Texas 2019 - 86th Regular

Texas Senate Bill SB860 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	86R5157 GRM-F
2	2	By: Paxton S.B. No. 860
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the creation of a regulatory sandbox program
8	8	administered by the attorney general for certain financial products
9	9	and services; authorizing a fee.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. Title 99, Business & Commerce Code, is amended by
12	12	adding Chapter 2005 to read as follows:
13	13	CHAPTER 2005. REGULATORY SANDBOX PROGRAM
14	14	SUBCHAPTER A. GENERAL PROVISIONS
15	15	Sec. 2005.001. DEFINITIONS. In this chapter:
16	16	(1) "Applicable agency" means the department of this
17	17	state established by law to regulate certain types of business
18	18	activity in this state and the people engaging in that business,
19	19	including the issuance of licenses and registrations, that the
20	20	attorney general determines would regulate a program participant if
21	21	the person were not operating under this chapter.
22	22	(2) "Consumer" means a person who enters into a
23	23	transaction or agreement to receive an innovative financial product
24	24	or service that is being offered under this chapter.
25	25	(3) "Financial product or service" means a financial
26	26	product or service that requires a license or registration, or a
27	27	financial product or service that includes a business model,
28	28	delivery mechanism, or element that would otherwise require a
29	29	license, registration, or other authorization to act as a financial
30	30	institution that is regulated under the Finance Code or The
31	31	Securities Act.
32	32	(4) "Innovative" means the use of new or emerging
33	33	technology or the reimagining of existing technology to address a
34	34	problem, provide a benefit, or otherwise offer a product, service,
35	35	business model, or delivery mechanism that is not known by the
36	36	attorney general to have comparable widespread offering.
37	37	(5) "Innovative financial product or service" means a
38	38	financial product or service that is considered innovative by the
39	39	attorney general.
40	40	(6) "Program" means the regulatory sandbox program
41	41	established under this chapter that allows a person, without being
42	42	licensed or registered under the laws of this state, to test
43	43	innovative financial products or services for a limited time and on
44	44	a limited basis.
45	45	(7) "Program participant" means a person whose
46	46	application to participate in the program is approved and in good
47	47	standing.
48	48	(8) "Test" means to provide a financial product or
49	49	service to the extent allowed under this chapter.
50	50	Sec. 2005.002. CONFLICT OF LAW. If there is a conflict
51	51	between this chapter and another law or regulation of this state,
52	52	this chapter controls.
53	53	Sec. 2005.003. FEDERAL LICENSURE REQUIREMENTS. A program
54	54	participant is considered to be licensed, registered, or otherwise
55	55	authorized to act in this state for purposes of any federal law that
56	56	requires a person to be licensed, registered, or otherwise
57	57	authorized to act.
58	58	Sec. 2005.004. CREATION OF PROGRAM. (a) The attorney
59	59	general, in consultation with applicable agencies in this state,
60	60	shall create a regulatory sandbox program that enables a person to
61	61	obtain limited access to the market in this state to test innovative
62	62	financial products or services without obtaining a license,
63	63	registration, or other regulatory authorization.
64	64	(b) The program shall be administered by the consumer
65	65	protection division of the office of the attorney general.
66	66	Sec. 2005.005. REPORT ON REGULATIONS. (a) Not later than
67	67	December 31 of each even-numbered year, the attorney general shall
68	68	deliver a report to each legislative committee with jurisdiction
69	69	over each applicable agency.
70	70	(b) The report shall give an overview of the program,
71	71	including detailed recommendations on regulations appropriate for
72	72	certain financial products and services tested in the program.
73	73	SUBCHAPTER B. APPLICATION FOR PROGRAM PARTICIPATION
74	74	Sec. 2005.051. APPLICATION REQUIRED. (a) A person must
75	75	obtain approval from the attorney general before testing an
76	76	innovative financial product or service as a program participant.
77	77	A separate application is required for each product or service to be
78	78	tested under the program.
79	79	(b) A person that is licensed, registered, or has otherwise
80	80	gained regulatory authorization to provide a financial product or
81	81	service in this state must submit an application to test a new
82	82	financial product or service under the program.
83	83	Sec. 2005.052. APPLICATION. (a) The attorney general
84	84	shall review each submitted application to test a product or
85	85	service under the program.
