Texas 2011 - 82nd Regular

Texas House Bill HB2342 Compare Versions

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1	1	By: Truitt (Senate Sponsor - Watson) H.B. No. 2342
2	2	(In the Senate - Received from the House April 28, 2011;
3	3	May 4, 2011, read first time and referred to Committee on Business
4	4	and Commerce; May 10, 2011, reported favorably by the following
5	5	vote: Yeas 9, Nays 0; May 10, 2011, sent to printer.)
6	6
7	7
8	8	A BILL TO BE ENTITLED
9	9	AN ACT
10	10	relating to certain violations of and offenses under The Securities
11	11	Act; providing penalties.
12	12	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
13	13	SECTION 1. Subsections A and B, Section 23-1, The
14	14	Securities Act (Article 581-23-1, Vernon's Texas Civil Statutes),
15	15	are amended to read as follows:
16	16	A. After giving notice and opportunity for a hearing, the
17	17	Commissioner may, in addition to any other remedies, issue an order
18	18	which assesses an administrative fine against any person or company
19	19	found to have:
20	20	(1) engaged in fraud or a fraudulent practice in
21	21	connection with:
22	22	(A) the offer for sale or sale of a security; or
23	23	(B) the rendering of services as an investment
24	24	adviser or investment adviser representative;
25	25	(2) made an offer containing a statement that is
26	26	materially misleading or is otherwise likely to deceive the public;
27	27	[or]
28	28	(3) engaged in an act or practice that violates this
29	29	Act or a Board rule or order; or
30	30	(4) with intent to deceive or defraud or with reckless
31	31	disregard for the truth or the law, materially aided any person in
32	32	engaging in an act or practice described by Subdivision (1) , (2),
33	33	or (3) of this subsection.
34	34	B. Any administrative fine assessed under this Section,
35	35	together with the amount of any civil penalty already awarded under
36	36	Subsection C of Section 32, must be in an amount not to exceed:
37	37	(1) the greater of:
38	38	(A) $20,000 per violation; or
39	39	(B) the gross amount of any economic benefit
40	40	gained by the person or company a result of the act or practice for
41	41	which the fine was assessed; and
42	42	(2) if the act or practice was committed against a
43	43	person 65 years of age or older, an additional amount of not more
44	44	than $250,000 [that does not exceed $10,000 for a single violation
45	45	or $100,000 for multiple violations in a single proceeding or a
46	46	series of related proceedings].
47	47	SECTION 2. Section 29, The Securities Act (Article 581-29,
48	48	Vernon's Texas Civil Statutes), is amended to read as follows:
49	49	Art. 581-29. PENAL PROVISIONS. Any person who shall:
50	50	A. Sell, offer for sale or delivery, solicit subscriptions
51	51	or orders for, dispose of, invite offers for, or who shall deal in
52	52	any other manner in any security or securities without being a
53	53	registered dealer or agent as in this Act provided shall be deemed
54	54	guilty of a felony of the third degree [, and upon conviction
55	55	thereof shall be sentenced to pay a fine of not more than $5,000 or
56	56	imprisonment in the penitentiary for not less than two or more than
57	57	10 years, or by both such fine and imprisonment].
58	58	B. Sell, offer for sale or delivery, solicit subscriptions
59	59	to and orders for, dispose of, invite orders for, or who shall deal
60	60	in any other manner in any security or securities issued after
61	61	September 6, 1955, unless said security or securities have been
62	62	registered or granted a permit as provided in Section 7 of this Act,
63	63	shall be deemed guilty of a felony of the third degree [, and upon
64	64	conviction thereof shall be sentenced to pay a fine of not more than
65	65	$5,000 or imprisonment in the penitentiary for not less than two or
66	66	more than 10 years, or by both such fine and imprisonment].
