By: Parker	H.B. No. 3425

	A BILL TO BE ENTITLED
	AN ACT
	relating to the creation of a intrastate investment market for
	purposes of trading securities issued under the intrastate
	crowdfunding exemption from federal securities laws.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  SHORT TITLE. This Act may be cited as the "Texas
	Investment Market Exchange Act".
	SECTION 2.  Section 5, The Securities Act (Article 581-23-5,
	Vernon's Texas Civil Statutes), is amended by adding subsection (W)
	to read as follows:
	(W)  Creation of Stock Exchange for Securities financed
	using the intrastate crowdfunding exemption or other exemption from
	federal securities regulation.
	(1)  Definitions.
	(a)  "Texas Investment Market" means a person that
	is a broker-dealer, is exempt from federal registration under
	Section 15(A)(1) of the Securities Exchange Act of 1934, 15 USC §
	780, and provides a market or exchange at which transactions in
	securities that are sold or offered for sale pursuant to the
	intrastate crowdfunding or other federal exemption from securities
	regulation take place. As used in this subsection, "market" or
	"exchange" includes an online market or exchange or any other
	market or exchange operated through an internet portal.
	(2)  Coordination with federal securities laws. A Texas
	investment market that trades securities that have been issued in
	reliance on the intrastate crowdfunding or other exemption from
	federal securities regulation must also meet all applicable
	requirements of the Securities and Exchange Commission relating to
	its establishment and operation.
	(3)  Texas Investment Market; Requirements
	(a)  Prohibited Activities.
	(1)  No person may transact business in this
	State as a Texas Investment Market unless that person has
	registered with the Securities Commission as a Texas Investment
	Market.
	(2)  Disqualifications. A person is not
	eligible to own, operate or otherwise manage a Texas Investment
	Market if that person has been subject to one of the following
	disqualifying events:
	(A)  has been convicted, within the 5
	years preceding the offering, of any felony or misdemeanor (i) in
	connection with the purchase or sale of any security; (ii)
	involving the making of any false filing with the SEC or state
	securities agency; or (iii) arising out of the conduct of the
	business of an underwriter, broker, dealer, municipal securities
	dealer, investment advisor or paid solicitor of securities;
	(B)  is subject to any order, judgment
	or decree of any court of competent jurisdiction entered with the
	5-year period preceding the offering, that at the time of such
	filing, restrains or enjoins such person from engaging or
	continuing to engage in any conduct or practice (i) in connection
	with the purchase or sale of a security; (ii) involving the making
	of any false filing with the SEC or a state securities agency; or
	(iii) arising out of the conduct of the business of an underwriter,
	broker, dealer, municipal securities dealer, investment advisor or
	paid solicitor of purchasers of securities; and
	(C)  is subject to any agreed order,
	final order, settlement agreement or other enforceable directive by
	the SEC or a state securities agency entered with the 5-year period
	preceding the offering, that at the time of such filing, restrains
	or enjoins such person from engaging or continuing to engage in any
	conduct or practice (i) in connection with the purchase or sale of a
	security; (ii) involving the making of any false filing with the SEC
	or a state securities agency; and (iii) arising out of the conduct
	of the business of an underwriter, broker, dealer, municipal
	securities dealer, investment advisor or paid solicitor of
	purchasers of securities; and (iv) arising out of scienter-based
	anti-fraud provisions in federal and state anti-fraud laws.
	(3)  A Texas Investment Market is prohibited
	from engaging in the following activities:
	(A)  selling or otherwise distributing
	to any third party personal identifying information of an
	individual without his or her written consent;
	(B)  charging a fee for a securities
	transaction conducted through the Texas Investment Market that
	exceeds 5% of the value of the transaction, as determined by the
	value passed from one user to another in exchange for that security;
	(C)  dealing in securities options, or
	in securities from more than one class in an offering, without
	obtaining written acknowledgement from each person involved in the
	transaction relating to the nature of the securities transaction.
	(4)  It is unlawful for any person, in
	connection with the organization and operation of a Texas
	Investment Market, to directly or indirectly do any of the
	following:
	(A)  employ a device, scheme, or
	artifice to defraud;
	(B)  make an untrue statement of a
	material fact or omit to state a material fact; or
	(C)  engage in an act, practice, or
	course of business that operates or would operate as a fraud or
	deceit on another person.
	(b)  Registration.
