April 25, 2014, Texas Securities Board Proposes Crowd Funding Rules for Texas Companies
Under previously-existing Texas law, crowdfunding websites may not sell shares of companies - "effect the purchase and sale of securities for the account of others" without registering as a securities dealer and complying with the considerable rules and regulations applicable to broker-dealers.
This is very much the same kind of restriction that has kept equity crowdfunding from becoming a reality at the national level (pending implmentation of the Title III JOBS Act rules).
The Texas rule proposal would change the status quo, possibly as early as Q4 2014. The Securities Board has recognized the problems with the old model, saying:
A person operating such a website merely for the purchase of securities of startups and small businesses, however, may find it impractical in view of the limited nature of that person's activities and business to register as a general dealer and operate under the full set of regulatory obligations that apply to dealers. The restricted registration provided by the new rule is expected to
encourage the formation of third-party portals.
The solution under the proposed rules is provide for lightweight registration for crowdfunding companies that can work with startups, small businesses, and other issuers to offer Texas investors a way to participate in companies started in their own backyard.
Crowdfunding portals can support smaller capital raises without performing all of the ordinarily costly duties associated with a full-service securities dealer.
The Securities Board stated that the rules are designed to assist small issuers conducting sales that are local in nature and where many investors may come from the company's customer base or from the surrounding community that will benefit from the growth of local businessses and the jobs they will provide.
Full text of the proposed rules in PDF format is below: