Syndicators looking to raise capital from investors in Texas should be aware of the Texas’s Blue Sky Laws. These laws regulate the securities industry within the state and understanding the basics of Texas‘s blue sky laws will help you make smart business decisions about how you put together an offer and protect yourself from potential legal trouble.
The purpose of securities laws is to protect investors. There are two levels of regulatory agencies that provide that protection: the Securities and Exchange Commission (the SEC) and each state’s security regulation agency.
Federal law has severely restricted the states’ abilities to review or restrict sales of most securities when offered through a Federal regulation (such as Regulation D offerings). The states do, however, often require a notice be filed with them along with the appropriate fee, conduct investigations, and bring fraud actions if necessary in order to protect those domiciled in their states.
When everything takes place within the state, then Texas’s Blue Sky Rules apply.
Here are the basic facts you need to know about giving notice to Texas about your Reg D Rule 506b or 506c offer:
Filing fee – Variable
New notice – $0 – $500
Late fee for late filings – None
TX AGRIC § 58.034 General Provisions Relating to Bonds
TX FIN § 89.005 Exemption From Securities Laws
TX FIN § 119.007 Exemption From Securities Laws
TX FIN § 149.002 Exemption From Securities Laws
TX GOVT § 1433.069 Exemptions From Taxation and Securities Act
TX GOVT § 2306.556 Exempt from Taxation and Registration
TX HEALTH & S § 221.067 Exempt Securities
TX HEALTH & S § 223.036 Bonds as Securities
TX INS § 882.756 Sale of Securities
TX LOCAL GOVT § 394.056 Bond as Security
TX CIV ST Art. 581-6 Exempt Securities
TX CIV ST Art. 581-7 Permit or Registration for Issue by Commissioner; Information for Issuance of Permit or Registration
TX CIV ST Art. 581-37 Pleading Exemptions
Non-profit domestic corporations with no capital stock; Other entities: railroads and public service utilities; Equipment trust certificates; Listed stock exchange securities etc.; Charitable type corporation bonds or notes; Current transaction commercial paper; Bonds or notes secured with certain securities
That depends. If the offering you are putting together is under Regulation D and not one of the Texas specific Blue Sky Laws (as discussed above), then probably not.
For example, if you needed a real estate syndication attorney to put together a private placement memorandum for a multifamily deal in Houston, Texas, that was going to be offered in different states, and you didn’t need counsel on questions related to Texas laws, then chances are a licensed syndication lawyer would be able to help. They could even put together the entity for you and write the operating agreement, they just couldn’t provide you counsel on the specific laws of Texas and how they may or may not pertain to your offer.
However, if you were putting together a private placement memorandum for a development project in San Antonio, Texas, all of the investors were from Texas, and you wanted to use one of Texas’s Blue Sky Laws above as an exception to registration, then you would need to work with someone licensed in Texas.
They can look, but they can’t give you advice as it pertains to Texas. For example, Tilden Moschetti, Esq, syndication attorney for the Moschetti Syndication Law Group, will look, if asked, about the contract underlying your purchase contract in Dallas, Texas, but makes it clear that he can give business consulting advice (discussion on price and broad deal points like the length of time until closing), but cannot speak to any specific term as he is not licensed there.
Contact our syndication and private placement memorandum law firm today!