the 
State of Texas, until such time as such proposed company or existing 
company shall have sold a specified monetary amount or number of 
shares of such securities as in his opinion will reasonably assure 
protection of the public.  When the Commissioner makes a written 
finding that the terms of the escrow agreement have been fully met, 
the bank or trust company shall transfer such funds to the proposed 
or existing corporation and its executive officers for the purpose 
of permitting it to use such securities or money in its business.  
In the event such proposed or existing company shall fail within two 
(2) years to sell the minimum amount of capital necessary under the 
escrow agreement, the Commissioner may authorize, and the bank or 
trust company shall return to the subscribers, upon receipt of such 
authority from the Commissioner, that portion of the funds which 
were deposited or escrowed under such escrow agreement;  provided, 
however, that any securities held by such bank or trust company 
under the escrow agreement shall be returned to the corporation 
only after the bank or trust company has received evidence of 
cancellation thereof from the issuer.  At the time of making the 
deposits, as herein provided for, the dealer or issuer shall 
furnish to such bank or trust company, and to the Commissioner, the 
names of the persons purchasing or subscribing for such securities, 
and the amount of money paid in by each.
	B. The total expenses for marketing securities, including all 
commissions for the sale of such securities, and all other 
incidental selling expenses, shall not in the aggregate exceed 
twenty per cent (20%) of the price at which the stock or other 
securities of any proposed or existing company are to be sold, or 
offered for sale, to the public of this State;  and this amount may 
be limited by the Commissioner to a less percentage which is in his 
opinion fair, just and equitable under the facts of the particular 
case.
	C. In connection with any permit to sell securities the 
Commissioner shall require all offers for sale of said securities 
to be made through and by prospectus which fairly discloses the 
material facts about the plan of finance and business.  Said 
prospectus shall be filed with and approved by the Commissioner;  
provided, however, if the applicant files a prospectus or offering 
circular with the Commissioner which is also filed with the S.E.C. 
under the Securities Act of 1933, as amended, or the regulations 
thereunder, this subsection shall in all respects be satisfied.  
Failure to comply with this requirement shall be treated as a 
violation of this Act, subjecting the parties responsible to the 
consequences thereof as provided herein.

Acts 1957, 55th Leg., p. 575, ch. 269, Sec. 9.  Amended by Acts 1963, 
58th Leg., p. 473, ch. 170, Sec. 8.

Last modified: August 10, 2007