Texas Register, Volume 38, Number 40, Pages 6747-6996, October 4, 2013 Page: 6,788
6747-6996 p. ; 28 cm.View a full description of this periodical.
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Board, P.O. Box 13167, Austin, Texas 78711-3167 or sent by
facsimile to (512) 305-8336.
The new rule is proposed under Texas Civil Statutes, Articles
581-5.T, 581-12.C, and 581-28-1. Section 5.T provides that the
Board may prescribe new exemptions by rule. Section 12.C pro-
vides the Board with the authority to prescribe new dealer, agent,
investment adviser, or investment adviser representative regis-
tration exemptions by rule. Section 28-1 provides the Board with
the authority to adopt rules and regulations necessary to carry
out and implement the provisions of the Texas Securities Act, in-
cluding rules and regulations governing registration statements
and applications; defining terms; classifying securities, persons,
and matters within its jurisdiction; and prescribing different re-
quirements for different classes.
The proposal affects Texas Civil Statutes, Articles 581-5, 581-7,
581-12, 581-12-1, and 581-18.
139.23. Registration Exemption for Investment Advisers to Private
Funds.
(a) Definitions. The following words and terms, when used
in this section, shall have the following meanings, unless the context
clearly indicates otherwise:
(1) Private Fund Adviser--An investment adviser who pro-
vides advice:
(A) solely to one or more Private Funds; or
(B) solely to one or more Private Funds and other
clients, who are not Private Funds, to whom advice may be provided
pursuant to another exemption from investment adviser registration
provided under the Texas Securities Act or Board rules.
(2) Private Fund--An issuer that would be an investment
company as defined in the Investment Company Act of 1940, 3, but
for an exclusion from the definition of an investment company in
3(c)(1) or 3(c)(7) of that Act, 15 U.S.C. 80a.
(3) 3(c)(1) Fund--A Private Fund that relies solely on the
exclusion from the definition of an investment company under 3(c)(1)
of the Investment Company Act of 1940, 15 U.S.C. 80a-3(c)(1).
(4) Private Equity Fund--A Private Fund that meets the def-
inition of a private equity fund in the Instructions to Part lA of Form
ADV.
(5) Real Estate Fund--A Private Fund that meets the defi-
nition of a real estate fund in the Instructions to Part IA of Form ADV.
(6) Venture Capital Fund A Private Fund that meets the
definition of a venture capital fund in SEC Rule 203(1)-1, 17 CFR
275.203(1)-1.
(b) Exemption for Private Fund Advisers. Subject to the addi-
tional requirements of this section, the State Securities Board, pursuant
to the Texas Securities Act, 5.T and 12.C, exempts from the invest-
ment adviser registration requirements of the Texas Securities Act, 12,
a Private Fund Adviser satisfying each of the following conditions and
limitations:
(1) The Private Fund Adviser files with the Securities Com-
missioner each report and amendment thereto that an exempt reporting
adviser is required to file with the Securities and Exchange Commis-
sion pursuant to SEC Rule 204-4, 17 CFR 275.204-4. These filings
are to be made electronically through the Investment Adviser Regis-
tration Depository (IARD). A report shall be deemed filed when the
report required by subsection (b) of this section is filed and accepted
by the IARD on the state's behalf.(2) Except as provided in paragraph (3) of this subsection,
neither the Private Fund Adviser, nor any of its advisory affiliates, as
that term is defined in the Instructions to Part IA of Form ADV, are
subject to the following disqualifications:
(A) any of those described in Rule 262 of SEC Regula-
tion A, 17 CFR 230.262;
(B) has been convicted within five years prior to the fil-
ing of the notice required under this exemption of any felony or misde-
meanor involving the offer, purchase, or sale of any security or the ren-
dering of investment advice, or any felony involving embezzlement,
obtaining money under false pretenses, larceny, or conspiracy to de-
fraud;
(C) is currently subject to any order, judgment, or de-
cree of any court of competent jurisdiction, entered within the last five
years, temporarily, preliminarily, or permanently restraining or enjoin-
ing such party from engaging in or continuing to engage in any conduct
or practice involving fraud or deceit in connection with the purchase or
sale of a security or the rendering of investment advice;
(D) is the subject of a United States Postal Service fraud
order that is currently effective and was issued within the last five years;
(E) is currently subject to any state or federal admin-
istrative enforcement order or judgment, entered within the last five
years, finding fraud or deceit in connection with the purchase or sale of
a security or the rendering of investment advice;
(F) is subject to an order issued by a state or federal
authority that bars the person from association with an entity regulated
by the authority that issued the order, or from engaging in the business
of securities, insurance, or banking, or savings association or credit
union activities; or
(G) is the subject of a suspension or expulsion from
membership in or association with a member of a self-regulatory or-
ganization that is currently effective and was issued within the last five
years.
(3) Exceptions from disqualifications. The prohibitions of
paragraph (2) of this subsection shall not apply if:
(A) the party subject to the disqualification is duly li-
censed or registered to conduct securities related business or render
investment advisory services in the state in which the order, judgment,
or decree creating the disqualification was entered against such party;
or
(B) before investment advisory services are rendered
under this section, the Securities Commissioner, or the court or reg-
ulatory authority that entered the order, judgment, or decree, waives
the disqualification upon a showing of good cause.
(c) Additional requirements for Private Fund Advisers to cer-
tain 3(c)(1) Funds. In order to qualify for an exemption pursuant to this
section, a Private Fund Adviser who advises at least one 3(c)(l) Fund
that is not a Private Equity Fund, Real Estate Fund, or Venture Capital
Fund shall comply with the following additional requirements:
(1) the Private Fund Adviser shall advise only those 3(c)(1)
Funds (other than Private Equity Funds, Real Estate Funds, and Ven-
ture Capital Funds) whose outstanding securities (other than short-term
paper) are beneficially owned entirely by persons who would each
meet the definition of a qualified client in SEC Rule 205-3, 17 CFR
275.205-3, at the time the securities are purchased from the issuer;
provided that if an entity was organized and exists only for the purpose
of acquiring an interest in the 3(c)(1) Fund, each beneficial owner of
such entity must be a qualified client; and38 TexReg 6788 October 4, 2013 Texas Register
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Texas. Secretary of State. Texas Register, Volume 38, Number 40, Pages 6747-6996, October 4, 2013, periodical, October 4, 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth342082/m1/42/: accessed May 7, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.