	(1)  No less than sixty (60) days prior to
	the offering of any securities for trade or sale, the Texas
	Investment Market must pay an appropriate filing fee, file a
	consent to service of process and file an application on a form and
	in a manner approved by the Securities Commissioner. At a minimum,
	the written application must contain the following information:
	(A)  the names, mailing addresses, and
	telephone numbers of all individuals who serve as executive
	officers of the Texas Investment Market or who are direct or
	indirect owners of at least a 20% ownership interest in the Texas
	Investment Market;
	(B)  the uniform resource locator
	(URL), if applicable, used primarily by the Texas Investment Market
	to effect transactions online;
	(C)  the rules that have been
	established by the Texas Investment Market to provide for the
	equitable allocation of reasonable dues, fees, and other charges
	among its issuers, investors, and other persons using its
	facilities; and
	(D)  any other information requested
	by the Securities Commissioner to make a determination regarding
	the registration application.
	(2)  In considering an application for
	registration, the Securities Commissioner shall consider all of the
	following factors:
	(A)  whether the Texas Investment
	Market has the capacity to facilitate the transactions contemplated
	in this subsection, the rules and orders of the Securities
	Commissioner and the rules established by the Texas Investment
	Market;
	(B)  whether any of the individuals
	listed in the application have been disqualified pursuant to
	subsection (b)(3)(a)(2) or for other good cause;
	(C)  whether the rules that have been
	established by the Texas Investment Market to provide for the
	equitable allocation of reasonable dues, fees, and other charges
	among its issuers, investors, and other persons using its
	facilities are in fact equitable;
	(D)  whether the rules established by
	the Texas Investment Market provide for appropriate discipline for
	users that violate its own rules, the rules and regulations of the
	Board or this Article;
	(E)  whether the rules established by
	the Texas Investment Market impose any burden of competition or
	obstruction to a liquid intrastate securities market that is not
	necessary or appropriate to further the purposes of this Article;
	and
	(F)  whether the structure established
	by the Texas Investment Market has been designed to (i) protect
	against fraud and manipulative behavior, and (ii) to ensure that
	its operations do not foster unfair discrimination among issuers,
	investors and other persons that interact with the market.
	(3)  If the information contained in an
	application that is filed under subsection (b)(1) is or becomes
	inaccurate or incomplete in any material respect, the registrant
	shall promptly file a correcting amendment to the application.
	(c)  Operation.
	(1)  The Texas Investment Market shall
	establish and maintain commercially reasonable measures to limit
	access to information concerning any transaction involving the
	offer or sale of securities issued pursuant to the intrastate
	crowdfunding exemption from securities regulation to Texas
	residents;
	(2)  The Texas Investment Market shall
	establish and maintain a secure method of communication through the
	internet website that will permit issuers and investors to
	communicate with one another;
	(3)  The Texas Investment Market shall
	establish rules that provide for the equitable allocation of dues,
	fees, and other charges among its issuers, investors, and other
	persons using its facilities, that provide for appropriate
	discipline of any person who violates it rules or the rules and
	regulations of the Board, that protect against fraud and
	manipulative behavior, and that ensure that its operations do not
	unfairly discriminate among issuers, investors and other persons
	interacting on the market;
	(4)  The Texas Investment Market shall
	establish rules, practices and procedures that address the measures
	that will be taken to verify Texas residency of the issuers and
	investors engaging in the offer, sale and purchase of securities in
	reliance on the intrastate crowdfunding exemption, to ensure that
	individuals are not disqualified from trading securities pursuant
	to federal and state securities laws or for other good cause, and
	that issuers and investors are not insolvent;
	(5)  A written and electronic record of each
	transaction conducted among users must be provided to each
	purchaser and must be maintained by the Texas Investment Market for
	a period of no less than seven (7) years after the date of the
	transaction. In addition, the Texas Investment Market must make and
	maintain the accounts, correspondence, memoranda, papers, books,
	and other records required by rule or order of the Securities
	Commissioner. These additional records shall be maintained in a
	form of data storage established by the Securities Commissioner;
	(6)  By no later than the end of January of
	each year, the Texas Investment Market must file a report with the
	Securities Commissioner and post the report at the same time on its
	internet site that includes a record of each transaction that was
	initiated and each transaction that was concluded during the
	previous calendar year; and
	(7)  Bonding/Financial Assurance. The Texas
	Investment Market must obtain and maintain appropriate bonding
	and/or insurance to protect the issuers and investors trading
	securities on its market, as specified by the Securities
	Commissioner by rule.
	(4)  Right of Access to Records; Inspection. Any person
	operating a Texas Investment Market shall keep and maintain records
	relating to all sales and trades of securities made pursuant to and
	in reliance on the intrastate crowdfunding or other exemption from
	federal securities regulation and shall provide ready access to
	these records to the Securities Commissioner upon request. The
	Securities Commissioner has the authority to access, inspect, audit
	and review any Texas Investment Market registered under this
	subsection as well as all of its records during reasonable business
	hours.
	(5)  Nothing in this exemption shall be construed to
	alleviate any person from the anti-fraud provisions in the Act or
	Board rules; nor shall such exemption be construed to provide
	relief from any other provisions of this Article other than as
	specifically stated
	SECTION 4.  The Securities Act (Article 581-13-1, Vernon's
	Texas Civil Statutes) is amended to read as follows:
	(A)  The Commissioner, without notice, may inspect a
	registered dealer, or registered investment advisor, issuer,
	crowdfunding portal and Texas Investment Market subject to
	regulation pursuant to Article 581-23-5(V)and (W) of the Act, as
	necessary to ensure compliance with this Act and Board rules.
	(B)  The Commissioner, during regular business hours, may:
	(1)  enter the business premises of a registered
	dealer, or registered investment adviser, any issuer and
	crowdfunding portal subject to regulation pursuant to Article
	581-23-5(V) of this Act and any Texas Investment Market subject to
	regulation pursuant to Article 581-23-5(W) of this Act;
	(2)  examine and copy books and records pertinent to
	the inspection.
	(C)  During the inspection, the dealer, investment advisor,
	issuer, crowdfunding portal and Texas Investment Market shall:
	(1)  provide to the Commissioner or the Commissioner's
	authorized representative immediate and complete access to the
	person's office, place of business, files, safe, and any other
	location in which books and records pertinent to the inspection are
	located; and
	(2)  allow the Commissioner or the Commissioner's
	authorized representative to make photostatic or electronic copies
	of books or records subject to the inspection.
	(D)  A dealer, or investment advisor, issuer, crowdfunding
	portal and Texas Investment Market may not charge a fee for copying
	information under this section.
	(E)  Information obtained under this section and any
	intra-agency or interagency notes, memoranda, reports, or other
	communications consisting of advice, analyses, opinions, or
	recommendations that are made in connection with the inspection are
	confidential and may not be disclosed to the public or released by
	the Commissioner except to the same extent provided for the release
	or disclosure of confidential documents or other information made
	or obtained in connection with an investigation under Section 28 of
	this Act.
	SECTION 5.  The Securities Act (Article 581-33,Vernon's
	Texas Civil Statutes) is amended by adding a new Section 581-33-4 to
	read as follows:
	Sec. 33-4.  Civil Liability with respect to Sale of a
	Security issued under the Intrastate Crowdfunding Exemption by a
	Texas Investment Market.
	(A)  Liability of Issuers
	(1)  A person who offers or sells a security issued
	under the intrastate crowdfunding exemption through a registered
	Texas Investment Market in violation of the provisions set forth in
	Section 581-23-5(W) is liable to the person buying the security,
	who may sue either at law or in equity for rescission or for damages
	if the buyer no longer owns the security.
	(2)  A person who offers or sells a security issued
	under the intrastate crowdfunding exemption through a registered
	Texas Investment Market by means of an untrue statement of a
	material fact or an omission to state a material fact necessary in
	order to make the statements made, in light of the circumstances
	under which they are made, is liable to the person buying the
	security, who may sue either at law or in equity for rescission, or
	for damages if the buyer no longer owns the security.
	(B)  Survivability of Actions. Every cause of action under
	this Act survives the death of any person who might have been a
	plaintiff or defendant.
	(C)  Unenforceability of Illegal Contracts. No person who
	has made or engaged in the performance of any contract in violation
	of this Act or any rule, regulation or order adopted hereunder, or
	who has acquired any purported right under any such contract with
	knowledge of the facts by reason of which its making or performance
	was in violation, may base any suit on the contract.
	(D)  Saving of Existing Remedies. The rights and remedies
	provided by this Act are in addition to any other rights (including
	exemplary or punitive damages) or remedies that may exist at law or
	in equity.
	SECTION 6.  This Act takes effect immediately if it receives
	a vote of two-thirds of all the members elected to each house, as
	provided by Section 39, Article III, Texas Constitution. If this
	Act does not receive the votes necessary for immediate effect, this
	Act takes effect September 1, 2015.