Texas Blue Sky Laws for Syndication

Navigating the complexities of securities regulations can be a daunting task for real estate developers, private equity fund managers, and business professionals looking to raise capital through syndication. Understanding both federal and state laws is crucial to ensuring compliance and protecting your investment. In the United States, these regulations are divided between federal laws, such as the SEC’s Regulation D, and state-level securities laws, often referred to as Blue Sky Laws.

This comprehensive guide aims to demystify Texas Blue Sky Laws and their relationship with Regulation D offerings. Whether you’re considering a multifamily real estate syndication in Houston or a private equity fund involving investors from multiple states, understanding how these laws interact will help you make informed decisions and avoid potential legal pitfalls. We will delve into the specifics of Texas Blue Sky Laws, the exemptions available, the procedures for claiming these exemptions, and the circumstances under which you might need a Texas-licensed attorney.

By the end of this article, you’ll have a clear understanding of why Regulation D Rule 506(b) or Rule 506(c) might be preferable over state Blue Sky Laws, the notification rules and terms for these federal exemptions, and the essential steps for ensuring compliance with Texas securities regulations. Whether you’re new to syndication or looking to deepen your knowledge, this guide provides the insights and practical advice needed to navigate the regulatory landscape effectively.

How do a State’s Blue Sky Laws Relate to the SEC’s Regulation D?

Understanding the relationship between state Blue Sky Laws and the SEC’s Regulation D is crucial for anyone involved in syndication, particularly in real estate syndication. Blue Sky Laws are state securities regulations designed to protect investors from fraud. These laws require securities offerings to be registered with the state unless they qualify for an exemption. However, Regulation D, specifically Rule 506(b) and Rule 506(c), offers a federal preemption that significantly simplifies the process for issuers.

Federal Preemption under Regulation D

Regulation D, established by the SEC, provides exemptions from registration requirements under the Securities Act of 1933. Rules 506(b) and 506(c) of Regulation D are particularly beneficial for syndicators because they preempt state Blue Sky Laws. This preemption is codified under 15 U.S. Code § 77r(b)(4)(F), which means that if you comply with these federal exemptions, you are not required to register your offering with state securities regulators. This can save significant time and resources.

• Rule 506(b): Allows issuers to raise an unlimited amount of capital from accredited investors and up to 35 non-accredited investors, provided that no general solicitation or advertising is used. Issuers must provide non-accredited investors with disclosure documents similar to those used in registered offerings.
• Rule 506(c): Permits issuers to broadly solicit and advertise their offering, provided that all purchasers are accredited investors, and the issuer takes reasonable steps to verify their accredited status.

Intrastate Offerings

While Regulation D offers federal preemption, there are scenarios where state Blue Sky Laws may still be relevant. If an offering is made entirely within one state, where the sponsor, all investors, and the assets are located in that state, the sponsor might choose to comply with the state’s Blue Sky Laws as an intrastate offering. This can be beneficial for local real estate syndications where the target investor base is within the same state.

In such cases, the offering does not rely on the federal exemption provided by Regulation D but instead adheres to the state’s specific securities regulations. These intrastate offerings can be advantageous because they might be subject to less stringent regulatory requirements compared to multi-state or national offerings.

Practical Implications for Syndicators

For real estate syndicators, understanding these distinctions is crucial. When choosing between a federal exemption under Regulation D and a state-specific intrastate offering, consider the following:

• Scope of the Offering: If you plan to raise capital from investors across multiple states, Regulation D (Rule 506(b) or Rule 506(c)) is likely more suitable due to its federal preemption.
• Local Focus: If your project and investor base are confined to a single state, exploring state Blue Sky Laws for an intrastate offering might be advantageous.
• Compliance and Legal Requirements: Always consult with a knowledgeable syndication attorney to navigate the complexities of both federal and state securities laws. This ensures that your offering is compliant and that you are leveraging the most suitable exemption for your situation.

In conclusion, while Regulation D provides a streamlined, federally preempted pathway for raising capital, understanding the interplay with state Blue Sky Laws allows for informed decision-making, particularly for intrastate offerings. This dual awareness ensures that syndicators can effectively strategize their fundraising efforts within the regulatory frameworks.

Why Would I Choose Regulation D Rule 506(b) or Rule 506(c) Over the State’s Blue Sky Laws?

