Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 7 - STATE SECURITIES BOARD › Chapter 125 - MINIMUM DISCLOSURES IN CHURCH AND NONPROFIT INSTITUTION BOND ISSUES › Section 125.7 - Risk Factors

Current through Reg. 49, No. 28; July 12, 2024
Mention must be made of appropriate risk factors. Statements
				  made concerning the risks or lack thereof in purchasing the securities must be
				  made in the light of the financial information concerning the particular
				  issuer. In the case of church bond offerings, it must be stated that church
				  bonds may be offered by other issuers (of the same or other denominations)
				  offering similar terms for greater security and less risk. Statements to the
				  effect that little or no risk is involved in buying church bonds will be
				  regarded as material misrepresentation. Likewise, comparisons with other
				  investments made solely on the basis of the interest return paid will be
				  considered misleading, unless other comparative aspects of these investments
				  are also described. The disclosure document involved must make prominent
				  reference to the risk factors, along with a notation as to the page number in
				  which these risk factors may be found. The risk factors which are to be
				  disclosed shall not be limited to the following.
(1) The issuer is primarily dependent upon
				contributions of the membership to meet the expenses of operation and the
				payment of the principal and interest on the securities. Due to population
				shifts or other factors, the issuer may not receive sufficient funds to meet
				its obligations.
(2) There has been
				no quoted market for the issuer's debt securities; however, the broker-dealer
				may effect secondary market transactions upon compliance with applicable
				securities laws. Neither the issuer nor the broker-dealer is obligated to
				repurchase the securities at the request of the holder thereof. Consequently,
				investors may not be able to resell any securities purchased should they need
				or wish to do so for emergency purposes or otherwise.
(3) (If the entity does not have a fixed
				price contract for the proposed construction, the following disclosure must be
				included.) A fixed price contract has not been obtained; consequently
				sufficient funds may not be available for completion of the project.
(4) If the entity has defaulted on previous
				issues and this issue is to refinance such a default, then such should be
				disclosed.
(5) If appropriate, the
				trust indenture permits the issuer to further encumber the property securing
				the bonds of this issue through the issuance and sale of additional bonds at
				some future date, the maximum debt-to-property valuation ratio and the
				debt-to-income ratio, in such event, should be set forth under section called
				"additional bond issues."
(6) If
				appropriate, issuer's financial statements as shown under "financial statements
				and statistical data" may be unaudited and prepared on a cash basis.
(7) Bonds of this issue will be offered to
				the general public and therefore must compete with other investment
				opportunities which may be of more or less risk by comparison and similarly
				provide higher or lower interest yields.
(8) The total value of the security for
				payment of bonds of this issue is based upon the market value appraisal of the
				land as shown under "security for payment of bonds" and the anticipated cost of
				the proposed facility to be constructed as shown under "purpose of bond issue."
				There is no assurance that the facility (its construction being for the most
				part single purpose) and land could be sold for the values stated therein in
				the event of a default.