Texas Annual Survey : Securities Regulation

The Texas Legislature passed Sunset Legislation that distinguished between securities dealers and investment advisors that allowed the Texas Securities Act (“TSA”) to comply with national trends in securities regulation. The court struggled with definitions of “control person” and “evidence of indebtedness.” However, the Sunset Legislation allowed the expanded Board to submit emergency cease and desist orders and to conduct surprise inspections of registered dealers and sellers of securities. Violation of a cease and desist order became a criminal offense. The Sarbanes-Oxley Act increased the existing statute of limitations under the federal securities laws for private causes of action involving claims of fraud, deceit, manipulation, or contrivance in contravention. The Act added provisions for fraud, recognizing knowledge and recklessness as suitable culpability requirements under the federal law. The breadth of culpability could create litigation over whether any fraud relating to an issuer constitutes a libelous relationship for the purposes of the enhanced provisions. Furthermore, the Act elevated attempts and conspiracies for these crimes to the same level as committing the offense