The primary mission of the Texas State Securities Board, as set forth in the Texas Securities Act, is to protect Texas investors. Consistent with that mission, the Texas State Securities Board works to ensure a free and competitive securities market in Texas, increase investor confidence, and thereby encourage the formation of capital and the creation of new jobs in Texas.
The securities markets provide a means for investors to achieve important financial objectives, such as providing a college education for their children and earning money for retirement. The securities markets also provide entrepreneurs with access to capital to build or expand businesses and create new jobs. Investment advisers, dealer firms, and their agents bring these two groups together in the marketplace to effect transactions for both groups' mutual benefit and to make our economic system work.
State and federal laws attempt to foster full and fair disclosure in the securities markets and thereby promote investor protection. On the state level, these regulatory laws are often referred to as "blue sky laws." This term reflects the desire of state legislatures to prohibit schemes so speculative as to represent nothing more than a square foot of blue sky. Texas' "blue sky law" is found in the Texas Securities Act (the "Act"). The rules and regulations of the Texas State Securities Board (the "Rules"), promulgated pursuant to the Act, interpret and expand on the protections afforded by the Act. The Act and Rules promote the goal of investor protection in the following ways:
The registration and informational requirements of the Act and Rules serve to heighten investor confidence and awareness. This, in turn, assures that businesses of all sizes have access to capital markets. While the Act and Rules provide for certain exemptions from the registration requirements, those exemptions reflect judgments that certain securities transactions and certain kinds of securities contain inherent safeguards that make registration unnecessary. Nonetheless, exempt transactions and exempt securities remain subject to the anti-fraud requirements of the Act.
The Act contains a broad definition of the term "security." Thus, the popular concept of what constitutes a security -- stocks and bonds -- is incomplete. The term also includes, among other things, limited partnership interests; notes; commercial paper; evidences of indebtedness; interests in or under an oil, gas or mining lease; and "investment contracts." Generally, an investment contract is an arrangement whereby an individual invests something of value in a common enterprise with an expectation of a return in the form of interest, dividends, increased capital, or other benefits to be derived from the significant managerial efforts of others. Any time a security is offered or sold in Texas, the security must be registered and must be sold by a registered person unless an exemption is available under the Act or Rules or federal law provides an exception from state registration.
The Texas State Securities Board is the state agency entrusted with the task of administering and enforcing the Act. The Agency is overseen by a board (the "Board") composed of five members appointed by the Governor, with the advice and consent of the Senate, for six-year overlapping terms. The Board adopts and periodically updates rules to ensure that investors are adequately protected and that unreasonable burdens on legitimate capital raising activities are avoided. The Board appoints a Securities Commissioner who serves at its pleasure. The Securities Commissioner serves as the Agency's chief administrative officer and supervises the day-to-day activities of the staff. The main office of the Texas State Securities Board is located in Austin. The Agency also maintains offices in Corpus Christi, Dallas, Houston, Lubbock, and San Antonio.
The Agency is organized into five divisions. Although the divisions coordinate closely in accomplishing the Agency's mission, each fulfills a unique role within the Agency.
The Registration Division is responsible for the registration of securities offered or sold in Texas and of firms and individuals who sell securities or render investment advice in the state.
Division personnel review all applications for securities registration to ensure that investors have access to full and fair disclosure of all relevant investment information and that the offering terms are "fair, just and equitable" in accordance with criteria established by the Act and Rules. The review is designed to assure that the promoter and investor will share in the results of the venture (whether profits or losses), that conflicts of interest are minimized, and that promotional expenses are reasonable. Approval of a registration application does not constitute a recommendation of the securities being registered, nor does it in any way predict investment success. The purpose of the review is to assure that certain minimal financial and informational requirements are met.
The Division reviews all applications for registration of dealers, agents, investment advisers, and investment adviser representatives to ensure that individuals and firms dealing with investors meet certain minimum standards of conduct and financial solvency. All individuals or firms offering or selling securities or providing investment advice within the state must be registered unless they meet the criteria for an exemption. Registrants must submit to an extensive background investigation, pass examinations on general securities principles and state securities laws, and agree to meet certain record-keeping and disclosure requirements. The following are considered in determining whether to approve an application for registration: financial solvency; criminal history; evidence of past inequitable or fraudulent business practices; and performance on written examinations.