86	86	(b) The attorney general shall accept and review
87	87	applications on a rolling basis.
88	88	(c) The application must be on a form prescribed under
89	89	Section 2005.053 and demonstrate that the applicant:
90	90	(1) is subject to the attorney general's jurisdiction
91	91	through incorporation, residency, presents agreement, or some
92	92	other means;
93	93	(2) has an established location that the attorney
94	94	general can access, either physically or virtually, from which
95	95	testing will be developed and performed, and where all required
96	96	records, documents, and data will be maintained; and
97	97	(3) has an adequate understanding of the product or
98	98	service and a sufficient plan to:
99	99	(A) test, monitor, and assess the product or
100	100	service; and
101	101	(B) ensure that consumers are protected from the
102	102	test's failure.
103	103	Sec. 2005.053. CONTENTS OF APPLICATION. The attorney
104	104	general by rule shall prescribe the application form. The form must
105	105	require the applicant to:
106	106	(1) provide personal and contact information for the
107	107	applicant, including the applicant's full legal name, addresses,
108	108	phone numbers, e-mail addresses, Internet website addresses, and
109	109	other information the attorney general requires;
110	110	(2) disclose any criminal convictions of the applicant
111	111	or the officers and directors of the applicant; and
112	112	(3) provide a detailed description of the innovative
113	113	product or service the applicant desires to test in the program,
114	114	including:
115	115	(A) the regulation the product or service would
116	116	be subject to outside of this program;
117	117	(B) the benefit the product or service would
118	118	provide consumers;
119	119	(C) how the product or service is different from
120	120	products and services available to consumers in this state;
121	121	(D) any risks to consumers who use or purchase
122	122	the product or service;
123	123	(E) how participation in the program will allow
124	124	for a successful test of the product or service;
125	125	(F) the proposed testing plan, including the
126	126	estimated time period needed for market entry, market exit, and
127	127	pursuit of necessary licensure, registration, or other regulatory
128	128	authorization; and
129	129	(G) how the applicant will wind down the test and
130	130	protect consumers if the product or service fails.
131	131	Sec. 2005.054. APPLICATION FEE. (a) The attorney general
132	132	shall collect an application fee for each application submitted.
133	133	(b) The attorney general by rule shall set the application
134	134	fee amount.
135	135	(c) All application fees collected under this section shall
136	136	be remitted to the comptroller for deposit in the general revenue
137	137	fund. Money deposited under this subsection may be appropriated
138	138	only for programs of the consumer protection division of the office
139	139	of the attorney general.
140	140	Sec. 2005.055. CONSULTATION WITH APPLICABLE AGENCY. (a)
141	141	Before acting on an application under Section 2005.056, the
142	142	attorney general must consult with the applicable agency.
143	143	(b) In consulting with the applicable agency, the attorney
144	144	general may seek information regarding if:
145	145	(1) the applicant could obtain a license,
146	146	registration, or other authorization from the applicable agency;
147	147	and
148	148	(2) the applicable agency has:
149	149	(A) issued a license or registration to the
150	150	applicant; or
151	151	(B) investigated, sanctioned, or disciplined, or
152	152	pursued legal action against, the applicant.
153	153	Sec. 2005.056. APPROVAL OR DENIAL OF APPLICATION. (a) Not
154	154	later than the 90th day after the date the application is submitted,
155	155	the attorney general shall notify the applicant if the application
156	156	is approved for participation in the program.
157	157	(b) The attorney general and an applicant may mutually agree
158	158	to extend the time to review an application under Subsection (a).
159	159	(c) In reviewing an application, the attorney general may
160	160	request any additional information necessary for the attorney
161	161	general to make a determination.
162	162	(d) Not later than the 30th day after the date the applicant
163	163	receives notice of denial of an application by the attorney
164	164	general, the applicant may file with the attorney general an appeal
165	165	of the attorney general's determination requesting a time and place
166	166	for a hearing before a hearing officer designated by the attorney
167	167	general. The applicant is entitled to a hearing not later than the
168	168	60th day after the date of the request. A hearing under this
169	169	subsection is governed by Chapter 2001, Government Code. After the
170	170	hearing, based on the findings of fact, conclusions of law, and
171	171	recommendations of the hearing officer, the attorney general shall
172	172	enter a final order.