67	67	C. In connection with the sale, offering for sale or delivery
68	68	of, the purchase, offer to purchase, invitation of offers to
69	69	purchase, invitations of offers to sell, or dealing in any other
70	70	manner in any security or securities, whether or not the
71	71	transaction or security is exempt under Section 5 or 6 of this Act,
72	72	or in connection with the rendering of services as an investment
73	73	adviser or an investment adviser representative, directly or
74	74	indirectly:
75	75	(1) engage in any fraud or fraudulent practice;
76	76	(2) employ any device, scheme, or artifice to defraud;
77	77	(3) knowingly make any untrue statement of a material
78	78	fact or omit to state a material fact necessary in order to make the
79	79	statements made, in the light of the circumstances under which they
80	80	are made, not misleading; or
81	81	(4) engage in any act, practice or course of business
82	82	which operates or will operate as a fraud or deceit upon any person,
83	83	is [guilty of a felony and upon conviction shall be]:
84	84	(a) guilty of a felony of the third degree
85	85	[imprisoned for not less than 2 or more than 10 years and fined not
86	86	more than $10,000], if the amount involved in the offense is less
87	87	than $10,000;
88	88	(b) guilty of a felony of the second degree
89	89	[imprisoned for not less than 2 or more than 20 years and fined not
90	90	more than $10,000], if the amount involved in the offense is $10,000
91	91	or more but less than $100,000; or
92	92	(c) guilty of a felony of the first degree
93	93	[imprisoned for life or for not less than 5 or more than 99 years and
94	94	fined not more than $10,000], if the amount involved is $100,000 or
95	95	more.
96	96	D. Knowingly violate a cease and desist order issued by the
97	97	commissioner under the authority of Section 23A, 23B, or 23-2 of
98	98	this Act shall be deemed guilty of a felony of the third degree [,
99	99	and upon conviction thereof shall be sentenced to pay a fine of not
100	100	more than $5,000 or imprisonment in the penitentiary for not more
101	101	than two years, or by both such fine and imprisonment].
102	102	E. Knowingly make or cause to be made, in any document filed
103	103	with the commissioner or in any proceeding under this Act, whether
104	104	or not such document or proceeding relates to a transaction or
105	105	security exempt under the provisions of Sections 5 or 6 of this Act,
106	106	any statement which is, at the time and in the light of the
107	107	circumstances under which it is made, false or misleading in any
108	108	material respect shall be deemed guilty of a felony of the third
109	109	degree [, and upon conviction thereof shall be sentenced to pay a
110	110	fine of not more than $5,000 or imprisonment in the penitentiary for
111	111	not less than two or more than 10 years, or by both such fine and
112	112	imprisonment].
113	113	F. Knowingly make any false statement or representation
114	114	concerning any registration made or exemption claimed under the
115	115	provisions of this Act shall be deemed guilty of a state jail
116	116	felony[, and upon conviction thereof shall be sentenced to pay a
117	117	fine of not more than $5,000 or imprisonment in the penitentiary for
118	118	not more than two years, or by both such fine and imprisonment].
119	119	G. Make an offer of any security within this State that is
120	120	not in compliance with the requirements governing offers set forth
121	121	in Section 22 of this Act shall be deemed guilty of a state jail
122	122	felony[, and upon conviction thereof, shall be sentenced to pay a
123	123	fine of not more than $5,000 or imprisonment in the penitentiary for
124	124	not more than two years, or by both such fine and imprisonment].
125	125	H. Knowingly make an offer of any security within this State
126	126	prohibited by a cease publication order issued by the Commissioner
127	127	under Section 23C of this Act shall be deemed guilty of a state jail
128	128	felony[, and upon conviction thereof, shall be sentenced to pay a
129	129	fine of not more than $5,000 or imprisonment in the penitentiary for
130	130	not more than two years, or by both such fine and imprisonment].
131	131	I. Render services as an investment adviser or an investment
132	132	adviser representative without being registered as required by this
133	133	Act shall be deemed guilty of a felony of the third degree [and on
134	134	conviction of the felony shall be sentenced to pay a fine of not
135	135	more than $5,000 or imprisonment in the penitentiary for not less
136	136	than two or more than 10 years, or by both the fine and
137	137	imprisonment].
138	138	J. A conviction of an offense under this section may be
139	139	enhanced as provided by Section 12.42, Penal Code.