Choosing between Regulation D Rule 506(b) or Rule 506(c) and a state’s Blue Sky Laws is a critical decision for any sponsor involved in syndication, particularly in real estate syndication. Understanding the key reasons for opting for the federal exemptions provided by Regulation D can help prevent regulatory issues and streamline the capital-raising process.

Broad Investor Base and Geographic Flexibility

One of the primary advantages of Regulation D, specifically Rule 506(b) and Rule 506(c), is the ability to attract investors from multiple states without the need to comply with each state’s Blue Sky Laws. This flexibility is crucial for sponsors who wish to reach a broad investor base. Here’s why:

• Geographic Diversity: If any investor or the sponsor is located outside the state where the project is based, the offering cannot rely solely on the state’s Blue Sky Laws. An intrastate offering must be limited to investors and the sponsor all residing within the same state.
• Regulatory Risk: Discovering that an investor is domiciled outside the state after the fact can create significant legal issues. Such a discovery reclassifies the offering from intrastate to interstate, thereby requiring compliance with federal securities laws. This can lead to a securities law problem, including potential penalties and the need to retroactively comply with federal regulations.

Simplified Compliance

Regulation D provides a straightforward, streamlined process for securities offerings that preempts state Blue Sky Laws. This simplifies compliance and reduces the administrative burden on the sponsor:

• Rule 506(b): Allows for the solicitation of an unlimited amount of capital from accredited investors and up to 35 non-accredited investors, with the stipulation that no general solicitation or advertising is used. This rule provides a relatively simple path to compliance, with clear guidelines on the disclosure requirements for non-accredited investors.
• Rule 506(c): Permits general solicitation and advertising, which can be beneficial for reaching a wider audience. However, all investors must be accredited, and the sponsor must take reasonable steps to verify their accredited status. This rule offers a clear and structured process for raising capital publicly while ensuring investor protection.

Risk Mitigation

Opting for Regulation D’s exemptions helps mitigate the risk associated with state-specific regulatory frameworks:

• Uniform Standards: Federal preemption under Regulation D ensures a uniform standard of compliance across all states. This reduces the risk of non-compliance with varying state securities laws.
• Legal and Financial Consequences: Failing to comply with state Blue Sky Laws can result in significant legal and financial repercussions. By adhering to Regulation D, sponsors can avoid the complexities and potential pitfalls of state-by-state compliance.

Practical Considerations for Real Estate Syndicators

For real estate syndicators, choosing Regulation D Rule 506(b) or Rule 506(c) over state Blue Sky Laws offers several practical benefits:

• Flexibility in Investor Outreach: The ability to attract investors from across the country without worrying about individual state securities laws is a significant advantage. This is particularly important for large real estate projects requiring substantial capital.
• Efficiency and Speed: Regulation D’s streamlined process can accelerate the timeline for raising capital, allowing projects to move forward more quickly.

In conclusion, while state Blue Sky Laws provide a framework for intrastate offerings, the federal exemptions under Regulation D Rule 506(b) and Rule 506(c) offer significant advantages in terms of geographic flexibility, simplified compliance, and risk mitigation. For sponsors and syndicators, particularly in the real estate sector, leveraging these federal rules ensures a more efficient and legally sound approach to raising capital. By choosing Regulation D, sponsors can focus on building successful projects and relationships with investors, confident in their compliance with securities laws.

What Are The Notification Rules and Terms For Notifying the State about a Regulation D Rule 506(b) or Rule 506(c) Offering?

When conducting a Regulation D offering under Rule 506(b) or Rule 506(c), issuers must comply with certain notification rules to ensure proper state-level compliance. Even though these offerings are federally preempted from state Blue Sky Laws, issuers are still required to notify state securities regulators of the offering. This involves specific filing requirements and associated fees.

Filing Requirements for Regulation D Offerings

1. Form D Submission: Issuers must file Form D with the Securities and Exchange Commission (SEC) within 15 days of the first sale of securities. This form provides the SEC with basic information about the issuer and the offering.
2. State Notice Filings: Despite federal preemption, most states require issuers to file a notice of the offering. This is typically referred to as a “blue sky filing” or “state notice filing.”

