116.1.General Provisions.
(a) Definitions.Wordsandtermsusedinthischapterarealsodefinedin§107.2ofthis title (relating toDefinitions). The following words and terms, when used in this chapter, shall have the following meanings unless the context clearly indicates otherwise.
(1)Applicant--Apersonwhosubmitsanapplicationforregistrationasan investment adviser or an investmentadviser representative.
(2)Branchoffice--Anylocationwhereoneormorerepresentativesofaninvestment adviser regularly conduct investment advisory services or that is held out as such.
(A)This definition excludes:
(i) anylocationthatisestablishedsolelyforcustomerservice and/or back office type functions where no advisory services areconductedandthatisnotheld out to the public as a branch office;
primary residence, provided that:
(ii)anylocationthatistheinvestmentadviserrepresentative’s
(I) onlyoneinvestmentadviserrepresentative,or multiple representativeswhoresideatthatlocationandaremembersofthesameimmediatefamily,conductbusiness at the location;
(II) thelocationisnotheldouttothepublicasanofficeand the investment adviser representative doesnot meet with customers at the location;
location;
(III)neithercustomerfundsnorsecuritiesarehandledat that
(IV) theinvestmentadviserrepresentativeisassignedto a designated branch office, and such designated branch office is reflected on all business cards, stationery, advertisements, and other communications to the public by such representative;
(V) theinvestmentadviserrepresentative’s correspondence and communications with the public are subject to the investment adviser’s supervision;
(VI) electronic communications (e.g., e-mail) are made through the investment adviser’s electronic system;
(VII) allordersareenteredthroughthedesignated branch office or an electronic system established by the investment adviser that is reviewable at the branch office;
(VIII) writtensupervisoryprocedurespertainingtosupervision of investment advisory services conducted at the residence are maintained by the investment adviser; and
investment adviser;
(IX)alistoftheresidencelocationsaremaintainedby the
(iii) anylocation,otherthanaprimaryresidence,thatisused for investmentadvisoryservicesforlessthan30businessdaysinanyonecalendaryear,providedtheinvestment adviser complies with the provisions ofclause(ii)(II)-(VIII)ofthissubparagraph;
(iv) any office of convenience, where investmentadviser representativesoccasionallyandexclusivelybyappointmentmeetwithcustomers,whichisnotheldouttothe public as an office;
(v) anylocationthatisusedprimarilytoengageinnon-securities activitiesandfromwhichtheinvestmentadviserrepresentative(s)effectsnomorethan25investmentadvisory servicesinanyonecalendaryear;providedthatanyadvertisementorsalesliteratureidentifyingsuchlocation alsosetsforththeaddressandtelephonenumberofthelocationfromwhichtherepresentative(s)conducting business at the non-branch locationsare directly supervised; and
(vi) a temporary location established in response tothe implementation of a business continuity plan.
(B) Notwithstandingtheexclusionsinsubparagraph(A)ofthis paragraph, anylocationthatisresponsibleforsupervisingtheactivitiesofpersonsassociatedwiththeinvestmentadviser at one or more non-branch locations of the investment adviser is considered to be a branch office.
(C)Theterm“businessday”shallnotincludeanypartialbusinessdayprovided that the investment adviser representative spends at least four hours on such business dayathisor her designated branch office during the hours that such office is normally open for business.
(3) Supervisor--Thepersonnamedbytheinvestmentadvisertosupervisethe activities of a branch office and registered as an investment adviser representative.
(4) Control--Thepossession,directorindirect,ofthepowertodirectorcausethe direction of the management and policies of a person or company, whetherthrough the ownership of voting securities, by contract, or otherwise.
(5)Inthisstate--
(A) Apersonrendersservicesasaninvestmentadviser“inthisstate”as set outintheTexasSecuritiesAct,Section12.B,ifeitherthepersonortheperson’sagentispresentinthisstate ortheclient/customerortheclient/customer’sagentispresentinthisstateatthetimeoftheparticularactivity. A person can be an investment adviser in more than one state at the same time.
(B) Likewise, a person renders services as an investmentadviser representative “in this state” as set out in the Texas Securities Act, Section 12.B, whetherbydirectact or throughsubagentsexceptasotherwiseprovided, if either the person or the person’s agent is present in this state or the client/customer or the client/customer’s agentispresentinthisstateatthetimeoftheparticular activity. A person can be an investment adviser representative in more than one state at the same time.
(C) Renderingservicesasaninvestmentadviserorasaninvestment adviser representativecanbemadebypersonalcontact,mail,telegram,telephone,wireless,electroniccommunication, or any other form of oral or written communication.
(6) Investmentadviser--Apersonwho, for compensation, engages in the business ofadvisingothers,eitherdirectlyorthroughpublicationsorwritings,withrespect tothevalueofsecuritiesor totheadvisabilityofinvestingin,purchasing,orsellingsecuritiesora person who, for compensation and as part of a regular business, issues or adopts analyses or a report concerning securities. The term does not include:
(A)abankorabankholdingcompany,asdefinedbytheBankHolding
Company Act of 1956 (12 U.S.C. §1841 et seq.), asamended, that is not an investment company;
(B) alawyer,accountant,engineer,teacher,orgeologistwhose performance of the services is solely incidental tothe practice of the person’s profession;
(C) adealeroragentwhoreceivesnospecialcompensationforthose servicesandwhoseperformanceofthoseservicesissolelyincidentaltotransactingbusinessasadealeror agent;
(D)thepublisherofabonafidenewspaper,newsmagazine,orbusiness or financial publication of general and regular circulation; or
other than a security that is:
(E)apersonwhoseadvice,analyses,orreportdoesnotconcerna security
(i) adirectobligationoforanobligationtheprincipalorinterestof which is guaranteed by the United States government, or
(ii) issuedorguaranteedbyacorporationinwhichtheUnited States hasadirectorindirectinterestanddesignatedbytheUnitedStatesSecretaryoftheTreasuryunderSecurities Exchange Act of 1934, Section 3(a)(12), (15 U.S.C. §78c(a)(12)), as amended, as an exempt securityfor purposesofthatAct.
(7) Investment adviser representative or representative of aninvestment adviser--Eachpersonorcompanywho,forcompensation, is employed, appointed, or authorized by an investment adviser to solicit clients for the investment adviser or who, on behalfofan investment adviser, providesinvestmentadvice,directlyorthroughsubagents,totheinvestmentadviser’sclients.Thetermdoes not include a partner of a partnershipor an officer of a corporation or otherentitythatisregistered as an investmentadviserundertheTexasSecuritiesActsolelybecauseoftheperson’sstatusasanofficerorpartner ofthatentity.
(8) Renderingservicesasaninvestmentadviser--Anyactbywhichinvestment advisory services are provided for compensation.
(9) Solicitor--Anyinvestmentadviserorinvestmentadviserrepresentativewholimits their activities to referring potential clients to an investment adviser for compensation.
(10) Federalcoveredinvestmentadviser--Aninvestmentadviserwhoisregistered under the Investment Advisers Act of 1940 (15 U.S.C. §80b-1 et seq.), asamended.Afederal covered investment adviser is not required to be registered pursuant to the Texas Securities Act.
(11) Registeredinvestmentadviser--Aninvestmentadviserwhohasbeenissued a registrationcertificatebytheSecuritiesCommissionerundertheTexasSecuritiesAct,Section15.(Afederal covered investment adviser is notprohibitedfrombeingregisteredwith the Securities Commissioner. If a federalcoveredinvestmentadviserelectstoregisterwiththeSecuritiesCommissioner,itissubjecttoallofthe registration requirements of the Act.)
(12) Officer--Apresident,vicepresident,secretary,treasurer,orprincipal financial officer,comptroller,orprincipalaccountingofficer,oranyotherpersonoccupyingasimilarstatusorperforming similar functions with respect to any organizationor entity, whether incorporated or unincorporated.
offices.
(b)Registrationofinvestmentadvisers,investmentadviserrepresentatives,and branch
(1)Requirements of registration.
(A) Anypersonwhorendersservicesasaninvestmentadviser, including actingasa solicitor,maynotengageinsuchactivity for compensation without first being registered as an investment adviser under the provisions of the TexasSecurities Act ornotice-filed under the provisions of paragraph(2)ofthissubsection.Likewise,everypersonemployedorappointed,orauthorizedbysuchperson torenderservices,whichincludethegivingofinvestmentadviceoractingasasolicitor,cannotconductsuch activities unless registered as an investment adviseror an investment adviserrepresentative under the provisions of the Act, or notice-filed as an investmentadviseroraninvestmentadviserrepresentativeunder the provisions of paragraph (2) of this subsection.
(B) EachbranchofficeofaregisteredinvestmentadviserinTexasmustbe registered. A registered officer, partner, or investment adviser representative must be named as supervisor.
(2) Exemptionfromtheregistrationrequirements.TheBoardpursuanttothe Texas SecuritiesAct,Sections12.Cand5.T,exemptsfromtheregistrationprovisionsoftheAct,Section12,persons notrequiredtoregisterasaninvestmentadviseroraninvestmentadviserrepresentativeonorafterJuly8,
1997, by act of Congress in Public Law Number 104-290, Title III.
(A)Registration as an investment adviser is not required for the following:
Act of 1940, Section 203;
(i)aninvestmentadviserregisteredundertheInvestmentAdvisers
(ii)an investment adviser registered with the Securitiesand
ExchangeCommissionpursuanttoaruleororderadoptedundertheInvestmentAdvisersActof1940,Section
203A(c);
(iii)apersonnotregisteredundertheInvestmentAdvisersActof
1940,Section203,becausesuchpersonisexceptedfromthedefinitionofaninvestmentadviserunderthe
Investment Advisers Act of 1940, Section 202(a)(11); or
(iv) aninvestmentadviserwhodoesnothaveaplaceof business locatedinthisstateand,duringthepreceding12-monthperiod,hashadfewerthansixclientswhoareTexas residents.
(B) Registrationasaninvestmentadviserrepresentativeofan investment adviser described in subparagraph (A) of this paragraph is not required for an investment adviser representative who does not have a place of businesslocated in Texas but whootherwiseengagesinthe rendering of investment advice in this state.
(C) Notice filing requirements and fees for investment advisers and investment adviser representatives exempted from registration pursuant to this subsection only.
(i) Initially,theprovisionsofsubparagraphs(A)and(B)ofthis paragraph are available provided thatthe investment adviser files:
(I)FormADVthroughtheIARDdesignatingTexasasa jurisdiction in which the filing is to be made; and
(II)aninitialfeeequaltotheamountthatwouldhavebeen paid had the investment adviser and each investment adviser representative filed for registration in Texas.
(ii) Annually,theinvestmentadviserfilesrenewalfeeswhichwould have been paid had the investment adviser and each investment adviser representative been registered in Texas.
(D) PersonsnotrequiredtoregisterwiththeSecuritiesCommissioner pursuanttosubparagraphs(A)and(B)ofthisparagraph,areremindedthattheTexasSecuritiesActprohibits fraudorfraudulentpracticesindealinginanymannerinanysecuritieswhetherornotthepersonengagingin fraudorfraudulentpracticesisrequiredtoberegistered.TheAgencyhasjurisdictiontoinvestigateandbring enforcementactionstothefullextentauthorizedintheTexasSecuritiesActwithrespecttofraudordeceit,or unlawfulconductbyaninvestmentadviserorinvestmentadviserrepresentativeinconnectionwithtransactions involving securities in Texas.
(c)Types of registrations.
(1) Generalregistration.Ageneralregistrationisaregistrationtorenderadvisory services regarding all categories ofsecurities, without limitation.
(2) Restrictedregistration.Arestrictedregistrationasaninvestmentadviserorasan investment adviser representative may be issued based upon the qualifying examination(s) passed by the investment adviser or investment adviser representative.
(3) Inrestrictedregistration,theevidenceofregistrationshallindicatethattheholder thereof is entitled to act as an investment adviser, investment adviser representative,or solicitor only in the restricted capacity.
(d) Prohibitiononfraudandavailabilityofanexemptionfromregistration.TheTexas SecuritiesActprohibitsfraudorfraudulentpracticesindealinginanymannerinanysecuritieswhetherornot thepersonengaginginfraudorfraudulentpracticesisrequiredtoberegistered.TheAgencyhasjurisdiction to investigate and bring enforcement actions to the full extent authorized in the Texas Securities Act with respecttofraudordeceit,orunlawfulconductbyaninvestmentadviserorinvestmentadviserrepresentative inconnectionwithtransactionsinvolvingsecuritiesinTexas.However,theregistrationrequirementsdetailed inthischapterdonotapplytoinvestmentadvisersandinvestmentadviserrepresentativesthatareexemptfrom registration as such pursuant to the Texas Securities Act, Section 5, or by Board rule pursuant tothe Texas Securities Act, Section 5.T or Section 12.C,contained in Chapters 109 or 139 of this title.
SourceNote:Theprovisionsofthis§116.1adoptedtobeeffectiveAugust12,2001,26TexReg5799;
amendedtobeeffectiveNovember26,2001,26TexReg9582;amendedtobeeffectiveMarch6,2002,27
TexReg1475;amendedtobeeffectiveAugust22,2004,29TexReg7968;amendedtobeeffectiveJanuary
8,2006,30TexReg8868;amendedtobeeffectiveAugust18,2011,36TexReg5094;amendedtobeeffective
December 21, 2011, 36 TexReg 8507.