140	140	SECTION 3. Section 32, The Securities Act (Article 581-32,
141	141	Vernon's Texas Civil Statutes), is amended to read as follows:
142	142	Art. 581-32. INJUNCTIONS, [AND] RESTITUTION, AND CIVIL
143	143	PENALTIES. A. Whenever it shall appear to the Commissioner either
144	144	upon complaint or otherwise, that any person has engaged, is
145	145	engaging, or is about to engage in fraud or a fraudulent practice in
146	146	connection with the sale of a security, has engaged, is engaging, or
147	147	is about to engage in fraud or a fraudulent practice in the
148	148	rendering of services as an investment adviser or investment
149	149	adviser representative, has made an offer containing a statement
150	150	that is materially misleading or is otherwise likely to deceive the
151	151	public, or has engaged, is engaging, or is about to engage in an act
152	152	or practice that violates this Act or a Board rule or order, the
153	153	Attorney General may, on request by the Commissioner, and in
154	154	addition to any other remedies, bring action in the name and on
155	155	behalf of the State of Texas against such person or company and any
156	156	person who, with intent to deceive or defraud or with reckless
157	157	disregard for the truth or the law, has materially aided, is
158	158	materially aiding, or is about to materially aid such person and any
159	159	other person or persons heretofore concerned in or in any way
160	160	participating in or about to participate in such acts or practices,
161	161	to enjoin such person or company and such other person or persons
162	162	from continuing such acts or practices or doing any act or acts in
163	163	furtherance thereof. The Commissioner shall verify, on information
164	164	and belief, the facts contained in an application for injunction
165	165	under this section. In any such court proceedings, the Attorney
166	166	General may apply for and on due showing be entitled to have issued
167	167	the court's subpoena requiring the forthwith appearance of any
168	168	defendant and the defendant's employees or agents and the
169	169	production of documents, books and records as may appear necessary
170	170	for the hearing of such petition, to testify and give evidence
171	171	concerning the acts or conduct or things complained of in such
172	172	application for injunction. The District Court of any county,
173	173	wherein it is shown that the acts complained of have been or are
174	174	about to be committed, or a district court in Travis County shall
175	175	have jurisdiction of any action brought under this section, and
176	176	this provision shall be superior to any provision fixing the
177	177	jurisdiction or venue with regard to suits for injunction. No bond
178	178	for injunction shall be required of the Commissioner or Attorney
179	179	General in any such proceeding.
180	180	B. In addition to any other remedies, the [The] Attorney
181	181	General may, on the request of the Commissioner, either in an action
182	182	under Subsection A of this section or in a separate action in
183	183	District Court, seek equitable relief, including restitution, for a
184	184	victim of fraudulent practices and may seek the disgorgement of any
185	185	economic benefit gained by a defendant through an act or practice
186	186	that violates this Act or for which this Act provides the
187	187	Commissioner or the Attorney General with a remedy. The court may
188	188	grant any equitable relief that the court considers appropriate and
189	189	may order the defendant to deliver to each victim of any act or
190	190	practice that violates this Act or for which this Act provides the
191	191	Commissioner or the Attorney General with a remedy [the person
192	192	defrauded] the amount of money or the property that the defendant
193	193	obtained from the victim, including any bonus, fee, commission,
194	194	option, proceeds, or profit from or loss avoided through the sale of
195	195	the security or through the rendering of services as an investment
196	196	adviser or investment adviser representative, or any other tangible
197	197	benefit [person by the fraudulent practices].
198	198	C. In addition to any other remedies, the Attorney General
199	199	may, on the request of the Commissioner, either in an action under
200	200	Subsection A of this section or in a separate action in District
201	201	Court, seek a civil penalty to be paid to the State in an amount,
202	202	together with the amount of any administrative fine already
203	203	assessed under Subsection B of Section 23-1, not to exceed:
204	204	(1) the greater of:
205	205	(A) $20,000 per violation; or
206	206	(B) the gross amount of any economic benefit
207	207	gained by the person or company as a result of the commission of the
208	208	act or practice; and
209	209	(2) if the act or practice was committed against a
210	210	person 65 years of age or older, an additional amount of not more
211	211	than $250,000.
212	212	D. In an action brought under this section, the [for fraud or
213	213	a fraudulent practice in connection with the sale of a security, the
214	214	Attorney General may seek, for an aggrieved person, the
215	215	disgorgement of any economic benefit gained by the defendant
216	216	through the violation, including a bonus, fee, commission, option,
217	217	proceeds, profit from or loss avoided through the sale of the
218	218	security, or any other tangible benefit. The] Attorney General may
219	219	recover [from an order of disgorgement obtained under this
220	220	subsection] reasonable costs and expenses incurred by the Attorney
221	221	General in bringing the action.
222	222	SECTION 4. (a) The changes in law made by this Act apply
223	223	only to a violation that occurs or an offense committed on or after
224	224	the effective date of this Act. A violation that occurs or an
225	225	offense committed before the effective date of this Act is governed
226	226	by the law in effect on the date the violation occurred or the
227	227	offense was committed, and the former law is continued in effect for
228	228	that purpose.
229	229	(b) For purposes of Subsection (a) of this section, a
230	230	violation occurred or an offense was committed before the effective
231	231	date of this Act if any element of the violation or offense occurred
232	232	before that date.
233	233	SECTION 5. This Act takes effect September 1, 2011.
234	234	* * * * *