Notification Rules and Terms in Texas

For issuers conducting a Regulation D offering in Texas, the following notification rules and terms apply:

1. Notice Filing with Texas State Securities Board: Issuers must submit a notice filing to the Texas State Securities Board (TSSB) via the NASAA Electronic Filing Depository (EFD). This process involves providing a copy of the Form D filed with the SEC, along with any additional state-specific forms or information required by the TSSB.
2. Filing Fee: The filing fee for the notice in Texas varies and can range from $0 to $500, depending on the specifics of the offering and applicable state regulations. It is important to check the current fee schedule on the TSSB website or consult with a syndication attorney to determine the exact amount due.
3. Submission Deadline: The notice filing must be submitted through the EFD within 15 days of the first sale of securities in Texas, aligning with the federal requirement for the Form D submission to the SEC.

Late Filing and Fees

One notable aspect of Texas’s rules regarding Regulation D offerings is the absence of a late fee for late filings. While timely submission is always recommended to ensure compliance and avoid potential issues, the lack of a late fee in Texas provides some flexibility for issuers who may miss the initial deadline.

Practical Steps for Compliance

To ensure compliance with Texas’s notification rules for Regulation D offerings, issuers should follow these practical steps:

1. Prepare Form D: Complete Form D accurately, providing all required information about the issuer, the offering, and the securities being sold.
2. Submit Form D to the SEC: File Form D with the SEC within 15 days of the first sale of securities.
3. File Notice through NASAA EFD: Submit a copy of Form D and any required state-specific forms to the Texas State Securities Board via the NASAA Electronic Filing Depository (EFD) within the same 15-day window.
4. Pay the Filing Fee: Determine the applicable filing fee and ensure it is paid at the time of the notice filing through the EFD. Check the TSSB’s current fee schedule or consult with a legal professional to confirm the amount.
5. Maintain Records: Keep detailed records of all filings and submissions, including copies of Form D, notice filings, and proof of payment of any fees. These records are essential for compliance and may be needed for future reference or in case of an audit.

In summary, while Regulation D Rule 506(b) and Rule 506(c) offerings benefit from federal preemption of state Blue Sky Laws, issuers must still comply with state notification rules. In Texas, this involves submitting a notice filing to the Texas State Securities Board through the NASAA Electronic Filing Depository within 15 days of the first sale, along with a variable filing fee ranging from $0 to $500. Understanding and adhering to these requirements ensures compliance and facilitates a smooth and legally sound capital-raising process.

What are Texas’ Blue Sky Laws?

Navigating the intricate landscape of securities regulation is crucial for any investor or business operating within Texas. Known as “Blue Sky Laws,” these state-level regulations are designed to protect investors from fraud and ensure transparency in securities transactions. This blog post will introduce you to several key statutes within Texas’s Blue Sky Laws, including the rules around bond issuance and securities exemptions, as well as the responsibilities of the Securities Commissioner and legal processes involved in pleading exemptions. By understanding these regulations, you can better comprehend how Texas works to maintain a fair and secure financial marketplace.

Texas Blue Sky Laws encompass a variety of provisions aimed at regulating securities to protect investors from fraud and ensure fair practices. Key statutes include:

1. Article 581-6: Exempt Securities – This article specifies the types of securities exempt from registration, such as those issued by certain corporations and securities listed on major stock exchanges.
2. Article 581-7: Registration Requirements – Outlines the process for registering securities, including the documentation and financial information required by the Securities Commissioner.
3. Article 581-35: Fee Structure – Details the fees associated with the registration and regulation of securities, ensuring that the Securities Board is adequately funded to enforce these laws.
4. Article 581-37: Pleading Exemptions – Clarifies that in legal proceedings, it is the responsibility of the party claiming an exemption to prove its applicability, simplifying the burden on the plaintiff.

These statutes form the foundation of Texas’s efforts to regulate securities, protect investors, and maintain the integrity of its financial markets.

TX AGRIC § 58.034 General Provisions Relating to Bonds

Texas Agriculture Code Section 58.034 outlines the general provisions related to bonds issued by the Texas Agricultural Finance Authority. This section specifies that all bonds must undergo review and approval by the attorney general, ensuring compliance with applicable legal standards. Additionally, no state agency may charge a fee in connection with bond issuance, and no further proceedings or approvals are required beyond those stipulated by the Act. The state pledges to uphold the rights and agreements made with bondholders until all obligations are fully met. Bonds can be sold publicly or privately, with terms determined by the board, and interim receipts or certificates may be issued pending the preparation of definitive bonds. The board is also empowered to provide for the replacement of lost or damaged bonds and include additional provisions or covenants in bond resolutions as needed (Tex..Pub..Law: Online Texas Law Library)​​ (Texas Statutes)​​ (Justia Law)​.

TX FIN § 89.005 Exemption From Securities Laws

Texas Finance Code Section 89.005 exempts savings accounts, certificates, or other evidence of interest in the savings liability of a savings and loan association from being classified as securities under The Securities Act. This means these financial instruments are not subject to the registration requirements typically imposed on securities. Additionally, officers of such associations are exempt from the registration and licensing provisions of the Act regarding their participation in transactions involving the association’s securities​ (Casetext – CoCounsel)​.

TX FIN § 119.007 Exemption From Securities Laws

Texas Finance Code Section 119.007 provides an exemption from securities laws for certain financial instruments associated with savings banks. Specifically, deposit accounts, certificates, or other evidence of an interest in the deposit liability of a savings bank are not considered securities under The Securities Act. This means they are not subject to the registration requirements typically required for securities. Additionally, any security of these savings banks, aside from those representing deposit liabilities, is also exempt from these registration requirements. Furthermore, officers of savings banks are exempt from the registration and licensing provisions of The Securities Act concerning their participation in transactions involving the bank’s securities​ (Tex..Pub..Law: Online Texas Law Library)​​ (Texas Statutes)​​ (Tex..Pub..Law: Online Texas Law Library)​​ (Tex..Pub..Law: Online Texas Law Library)​.

TX FIN § 149.002 Exemption From Securities Laws

Texas Finance Code Section 149.002 provides an exemption from securities laws for credit unions and their associated personnel. Specifically, credit unions authorized to operate under Texas state law or the Federal Credit Union Act, along with their officers, employees, and agents, are exempt from state laws that supervise, register, or regulate the sale, issuance, or offering of securities. This exemption simplifies regulatory requirements for credit unions, allowing them to issue and sell securities without additional state-level oversight. The term “security” is defined as per Section 4001.068 of the Government Code, ensuring consistency across legal definitions​ (Texas Statutes)​​ (Texas Statutes)​​ (Texas Statutes)​.

TX GOVT § 1433.069 Exemptions From Taxation and Securities Act

Texas Government Code Section 1433.069 outlines specific exemptions related to bonds issued under Chapter 1433, which deals with the development of employment, industrial, and health resources. According to this section, bonds issued under this chapter, as well as the issuance and transfer of these bonds, including any profits made from their sale, are exempt from state taxation and taxation by political subdivisions within the state. Furthermore, these bonds and any coupons representing interest on them are considered exempt securities under The Securities Act, as specified in Title 12 of the Government Code. Additionally, lease agreements under this chapter are not regarded as securities under The Securities Act​ (Justia Law)​​ (Texas Statutes)​​ (Justia Law)​.

TX GOVT § 2306.556 Exempt from Taxation and Registration

Texas Government Code Section 2306.556 provides specific exemptions for the Texas State Affordable Housing Corporation (TSAHC) regarding taxation and securities registration. The law states that the TSAHC is exempt from all forms of taxation by the state or any of its political subdivisions, including municipalities. Additionally, bonds or other obligations issued by the corporation are considered exempt securities under The Securities Act, and this exemption also applies to any subsequently enacted securities laws. However, contracts, guarantees, or other documents related to the issuance of these bonds do not qualify as exempt securities under the Act​ (Tex..Pub..Law: Online Texas Law Library)​​ (Justia Law)​​ (LawServer)​.

TX HEALTH & S § 221.067 Exempt Securities

Texas Health and Safety Code Section 221.067 addresses the classification of certain securities issued under this chapter. It designates that bonds and any interest coupons issued under this chapter are considered exempt securities under The Securities Act (Title 12, Government Code). This means they are not subject to the usual securities regulations, facilitating their issuance and transfer. Additionally, if these bonds are secured by an agreement that ensures payment sufficient to cover the principal, interest, and any redemption premiums, this agreement is considered a separate security issued by the user, not the corporation. Such agreements are exempt from The Securities Act only if the Act explicitly provides such an exemption or if the bonds or payments are guaranteed by an entity whose guarantee is also an exempt security under the Act​ (Tex..Pub..Law: Online Texas Law Library)​​ (Texas Statutes)​.