173	173	SUBCHAPTER C. PROGRAM ADMINISTRATION
174	174	Sec. 2005.101. APPROVAL OF PROGRAM PARTICIPATION. (a) On
175	175	approval of an application by the attorney general, the applicant
176	176	shall be issued a unique registration number.
177	177	(b) The program participant may test the product or service
178	178	under the program for not longer than 24 months after the date the
179	179	application is approved.
180	180	Sec. 2005.102. MAXIMUM NUMBER OF CONSUMERS. A product or
181	181	service tested under the program may not be offered for sale or use
182	182	to more than 10,000 consumers.
183	183	Sec. 2005.103. SCOPE OF PROGRAM. (a) Program participants
184	184	may only offer financial products or services to residents of this
185	185	state.
186	186	(b) The program is open only to the following financial
187	187	products and services:
188	188	(1) consumer loans subject to Chapter 342, Finance
189	189	Code, other than mortgage loans;
190	190	(2) money transmission as defined by Section 151.301,
191	191	Finance Code;
192	192	(3) retail installment transactions as defined by
193	193	Section 348.001, Finance Code; and
194	194	(4) acting as an investment adviser as defined by
195	195	Subsection N, Section 4, The Securities Act (Article 581-4,
196	196	Vernon's Texas Civil Statutes).
197	197	(c) Mortgage loans are not an eligible product to be tested
198	198	in the program.
199	199	Sec. 2005.104. PROVISIONS APPLICABLE GENERALLY. (a) The
200	200	attorney general may determine that certain laws or regulations
201	201	apply to a program participant.
202	202	(b) If the attorney general determines that a law or
203	203	regulation applies to a program participant, the attorney general
204	204	must notify in writing the participant of the specific law or
205	205	regulation.
206	206	Sec. 2005.105. PROVISIONS APPLICABLE TO CONSUMER LOANS.
207	207	(a) This section applies to consumer loans that would be subject to
208	208	Chapter 342, Finance Code, if not offered under the program.
209	209	(b) A lender may not lend to an individual borrower more
210	210	than:
211	211	(1) $15,000 for each loan; and
212	212	(2) $50,000 in aggregate for all loans.
213	213	(c) The sum of all fees, interest, and other amounts in
214	214	excess of principal due under a loan may not exceed 30 percent of
215	215	the principal of that consumer loan.
216	216	Sec. 2005.106. PROVISIONS APPLICABLE TO MONEY
217	217	TRANSMISSION. (a) This section applies to money transmission as
218	218	defined by Section 151.301, Finance Code.
219	219	(b) A money transmission business may not transmit for an
220	220	individual consumer more than:
221	221	(1) $2,500 for each transaction; and
222	222	(2) $25,000 in aggregate for all transactions.
223	223	Sec. 2005.107. PROVISIONS APPLICABLE TO MOTOR VEHICLE
224	224	RETAIL INSTALLMENT TRANSACTIONS. (a) This section applies to a
225	225	retail installment transaction as defined by Section 348.001,
226	226	Finance Code.
227	227	(b) Sections 342.002, 348.102, 348.107, 348.112, 348.123,
228	228	348.201, 348.204, 348.205, 348.208, 348.209, and 348.412, Finance
229	229	Code, apply to a retail installment transaction under the program.
230	230	(c) The sum of all fees, interest, and other amounts in
231	231	excess of principal due under a retail installment transaction may
232	232	not exceed 30 percent of the principal of that retail installment
233	233	transaction.
234	234	Sec. 2005.108. PROVISIONS APPLICABLE TO INVESTMENT
235	235	ADVISERS. (a) This section applies to a financial adviser as
236	236	defined by Subsection N, Section 4, The Securities Act (Article
237	237	581-4, Vernon's Texas Civil Statutes), offering investment
238	238	services.
239	239	(b) Each program participant offering investment services
240	240	must make, maintain, and preserve books and records in accordance
241	241	with the requirements imposed on federal covered advisers under 17
242	242	C.F.R. Section 275.204-2.
