By: Truitt (Senate Sponsor - Watson) H.B. No. 2342
(In the Senate - Received from the House April 28, 2011;
May 4, 2011, read first time and referred to Committee on Business
and Commerce; May 10, 2011, reported favorably by the following
vote: Yeas 9, Nays 0; May 10, 2011, sent to printer.)
A BILL TO BE ENTITLED
AN ACT
relating to certain violations of and offenses under The Securities
Act; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subsections A and B, Section 23-1, The
Securities Act (Article 581-23-1, Vernon's Texas Civil Statutes),
are amended to read as follows:
A. After giving notice and opportunity for a hearing, the
Commissioner may, in addition to any other remedies, issue an order
which assesses an administrative fine against any person or company
found to have:
(1) engaged in fraud or a fraudulent practice in
connection with:
(A) the offer for sale or sale of a security; or
(B) the rendering of services as an investment
adviser or investment adviser representative;
(2) made an offer containing a statement that is
materially misleading or is otherwise likely to deceive the public;
[or]
(3) engaged in an act or practice that violates this
Act or a Board rule or order; or
(4) with intent to deceive or defraud or with reckless
disregard for the truth or the law, materially aided any person in
engaging in an act or practice described by Subdivision (1) , (2),
or (3) of this subsection.
B. Any administrative fine assessed under this Section,
together with the amount of any civil penalty already awarded under
Subsection C of Section 32, must be in an amount not to exceed:
(1) the greater of:
(A) $20,000 per violation; or
(B) the gross amount of any economic benefit
gained by the person or company a result of the act or practice for
which the fine was assessed; and
(2) if the act or practice was committed against a
person 65 years of age or older, an additional amount of not more
than $250,000 [that does not exceed $10,000 for a single violation
or $100,000 for multiple violations in a single proceeding or a
series of related proceedings].
SECTION 2. Section 29, The Securities Act (Article 581-29,
Vernon's Texas Civil Statutes), is amended to read as follows:
Art. 581-29. PENAL PROVISIONS. Any person who shall:
A. Sell, offer for sale or delivery, solicit subscriptions
or orders for, dispose of, invite offers for, or who shall deal in
any other manner in any security or securities without being a
registered dealer or agent as in this Act provided shall be deemed
guilty of a felony of the third degree [, and upon conviction
thereof shall be sentenced to pay a fine of not more than $5,000 or
imprisonment in the penitentiary for not less than two or more than
10 years, or by both such fine and imprisonment].
B. Sell, offer for sale or delivery, solicit subscriptions
to and orders for, dispose of, invite orders for, or who shall deal
in any other manner in any security or securities issued after
September 6, 1955, unless said security or securities have been
registered or granted a permit as provided in Section 7 of this Act,
shall be deemed guilty of a felony of the third degree [, and upon
conviction thereof shall be sentenced to pay a fine of not more than
$5,000 or imprisonment in the penitentiary for not less than two or
more than 10 years, or by both such fine and imprisonment].
C. In connection with the sale, offering for sale or delivery
of, the purchase, offer to purchase, invitation of offers to
purchase, invitations of offers to sell, or dealing in any other
manner in any security or securities, whether or not the
transaction or security is exempt under Section 5 or 6 of this Act,
or in connection with the rendering of services as an investment
adviser or an investment adviser representative, directly or
indirectly:
(1) engage in any fraud or fraudulent practice;
(2) employ any device, scheme, or artifice to defraud;
(3) knowingly make any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they
are made, not misleading; or
(4) engage in any act, practice or course of business
which operates or will operate as a fraud or deceit upon any person,
is [guilty of a felony and upon conviction shall be]:
(a) guilty of a felony of the third degree
[imprisoned for not less than 2 or more than 10 years and fined not
more than $10,000], if the amount involved in the offense is less
than $10,000;
(b) guilty of a felony of the second degree
[imprisoned for not less than 2 or more than 20 years and fined not
more than $10,000], if the amount involved in the offense is $10,000
or more but less than $100,000; or
(c) guilty of a felony of the first degree
[imprisoned for life or for not less than 5 or more than 99 years and
fined not more than $10,000], if the amount involved is $100,000 or
more.
D. Knowingly violate a cease and desist order issued by the
commissioner under the authority of Section 23A, 23B, or 23-2 of
this Act shall be deemed guilty of a felony of the third degree [,
and upon conviction thereof shall be sentenced to pay a fine of not
more than $5,000 or imprisonment in the penitentiary for not more
than two years, or by both such fine and imprisonment].
E. Knowingly make or cause to be made, in any document filed
with the commissioner or in any proceeding under this Act, whether
or not such document or proceeding relates to a transaction or
security exempt under the provisions of Sections 5 or 6 of this Act,
any statement which is, at the time and in the light of the
circumstances under which it is made, false or misleading in any
material respect shall be deemed guilty of a felony of the third
degree [, and upon conviction thereof shall be sentenced to pay a
fine of not more than $5,000 or imprisonment in the penitentiary for
not less than two or more than 10 years, or by both such fine and
imprisonment].
F. Knowingly make any false statement or representation
concerning any registration made or exemption claimed under the
provisions of this Act shall be deemed guilty of a state jail
felony[, and upon conviction thereof shall be sentenced to pay a
fine of not more than $5,000 or imprisonment in the penitentiary for
not more than two years, or by both such fine and imprisonment].