TX HEALTH & S § 223.036 Bonds as Securities

Texas Health and Safety Code Section 223.036 pertains to the status of bonds issued for hospital projects under this chapter. Specifically, it states that these bonds, including any interest coupons attached to them, are classified as securities under Texas law. This classification as securities means they are subject to the same legal framework and protections as other securities within the state. This designation helps facilitate the issuance and management of these bonds by ensuring they are recognized and regulated appropriately within the financial and legal systems of Texas​ (Texas Statutes)​​ (Tex..Pub..Law: Online Texas Law Library)​.

TX INS § 882.756 Sale of Securities

Texas Insurance Code Section 882.756 outlines the regulations for the sale, issuance, or offering of securities by mutual life insurance companies. This section exempts such transactions from the registration and licensing provisions of The Securities Act (Title 12, Government Code). Additionally, officers, directors, or employees of these insurance companies, or those resulting from a conversion, who participate in these securities transactions, are also exempt from these registration and licensing requirements. However, they are prohibited from receiving any compensation beyond their usual salary for services related to these exemptions​ (Tex..Pub..Law: Online Texas Law Library)​​ (One Cle Law)​.

TX LOCAL GOVT § 394.056 Bond as Security

Texas Local Government Code Section 394.056 specifies that bonds issued under this chapter can serve as secure investments for fiduciary and trust funds. These bonds are also deemed appropriate for investment by financial institutions, insurance companies, and public or private pension or retirement systems. The provision establishes that any contract made under this chapter does not qualify as a security under The Securities Act, thereby exempting such contracts from the registration and licensing requirements typically associated with securities transactions​ (Tex..Pub..Law: Online Texas Law Library)​​ (Texas Statutes)​​ (One Cle Law)​.

TX CIV ST Art. 581-6 Exempt Securities

Texas Civil Statutes Article 581-6 details the exemptions for certain securities from the registration requirements typically imposed by The Securities Act. Specifically, it exempts securities issued or guaranteed by corporations operating railroads or public utilities, provided these entities comply with stringent regulations. Additionally, securities listed on major stock exchanges like the NYSE or NASDAQ, as well as commercial paper used for current transactions and notes issued by religious or charitable organizations, are also exempt. This ensures that these financial instruments can be issued and traded with less regulatory burden, facilitating smoother financial operations for these entities​ (Justia Law)​​ (Justia Law)​.

TX CIV ST Art. 581-7 Permit or Registration for Issue by Commissioner; Information for Issuance of Permit or Registration

Texas Civil Statutes Article 581-7 addresses the requirements for the registration and issuance of securities by the Commissioner. The statute mandates that no dealer or agent may sell or offer securities issued after September 6, 1955, unless these securities have been registered either by notification or by coordination with the federal Securities Act of 1933. The article outlines specific criteria for interest-bearing securities, securities with a specified dividend rate, and those without a specified dividend rate, ensuring that financial stability and transparency are maintained. The registration process includes the submission of detailed financial statements, a prospectus, and other relevant documents to the Commissioner, who may request additional information if necessary. The Commissioner has the authority to issue a cease and desist order if the information provided is deemed insufficient or misleading. The registration remains effective for one year, with provisions for renewal if the securities continue to meet the eligibility criteria​ (Justia Law)​​ (Texas State Securities Board)​.

TX CIV ST Art. 581-35 Fees

Texas Civil Statutes Article 581-35 outlines the fee structure for the registration and regulation of securities under the Texas Securities Act. The statute mandates the State Securities Board to establish fees that cover the costs of administering and enforcing the Act. These fees include charges for filing original, amended, or renewal applications for the sale or disposal of securities, as well as for the registration of dealers, investment advisers, agents, officers, and investment adviser representatives. The collected fees are utilized exclusively to fund the administration and enforcement activities related to securities regulation, ensuring that the State Securities Board operates without requiring additional state funding. This structure supports the Board’s self-sufficiency in managing securities oversight​ (Texas State Securities Board)​​ (Capitol Texas)​.

