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November 1, 2015Joseph R. Anderson
Life Settlement Agreements and the Texas Securities Act: a Summary and Review of Life Partners, Inc. v. Arnold
Life Partners, Inc. v. Arnold, 464 S.W.3d 660 (Tex. 2015)
November 8, 202406773540, Paul Flack, Reagan Pratt
Private Causes of Action Under the Texas Securities Act
Business attorneys should be familiar with the Texas Securities Act’s private causes of action and remedies, in order to properly advise clients of potential pitfalls in securities transactions. Compliance with the Texas Securities Act (the “TSA”) cannot be contractually waived3 and thus will be a common focus of potential investment litigation claims. This article explains the tests and analysis required to determine whether a security is present, before detailing the Texas Security Act’s private causes of action and the ways in which they differ from theSecurities Act of 1933 and Securities Exchange Act of 1934
November 8, 202406773540
Securities Intermediaries
Clients often ask business attorneys how to obtain money to capitalize a new or expanding business and they are often approached by purported fundraisers who claim to be able to do so, often with upfront fees. Business attorneys should have some understanding of these fundraisers and the legitimate roles they can inhabit including those of registered broker dealers, exempt brokers, finders and lead brokers.
March 22, 2024Mike Tankersley
Enactment of HB 19: Specialized Texas Business Court
Litigation is part of doing business, and costs businesses millions of dollars annually. Thirty states have created specialized courts to address complex business litigation with greater efficiency and consistency. With the passage of House Bill 19 (HB 19) by the 2023 Texas Legislature and Governor Abbott’s signature on June 9, 2023, Texas now has a business court that will open its doors in 2024, becoming the thirty-first state to undertake this judicial innovation.This followed unsuccessful efforts to pass business court legislation in the 2015, 2017, 2019 and 2021 sessions of the Texas Legislature. What made the difference in 2023?The creation of a Texas business court was identified by each of Governor Abbott, Lt. Governor Patrick and House Speaker Phelan as a top legislative priority in 2023. Chief Justice Hecht’s 2023 State of the Judiciary message noted that while the proposed creation of Texas business courts by HB 19 “is not without controversy” . . . “I believe business courts would benefit the Texas justice system, and I support their creation.”Despite strong opposition from Texas trial lawyer organizations, HB 19 was broadly supported by Texas businesses, and received overwhelming legislative approval. The hard work and skillful negotiation of primary authors Representative Andy Murr (R-Kerrville) and Senator Bryan Hughes (R-Tyler), supported by 77 joint and co-authors,produced floor votes in the Texas House of Representatives of 90 to 51 and 86 to 53, and in the Texas Senate of 24 to6, favoring passage of HB 19.The jurisdiction of the Texas business court provided in HB 19 is narrowly tailored to reach disputes between businesses, or among businesses and their owners, directors and management, relating to matters such as breach of contract, breach of fiduciary duty, governance and control disputes, and violations of state and federal securities and trade regulation laws. The minimum amount in controversy for most actions before the business court is set at $5million or $10 million depending on the nature of the specific claims asserted. The amount in controversy requirements do not apply to a limited set of actions - those seeking only injunctive or declaratory relief and cases addressing claims of breach of fiduciary duty, governance and control disputes and securities and trade regulation litigation if a publicly traded company is a party.The Texas business court when fully operational will have statewide jurisdiction, supporting the creation of consistent business case law and court rules, and complementing the state’s innovative business laws as codified in the Business Organizations Code, the Business & Commerce Code, the Finance Code and the Texas Securities Act. The specifics of the business court’s jurisdiction are addressed in more detail in Part II below.
March 4, 2024Travis Iles, Ronak V. Patel
Securities Law in Texas – Perspectives from a Regulator & a "Reformed" Regulator
Capital formation efforts by businesses small and large continue to contribute to the vitality of the Texas economy. The Texas Securities Act and the regulations, thereunder, provide avenues to raise capital while also establishing standards and processes intended to protect investors. As such, business owners and their lawyers commonly face questions like “Do I have to file anything if I want to find investors?,” “Who can I raise money from?,” “Can Jane help me raise money if I don’t pay her?,” and“What is the penalty for doing this wrong?” The easy answer – and the least satisfying one for all involved – “It depends.” This article outlines for counsel certain key initial considerations raised regularly by businesses seeking to raise capital or other activity involving securities.