Division personnel also answer questions from the public concerning securities exemption and registration requirements; the status of securities registration applications; and the registration status, disciplinary history, and activities of dealers, agents, investment advisers, or investment adviser representatives.
Inspections and Compliance Division staff conduct periodic inspections of the books and records of registered dealers and registered investment advisers. Inspections are unannounced and focus on: (1) registered dealers who have their principal offices in Texas but are not members of the National Association of Securities Dealers and (2) registered investment advisers; however, all registrants are subject to such inspections. Staff also investigate complaints made about registered individuals and firms. Serious violations of the Act or Rules noted during an inspection may be addressed through administrative action or be referred to the Enforcement Division for appropriate civil or criminal action.
The Enforcement Division works to prevent, detect, and redress violations of the Act and Rules. The Division is armed with certain statutory tools to protect investors. The Act provides for administrative sanctions to be imposed by the Securities Commissioner. These sanctions include: denial, revocation, or suspension of dealer, agent, investment adviser, or investment adviser representative registrations; cease and desist orders prohibiting or suspending the sale of securities or prohibiting fraudulent conduct; orders denying or revoking the registration of securities; orders revoking exemptions; and cease publication orders.
The Act provides criminal penalties for certain unlawful activities. After the Enforcement Division investigates suspected violations of the Act, it may recommend criminal prosecution of the suspected violator. Indictments and convictions are usually prosecuted by local district attorneys or United States attorneys, with the assistance of Enforcement staff. Finally, a matter may be referred to the Attorney General for an injunction or receivership action.
The General Counsel Division provides internal legal advice to the Board, Securities Commissioner, and staff; responds to public inquiries concerning interpretation of the Act and Rules; and issues written interpretive opinions to assist persons in complying with the law.
The Staff Services Division handles accounting, budgeting, data processing, personnel services, purchasing, and other essential administrative functions for the Agency.
No investment is risk free and certain risks cannot be avoided. However, investors often can protect themselves against unnecessary risks by learning about investments and investing, taking steps to avoid investment "scams" or "swindles," determining their personal financial situation and needs, and setting realistic investment objectives.
Many investors need assistance in reading and understanding the disclosures relating to investments. If you are not sure you understand the materials, do not hesitate to ask for help from someone you trust who is knowledgeable about financial matters.
The Texas Family Guide to Personal Money Management provides considerable information that may be helpful to individual investors. This document can be obtained by contacting the Texas State Securities Board or by visiting the Agency's web sites (www.ssb.state.tx.us and www.TexasInvestorEd.org).
There is perhaps no better way to protect yourself than by becoming informed about certain risks associated with investments. The Agency routinely provides such information to the public by disseminating, among other things, "Investor Alerts" sponsored by the North American Securities Administrators Association and/or the Better Business Bureau. Printed copies of these publications are available from the Agency at no charge, and many are available on the Agency's web site. Some of the materials are also available in Spanish.
Although many legitimate investment opportunities are offered by reputable investment professionals, "con artists" or "investment swindlers," who often imitate the techniques of legitimate professionals, also are vying for your investment dollars. Many people believe that they can spot a con artist by his or her appearance; however, a successful con artist often looks like any other successful business person and can be smooth, cultured, and charming. Some swindlers rent luxurious offices with impressive addresses, distribute polished written materials, and wear expensive clothing to give the appearance of being reputable, successful business people.
Some of the ways that swindlers find their victims include:
You are most vulnerable when you fail to gather all the facts about an investment opportunity. Always investigate before you invest! You can help protect yourself from unscrupulous persons by taking the following precautions:
Taking steps to prevent fraud will help you avoid bad investments. Your best guide to choosing an investment is a careful assessment of your personal financial situation and investment goals. Your library has various books and other publications that can assist you in developing your investment strategy, and many schools, community centers, financial institutions, and community colleges offer courses or seminars on the basics of personal investing. Remember: All investments require research and deliberation!