TX CIV ST Art. 581-37 Pleading Exemptions

Texas Civil Statutes Article 581-37 addresses pleading exemptions in legal proceedings related to securities law. It states that in any complaint, information, indictment, writ, or proceeding under this Act, it is not necessary to negate any of the exemptions provided by the Act. The responsibility to prove that an exemption applies rests with the party claiming the exemption. This provision streamlines legal procedures by clarifying that the burden of proof for exemptions lies with the defendant, not the prosecution or plaintiff.

What are Texas’s Securities Laws Exemptions?

Texas’ Blue Sky Laws, like those in other states, aim to protect investors from fraudulent securities transactions within the state. These laws promote transparency and trust in the securities industry, ensuring the interests of investors are safeguarded. While these laws impose various regulations on the offer and sale of securities, they also provide critical exemptions that issuers need to understand.

Key Exemptions under Texas Blue Sky Laws

Non-Profit Domestic Corporations

• Non-profit domestic corporations that have no capital stock are exempt from Texas Blue Sky Laws. This exemption acknowledges the distinct financial structure of non-profits, which do not issue ownership shares or dividends. Consequently, these organizations are not subject to the stringent regulations that apply to for-profit entities, facilitating their fundraising activities.

Railroads and Public Service Utilities

• Railroads and public service utilities are also exempt from certain Blue Sky Laws in Texas. These industries are essential to public infrastructure and services and are already heavily regulated by other federal and state bodies. Given their importance and the existing rigorous oversight, these entities are granted exemptions to streamline their operations.

Equipment Trust Certificates

• Equipment trust certificates, which offer the holder beneficial ownership in equipment (often related to transportation industries), are exempt. The exemption arises because these certificates are backed by physical assets, reducing the risk of fraud and providing inherent security to investors.

Securities Listed on Recognized Stock Exchanges

• Securities listed on recognized stock exchanges are exempt under Texas Blue Sky Laws. This exemption considers the comprehensive federal regulations and the oversight provided by the exchanges themselves, ensuring sufficient protection for investors without additional state-level regulation.

Charitable-Type Corporations’ Bonds or Notes

• Bonds or notes issued by charitable-type corporations are exempted. This exemption supports non-profit and charitable organizations by easing their regulatory burden, enabling them to raise funds more effectively for their philanthropic activities.

Commercial Paper in Current Transactions

• Commercial paper, typically short-term debt instruments like promissory notes or bills of exchange used to finance current operations, is exempt from Blue Sky Laws in Texas. This exemption generally applies to instruments involved in current transactions, reflecting their lower risk profile.

Bonds or Notes Secured by Certain Securities

• Bonds or notes that are secured by specific securities are also exempt. This exemption applies to securities that have an added layer of investor protection through their link to other, typically lower-risk, securities, thereby mitigating potential risks.

Understanding these exemptions is crucial for issuers, especially those involved in syndication and real estate syndication. Leveraging these exemptions can help streamline the process of raising capital while ensuring compliance with applicable laws. However, it is always advisable to consult with a knowledgeable syndication attorney to navigate the complexities of securities regulations effectively.

What are Texas’ Procedures for Securities Law Exemptions?

Navigating the procedures for securities law exemptions in Texas is essential for issuers looking to take advantage of these provisions. Texas’ Blue Sky Laws provide several exemptions designed to streamline the process of raising capital while maintaining investor protection. Understanding and following the correct procedures ensures compliance and avoids potential legal issues.

To claim an exemption under Texas securities laws, issuers must generally follow these steps:

