Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 7 - STATE SECURITIES BOARD › Chapter 109 - TRANSACTIONS EXEMPT FROM REGISTRATION › Section 109.7 - Secondary Trading Exemption under the Texas Securities Act, Section 5.O

Current through Reg. 49, No. 28; July 12, 2024
(a) When a
				withdrawal of an application for registration of securities is allowed and
				thereafter the applicant files for a secondary trading exemption under the Act,
				§5.O, the Commissioner may, without a hearing, revoke or suspend the
				§5.O exemption. The applicant may either accept such action of the
				Commissioner or request a hearing under the Act, §24.
(b) The language, ". . . at prices reasonably
				related to the current market price of such securities at the time of such
				sale," means that the market price of the security in the existing secondary
				market must have a basis supported by a substantial volume of bona fide sales
				transactions within or without this state. In the absence of a going market or
				where there have been only casual transactions, it shall be incumbent on the
				person filing the §5.O exemption notice to prove to the Commissioner that
				the securities will have a market price which has been fairly determined and
				justified at inception with reasonable assurance of continuity of the market
				into the future, pursuant to which the following criteria will be considered:
(1) the nature and extent of the business
				operations of the issuer and its predecessor, if any, and the period of time
				during which the issuer and its predecessor, if any, has been continuously
				engaged in business;
(2) the net
				asset value of the stock per share;
(3) if there is a record of earnings for the
				issuer, the value per share of the stock based upon a reasonable times-earnings
				factor (setting out the factor used) related to the industry represented by the
				issuer;
(4) if the value per share
				of the stock on any other basis has been fully justified;
(5) if the issuer undertakes to furnish to
				its shareholders and dealers deemed likely to trade the securities of the
				issuer, financial statements for the three most recent fiscal years ending as
				of the balance sheet date (or for the period of existence if less than three
				years) and annual financial statements thereafter for so long as the exemption
				is maintained by filing statements with the Commissioner;
(6) whether a registered Texas securities
				dealer who is financially able has made a written undertaking setting out:
(A) his willingness to make a market in the
				issue of securities;
(B) the price
				at which he will begin the market; and
(C) the procedures which he intends to follow
				for the purpose of assuring an orderly market; and
(7) supplementary data to assist in
				determining the character of the share distribution and the number of
				publicly-held shares shall be as follows:
(A)
				identification of 10 largest holders of record, including beneficial owners (if
				known) of holdings of record by nominees;
(B) list of holdings of 1,000 shares or more
				in the names of registered dealers and unregistered out-of-state
				dealers;
(C) number of transfers
				and shares transferred during the last two years (or period of existence of the
				issuer, if shorter);
(D) summary,
				by principal groups, of stock owned or controlled by:
(i) officers or directors and their immediate
				families; or
(ii) other
				concentrated holdings of 10% or more;
(E) estimates of number of nonofficer
				employees owning stock and the total shares held;
(F) company shares held in profit-sharing,
				savings, pension, or other similar funds or trusts established for the benefit
				of officers or employees; and
(G)
				number of round-lot and number of odd-lot holders of record and aggregate
				numbers of shares so held.