No investment is risk free; generally, the greater the potential return, the greater the risk. Nevertheless, if you ask the following questions, among others, before you invest, you may be able to avoid some common investment pitfalls.
In addition to the administrative and criminal sanctions discussed above in the description of the Enforcement Division, the Act provides for private civil remedies for violations of its provisions. If you suspect that you have been defrauded, you may wish to contact an attorney to determine what course you should take to establish your rights. In addition, you may wish to contact the Agency and inquire about a suspected violation.
Investors should realize that the Agency cannot protect them from possible financial loss or the risks inherent in any investment. However, the Agency welcomes information and inquiries concerning suspected violations of the Act.
Investors with such concerns should complete the form inserted in this brochure or send the Agency a letter describing the nature of the concern, together with copies of any relevant documents. As an alternative, investors may telephone the Agency's Enforcement Division. Staff responding to such calls may provide investors with brief questionnaires to fill out and return. Complaints can also be submitted via e-mail to: complaints@ssb.state.tx.us. The Agency acknowledges receipt of all inquiries. Anonymous inquiries, both written and oral, are also accepted.
Depending on the circumstances, the Agency may begin an investigation. If an investigation uncovers facts that indicate a violation of the Act, the Agency may pursue administrative sanctions, injunctive relief through the Attorney General, or indictment and criminal conviction through the appropriate prosecuting authority.
If you have information about a suspected violation, or wish to inquire about the activities of persons issuing or selling securities or giving investment advice, please contact:
Texas State Securities Board
P. O. Box 13167
Austin, Texas 78711-3167
(512) 305-8300
(512) 305-8310 (Fax)
(888) 663-0009 (Complaints)
www.ssb.state.tx.us
Se habla Español
The following entities also may assist you. (Additionally, many of the web sites listed below have valuable informational resources for investors.)
American Stock Exchange
86 Trinity Place
New York, New York 10006
(212) 306-1000
www.amex.com
The Better Business Bureau, Inc.
1105 La Posada
Austin, Texas 78752
(512) 445-2911
(Or your local Better Business Bureau)
www.bbb.org
Commodity Futures Trading Commission
1155 21st Street, N.W.
Washington, D.C. 20581
(202) 418-5000
(866) 366-2382 (Complaint line)
(800) 621-3570 (Registration status)
www.cftc.gov
Federal Trade Commission
1999 Bryan Street - Suite 2150
Dallas, Texas 75201-6808
(877) 382-4357 (Consumer complaints)
www.ftc.gov
The NASDAQ Stock Market, Inc.
One Liberty Plaza, 165 Broadway
New York, New York 10006
(212) 401-8700
www.nasdaq.com
Financial Industry Regulatory Authority (FINRA)
12801 North Central Expressway - Suite 1050
Dallas, Texas 75243
(972) 701-8554
(800) 289-9999 (Disciplinary history)
www.finra.org
National Futures Association
300 S. Riverside Plaza, Suite 1800
Chicago, Illinois 60606-6615
(800) 621-3570
www.nfa.futures.org
NYSE Euronext
11 Wall Street
New York, New York 10005
(212) 656-3000
www.nyse.com
North American Securities Administrators
Association, Inc.
750 First Street, N.E. - Suite 1140
Washington, D.C. 20002
(202) 737-0900
www.nasaa.org
Office of the Texas Attorney General
P. O. Box 12548
Austin, Texas 78711-2548
(512) 463-2100
(800) 252-8011 (Public information and assistance)
(512) 475-4413 (in Austin)
www.oag.state.tx.us
U.S. Securities and Exchange Commission
801 Cherry Street - 19th Floor
Fort Worth, Texas 76102
(817) 978-3821
1-800-732-0330 (Investor Information Service)
www.sec.gov
If you have any questions about whether a security or a firm or person selling securities or providing investment advice is registered, contact:
Registration Division
Texas State Securities Board
P. O. Box 13167
Austin, Texas 78711-3167
(512) 305-8300
(512) 305-8310 (Fax)
secreginfo@ssb.state.tx.us
(Securities registration information)
registrationcheck@ssb.state.tx.us
(Dealer and investment adviser registration inquiries)