November 12, 2023Mike Tankersley
Enactment of HB 19 by the 2023 Texas Legislature - Texas Business Courts
Litigation is part of doing business, and costs businesses millions of dollars annually. Thirty states have created specialized courts to address complex business litigation with greater efficiency and consistency. With the passage of House Bill 19 (HB 19) by the 2023 Texas Legislature and Governor Abbott’s signature on June 9, 2023, Texas now has a business court that will open its doors in 2024, becoming the thirty-first state to undertake this judicial innovation. This followed unsuccessful efforts to pass business court legislation in the 2015, 2017, 2019 and 2021 sessions of the Texas Legislature. What made the difference in 2023?
March 3, 2022Travis J. Iles, 18874100
Codification of Texas Securities Act
Section 323.007 of the Government Code requires the Texas Legislative Council (Legislative Council or Council) to carry out a complete, nonsubstantive revision of the Texas statutes. The process involves reclassifying and rearranging the statutes in a more logical order; employing a numbering system and format that will accommodate future expansion of the law; eliminating repealed, invalid, duplicative, and other ineffective provisions; and improving the draftsmanship of the law if practicable—all toward promoting the stated purpose of making the statutes “more accessible, understandable, and usable” without altering the sense, meaning, or effect of the law. The continuing statutory revision program was created by a 1963 statute. Under the Texas statutory revision program, all Texas statutes will eventually be contained in one of 27 topical codes. The Texas Securities Act, previously contained in Articles 581-1 through 581-45 of the Texas Civil Statutes, was one of the last of the remaining civil statutes to go though the codification process.
March 3, 202206773540
Private Causes of Action Under the Texas Securities Code
The Texas Legislature passed the Texas Securities Act recodification in the 2019 regular session with an effective date of January 1, 2022.1 The Legislature amended the recodified Texas Securities Act’s private cause of action provisions through SB 1280 during the 2021 regular session by deleting cross-references imposing liability for violations as to six Texas Securities Act provisions that imposed no duties on private actors and thus had no potential for violations by private actors.2 Business attorneys should have some familiarity with the recodified Texas Securities Act’s private causes of action and remedies in order to properly advise clients of potential pitfalls in securities transactions. Business attorneys should also relearn the Texas Securities Act statutory structure, which has significantly changed. The previous Texas Securities Act had had 64 sections. The recodified Texas Securities Act (“Recodified TSA”) has 248 sections - almost 400% more.
March 20, 2019Adrienne Randle Bond
Basics of Securities Laws of Federal and Texas Securities Laws Compliance and Review of Available Exemption Processes
This paper will address basic issues for securities law compliance for an exempt offering of securities in the State of Texas. Set out below are the basic building blocks of federal and state securities requirements that with the principal purpose of guiding compliance with securities laws concerning the offering and sale of equity in a client’s business. Compliance may consider issues such as the client in choosing the form of business entity, identifying and quantifying the risk of the transaction, as well as assisting the client in identifying the nature of the investors most likely to consider an investment in the proposed transaction. This paper, however, will focus on an overview of how to comply, with some explanation about the history and thought processes involved, so as to help you off to a running start. I will focus on the most common federal exemption, since that is the most simple and common form of compliance (very easy to find templates and “go-bys”), and also makes state compliance the most straight forward. Other possibilities for compliance are listed, both for education and also to make you aware of other possible compliance regimes if the most common is not available or a good fit. This paper will not, however, be a compendium. For example issues such as what constitutes a “security,” or liabilities for issuers and their control persons, or principles of rescission (to fix a broken exemption) are all outside the scope of this paper.
March 14, 2019Jeff Golub
Shareholder Agreements: Litigation Perspectives
It has been almost five years since the Texas Supreme Court declined to recognize a common law cause of action for shareholder oppression. Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014). Although it restricted shareholder common law rights, Ritchie did not put an end to shareholder litigation. As highlighted further below, recent cases show that shareholders continue to seek available judicial remedies, including through derivative actions and the various statutory and common law causes of action and remedies outlined by the Court in Ritchie. These cases provide insight into the types of claims practitioners should be cognizant of when advising their clients and drafting organizational documents. Through its repeated emphasis on the use of shareholder agreements, the Court in Ritchie for many situations left it to shareholders and corporations to protect their respective rights and interests and govern themselves by contract. Id. at 871. Thus, five years after Ritchie, the importance of well-drafted shareholder agreements cannot be understated. Accordingly, this article also discusses some of the potential provisions that practitioners should strongly consider including in their organizational documents, including shareholder agreements.
March 4, 2016J. R. Morgan
Secondary Liability Under Federal and State Laws
In conclusion, Texas attorneys should look beyond TDRPC Rule 1.15(a)(1) to consider when they should withdraw from the representation of a client. While a private right of action is no longer a primary concern under federal law, federal government enforcement actions are a growing risk. The Texas Securities Act is not as likely to be a risk for attorneys operating in the normal course of offering legal services. However, other states' blue sky laws may be of much more concern for Texas attorneys with issuer clients based in other states or offering securities to potential investors in other states.
November 8, 2013Matthew Deffebach, Zach Wolfe
Regulatory Issues of Social Media
Today most companies perceive social media as a beneficial way to advertise their brands and increase their web presence. They also view social media as a way to enhance their relationships with customers and clients, recruit new employees, make corporate announcements, and acquire information regarding customer preferences. Companies are increasingly mindful of the potential benefits of using social media for marketing, recruiting new employees, connecting with clients, and effectively making announcements to a vast audience in a cost-effective manner. Of course, the potential benefits of social media come with costs, including potential legal liabilities. Many companies may not be fully cognizant of the legal issues that arise from the use of social media in the workplace, in the marketplace, and in litigation. This paper explores the use of social media in these three arenas. First, what issues emerge from employees using social media and employers attempting to regulate such use? Employers and their counsel need to understand employee privacy rights as well as the risk that overly broad social media restrictions could run afoul of worker protections under the National Labor Relations Act concerning employee discipline. Second, what limitations exist on companies using social media for commercial purposes? Public companies face SEC restrictions on disclosures made through social media. Public and private companies deal with FTC rules on advertising and a host of laws addressing trademark protection. Finally, how does the use of social media impact litigation? Companies in litigation must be prepared to address the preservation of social media content, discovery of social media, and the potential misuse of social media in jury trials.
November 8, 2013Michael C. Holmes
Fiduciary Duties in Alternate Entities
Overview of Traditional Fiduciary Duties and Alternate Entities Relevant Delaware Statutes Governing Alternate Entities Relevant Texas Statutes Governing Alternate Entities Standard Contractual Provisions in Alternate Entity Agreements Delaware Supreme Court Cases
October 15, 2011Ryan R. Cox
Practical Considerations for Registering Securities Pursuant to the Texas Securities Act
Prior to adoption of the National Securities Markets Improvement Act of 1996 (“NSMIA”),1 many practitioners routinely wrestled with state securities laws (commonly referred to as “blue sky” laws) in conjunction with a proposed offering of securities regardless of whether such offering was registered under the federal Securities Act of 1933 (the “Securities Act”). Since 1996, however, the blue sky analysis has been simplified considerably because of NSMIA’s preemption of state regulation as it relates to certain “covered” securities. As a result, many securities practitioners have little experience when it comes to registering securities pursuant to the Texas Securities Act. This article provides an analysis of the state registration process in Texas and issues frequently encountered.
April 15, 2011Rex S. Whitaker, Wayne M. Whitaker
Obtaining Financing for your Business
Raising money for a business invariably involves selling a security in exchange for money unless commercial lines of debt are utilized such as bank lending, other similar lending, or vendor financing. If a security is sold by the issuer company, applicable securities laws must be complied with both at the state and federal levels. Federal securities laws are primarily embodied in the Securities Act of 1933 (the "Securities Act"). State securities laws are generally set out in what is commonly known as "Blue Sky" laws. The Texas Securities laws are found in the Texas Securities Act (the "Texas Act").
August 19, 202406773540
Private Causes of Action under the Texas Securities Act
Business attorneys should be familiar with the Texas Securities Act’s private causes of action and remedies, in order to properly advise clients of potential pitfalls in securities transactions. Compliance with the Texas Securities Act (the “TSA”) cannot be contractuallywaived3 and thus will be a common focus of potential investment litigation claims. This article explains the tests and analysis required to determine whether a security is present, before detailing the Texas Security Act’s private causes of action and the ways in which they differ from the Securities Act of 1933 and Securities Exchange Act of 1934.