243	243	(c) The participant shall file with the attorney general and
244	244	the State Securities Board a copy of any notices or written
245	245	undertakings required to be filed by federal covered advisors with
246	246	the United States Securities and Exchange Commission under 17
247	247	C.F.R. Section 275.204-2.
248	248	(d) Subsection C, Section 29, The Securities Act (Article
249	249	581-29, Vernon's Texas Civil Statutes), applies to investment
250	250	services offered under this program.
251	251	(e) State Securities Board rules adopted under The
252	252	Securities Act (Article 581-1 et seq., Vernon's Texas Civil
253	253	Statutes) apply as they relate to:
254	254	(1) dishonest and unethical practices;
255	255	(2) information required to be furnished to clients;
256	256	(3) custody of client funds or securities; and
257	257	(4) disclosure of financial and disciplinary
258	258	information to clients.
259	259	Sec. 2005.109. REPORTING REQUIREMENTS. (a) The attorney
260	260	general may require program participants to periodically report
261	261	information requested by the attorney general.
262	262	(b) Program participants shall make records, documents, and
263	263	data available for inspection by the attorney general.
264	264	Sec. 2005.110. CONFIDENTIALITY OF RECORDS UNDER PROGRAM.
265	265	(a) Subject to Subsection (b), records provided to the attorney
266	266	general by a program participant are confidential and do not
267	267	constitute public information for purposes of Chapter 552,
268	268	Government Code.
269	269	(b) Records provided to the attorney general by a program
270	270	participant may be disclosed to:
271	271	(1) federal and state agencies;
272	272	(2) representatives of foreign governments who have
273	273	regulatory authority over a program participant;
274	274	(3) a state or federal grand jury in response to a
275	275	subpoena; and
276	276	(4) the state auditor for the purpose of conducting
277	277	audits authorized by law.
278	278	Sec. 2005.111. REMOVAL FROM PROGRAM. (a) If the attorney
279	279	general believes a program participant is violating an applicable
280	280	state or federal regulation, the attorney general may remove the
281	281	participant from the program immediately.
282	282	(b) The decision to remove a program participant may be
283	283	appealed using the process under Section 2005.056(d).
284	284	SUBCHAPTER D. CONSUMER PROTECTION
285	285	Sec. 2005.151. WRITTEN CONSUMER DISCLOSURE REQUIRED. (a)
286	286	Before providing an innovative financial product or service to a
287	287	consumer, a program participant must disclose to the consumer all
288	288	information required under this section.
289	289	(b) The program participant must disclose:
290	290	(1) the name and contact information of the
291	291	participant, including the registration number assigned by the
292	292	attorney general under Section 2005.101(a);
293	293	(2) that the financial product or service is
294	294	authorized under the program, and the participant does not have a
295	295	license, registration, or other regulatory authorization to
296	296	provide financial products or services under the laws of this state
297	297	that regulate financial products and services;
298	298	(3) that this state does not endorse or recommend the
299	299	financial product or service;
300	300	(4) that the financial product or service is a
301	301	temporary test under the program and may be discontinued at the end
302	302	of the testing period, and the expected end date of the test; and
303	303	(5) that consumers may contact the consumer protection
304	304	division of the office of the attorney general regarding the
305	305	financial product or service and provide the division's phone
306	306	number, e-mail address, and Internet website where complaints may
307	307	be filed.
308	308	(c) The disclosure required by Subsection (b) must be:
309	309	(1) clear and conspicuous;
310	310	(2) in both English and Spanish; and
311	311	(3) physically or digitally signed by the consumer.
312	312	Sec. 2005.152. FAILURE OF TEST. (a) If a financial product
313	313	or service fails, the program participant shall notify the attorney
314	314	general not later than the 30th day before the date the program
315	315	participant will cease operation.
316	316	(b) The program participant shall implement the wind down
317	317	plan as described in the application under Section 2005.053.
318	318	SUBCHAPTER E. TERMINATION OF PROGRAM
319	319	Sec. 2005.201. EXPIRATION. This chapter expires on
320	320	December 31, 2029.
321	321	Sec. 2005.202. PROGRAM WRAP UP. The attorney general shall
322	322	make all necessary preparations to ensure that all program
323	323	participants' tests of financial products or services are concluded
324	324	before the date under Section 2005.201.
325	325	SECTION 2. This Act takes effect September 1, 2019.