G. Make an offer of any security within this State that is
not in compliance with the requirements governing offers set forth
in Section 22 of this Act shall be deemed guilty of a state jail
felony[, and upon conviction thereof, shall be sentenced to pay a
fine of not more than $5,000 or imprisonment in the penitentiary for
not more than two years, or by both such fine and imprisonment].
H. Knowingly make an offer of any security within this State
prohibited by a cease publication order issued by the Commissioner
under Section 23C of this Act shall be deemed guilty of a state jail
felony[, and upon conviction thereof, shall be sentenced to pay a
fine of not more than $5,000 or imprisonment in the penitentiary for
not more than two years, or by both such fine and imprisonment].
I. Render services as an investment adviser or an investment
adviser representative without being registered as required by this
Act shall be deemed guilty of a felony of the third degree [and on
conviction of the felony shall be sentenced to pay a fine of not
more than $5,000 or imprisonment in the penitentiary for not less
than two or more than 10 years, or by both the fine and
imprisonment].
J. A conviction of an offense under this section may be
enhanced as provided by Section 12.42, Penal Code.
SECTION 3. Section 32, The Securities Act (Article 581-32,
Vernon's Texas Civil Statutes), is amended to read as follows:
Art. 581-32. INJUNCTIONS, [AND] RESTITUTION, AND CIVIL
PENALTIES. A. Whenever it shall appear to the Commissioner either
upon complaint or otherwise, that any person has engaged, is
engaging, or is about to engage in fraud or a fraudulent practice in
connection with the sale of a security, has engaged, is engaging, or
is about to engage in fraud or a fraudulent practice in the
rendering of services as an investment adviser or investment
adviser representative, has made an offer containing a statement
that is materially misleading or is otherwise likely to deceive the
public, or has engaged, is engaging, or is about to engage in an act
or practice that violates this Act or a Board rule or order, the
Attorney General may, on request by the Commissioner, and in
addition to any other remedies, bring action in the name and on
behalf of the State of Texas against such person or company and any
person who, with intent to deceive or defraud or with reckless
disregard for the truth or the law, has materially aided, is
materially aiding, or is about to materially aid such person and any
other person or persons heretofore concerned in or in any way
participating in or about to participate in such acts or practices,
to enjoin such person or company and such other person or persons
from continuing such acts or practices or doing any act or acts in
furtherance thereof. The Commissioner shall verify, on information
and belief, the facts contained in an application for injunction
under this section. In any such court proceedings, the Attorney
General may apply for and on due showing be entitled to have issued
the court's subpoena requiring the forthwith appearance of any
defendant and the defendant's employees or agents and the
production of documents, books and records as may appear necessary
for the hearing of such petition, to testify and give evidence
concerning the acts or conduct or things complained of in such
application for injunction. The District Court of any county,
wherein it is shown that the acts complained of have been or are
about to be committed, or a district court in Travis County shall
have jurisdiction of any action brought under this section, and
this provision shall be superior to any provision fixing the
jurisdiction or venue with regard to suits for injunction. No bond
for injunction shall be required of the Commissioner or Attorney
General in any such proceeding.
B. In addition to any other remedies, the [The] Attorney
General may, on the request of the Commissioner, either in an action
under Subsection A of this section or in a separate action in
District Court, seek equitable relief, including restitution, for a
victim of fraudulent practices and may seek the disgorgement of any
economic benefit gained by a defendant through an act or practice
that violates this Act or for which this Act provides the
Commissioner or the Attorney General with a remedy. The court may
grant any equitable relief that the court considers appropriate and
may order the defendant to deliver to each victim of any act or
practice that violates this Act or for which this Act provides the
Commissioner or the Attorney General with a remedy [the person
defrauded] the amount of money or the property that the defendant
obtained from the victim, including any bonus, fee, commission,
option, proceeds, or profit from or loss avoided through the sale of
the security or through the rendering of services as an investment
adviser or investment adviser representative, or any other tangible
benefit [person by the fraudulent practices].
C. In addition to any other remedies, the Attorney General
may, on the request of the Commissioner, either in an action under
Subsection A of this section or in a separate action in District
Court, seek a civil penalty to be paid to the State in an amount,
together with the amount of any administrative fine already
assessed under Subsection B of Section 23-1, not to exceed:
(1) the greater of:
(A) $20,000 per violation; or
(B) the gross amount of any economic benefit
gained by the person or company as a result of the commission of the
act or practice; and
(2) if the act or practice was committed against a
person 65 years of age or older, an additional amount of not more
than $250,000.
D. In an action brought under this section, the [for fraud or
a fraudulent practice in connection with the sale of a security, the
Attorney General may seek, for an aggrieved person, the
disgorgement of any economic benefit gained by the defendant
through the violation, including a bonus, fee, commission, option,
proceeds, profit from or loss avoided through the sale of the
security, or any other tangible benefit. The] Attorney General may
recover [from an order of disgorgement obtained under this
subsection] reasonable costs and expenses incurred by the Attorney
General in bringing the action.
SECTION 4. (a) The changes in law made by this Act apply
only to a violation that occurs or an offense committed on or after
the effective date of this Act. A violation that occurs or an
offense committed before the effective date of this Act is governed
by the law in effect on the date the violation occurred or the
offense was committed, and the former law is continued in effect for
that purpose.
(b) For purposes of Subsection (a) of this section, a
violation occurred or an offense was committed before the effective
date of this Act if any element of the violation or offense occurred
before that date.
SECTION 5. This Act takes effect September 1, 2011.
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