1. Determine Eligibility: The first step is to determine whether the security and the transaction qualify for an exemption under Texas law. This involves understanding the specific criteria for each exemption category, such as non-profit status, equipment trust certificates, or securities listed on recognized stock exchanges.
2. Documentation: Proper documentation is crucial. Issuers should prepare all necessary documents that demonstrate eligibility for the exemption. This may include organizational documents for non-profits, details of physical assets for equipment trust certificates, or proof of listing on a recognized exchange.
3. Notice Filings: While some exemptions do not require a formal filing with the Texas State Securities Board (TSSB), others may necessitate a notice filing. For example, issuers relying on certain exemptions might need to file a Form D and other relevant documents with the TSSB. The NASAA Electronic Filing Depository (EFD) facilitates these filings, making it easier to comply with state requirements.
4. Fee Payment: Depending on the exemption, there may be a filing fee associated with the notice. The fees vary and can range from $0 to $500. Issuers must ensure timely payment of these fees to avoid any delays or issues with their exemption claim.
5. Compliance with Additional Requirements: Certain exemptions may have additional requirements or conditions. For instance, commercial paper exemptions might require that the instruments are part of a current transaction. Issuers must ensure they meet all specific conditions outlined by the exemption to maintain compliance.
6. Maintain Records: Keeping detailed records of all filings, submissions, and communications with the TSSB is vital. These records should include copies of all filed forms, proof of fee payments, and any correspondence with regulatory authorities. Maintaining thorough records helps demonstrate compliance and can be essential in the event of an audit or review.
7. Consultation with Legal Experts: Given the complexity of securities laws, it is highly advisable for issuers to consult with a syndication attorney or a legal expert specializing in securities law. An attorney can provide guidance on eligibility, documentation, and compliance, ensuring that the issuer takes full advantage of available exemptions while adhering to all regulatory requirements.

In summary, the procedures for claiming securities law exemptions in Texas involve determining eligibility, preparing necessary documentation, filing notices and paying fees where required, complying with additional conditions, maintaining thorough records, and seeking legal counsel. By carefully following these steps, issuers can effectively navigate the regulatory landscape, raise capital efficiently, and ensure that they remain compliant with Texas Blue Sky Laws.

Frequently Asked Questions

Do I Need an Attorney from Texas Then to Put Together an Offering?

Whether you need an attorney from Texas to put together an offering depends largely on the specifics of your offering and the applicable securities laws. If your offering is under Regulation D and does not rely on one of the Texas-specific Blue Sky Laws, then you may not necessarily need an attorney licensed in Texas.

For instance, consider a scenario where you need a real estate syndication attorney to create a private placement memorandum (PPM) for a multifamily deal in Houston, Texas, which will be offered to investors in various states. In this case, as long as you do not require legal advice specific to Texas state laws, a licensed syndication lawyer from outside Texas can typically assist you. Such an attorney can draft the PPM, establish the entity, and write the operating agreement, although they would be unable to provide counsel on Texas-specific legal nuances.

On the other hand, if you are preparing a PPM for a development project in San Antonio, Texas, and all your investors are based in Texas, with the intention of utilizing one of Texas’s Blue Sky Laws exemptions, you would need to work with an attorney licensed in Texas. This is because navigating state-specific exemptions and ensuring compliance with Texas securities regulations requires expertise in local law.

In summary, while a non-Texas licensed syndication attorney can handle many aspects of preparing your offering, including drafting documents and structuring the deal, they cannot advise on the specific laws of Texas if those laws are relevant to your offering. Therefore, for offerings relying on Texas’s Blue Sky Laws or those requiring detailed legal guidance on Texas regulations, engaging a Texas-licensed attorney is essential to ensure full compliance and avoid potential legal issues.

Is it Ok if the Real Estate Syndication Attorney, Licensed Outside of Texas, Looks Over My Purchase Contract?

While a real estate syndication attorney licensed outside of Texas can certainly review your purchase contract, they are limited in the advice they can provide regarding Texas-specific legal issues. For instance, Tilden Moschetti, Esq., a syndication attorney with the Moschetti Syndication Law Group, can review the contract underlying your purchase in Dallas, Texas. However, he will clarify that while he can offer business consulting advice—such as discussions on price and general deal points like the length of time until closing—he cannot provide legal counsel on specific terms of the contract due to his lack of licensure in Texas.

This distinction is important because, while non-Texas attorneys can provide valuable insights and general business advice, they cannot interpret or advise on Texas law. This limitation means they cannot help with legal nuances or specific contractual terms governed by Texas law. For comprehensive legal advice and to ensure compliance with local regulations, it is crucial to consult with an attorney licensed in Texas. This ensures that all aspects of the contract are legally sound and that you are fully informed about any state-specific legal implications.

In summary, while out-of-state syndication attorneys can review and provide general business advice on your Texas purchase contract, they cannot offer legal advice specific to Texas law. For detailed legal guidance and to address Texas-specific contractual terms, you should seek the expertise of an attorney licensed in Texas.