Table of Contents
Overview
The Texas State Securities Board (TSSB) is a regulatory agency responsible for enforcing state laws governing the sale of stocks, bonds, and other financial instruments. While federal agencies like the Securities and Exchange Commission (SEC) oversee national securities markets, the TSSB focuses on intrastate transactions and state-level enforcement, ensuring compliance with Texas securities laws.
By enforcing these laws, the agency helps maintain investor confidence, prevent financial crimes, and ensure fair market practices in Texas.
The Texas State Securities Board’s mission is to safeguard Texas investors from fraud, deceptive practices, and unregistered securities sales.
Founded in 1957, the agency registers firms and individuals who sell financial securities or give investment advice. It also examines registered firms and enforces the Securities Act through administrative, civil, and criminal actions.
Structure and Leadership
The Texas State Securities Board has five internal divisions:
- Enforcement Division – Investigates fraud and unregistered securities sales.
- Registration Division – Reviews securities and investment firm applications.
- Inspections and Compliance Division – Conducts audits of registered firms.
- General Counsel Division – Provides legal guidance and regulatory updates.
- Staff Services Division – Manages internal agency functions.
TSSB has a main office in Austin and branch offices in Dallas, Houston, and Corpus Christi.
A five-member board, appointed by the Texas governor, oversees the agency. Board members serve staggered six-year terms, ensuring continuity in oversight. Board members serve without compensation, but are entitled to per diem and reimbursement of actual travel expenses while performing their official duties.
Funding for the State Securities Board comes mostly from fees for the registration of securities and financial advisory firms.
Agency Functions
TSSB’s Enforcement Division is charged with detecting and investigating fraud committed in connection with the sale of securities, illegal sales of unregistered securities, and sales of securities by unregistered dealers.
The division makes criminal referrals to district attorneys and United States attorneys throughout Texas, and it routinely assists prosecutors in drafting indictments, presenting cases to grand juries, and the trial of criminal cases.
The Registration Division reviews applications to register securities for sale in Texas. The primary function of this review is to ensure that investors have access to full and fair disclosure of all relevant investment information, that the promoter and investor share in the results of the venture, prices being asked for the securities are reasonable, conflicts of interest are minimized, and that promotional expenses are reasonable.
The Inspections and Compliance Division conducts periodic examinations of the books and records of registered firms. The primary focus is on state-registered investment advisers who have main offices in Texas as well as dealers who are not members of the Financial Industry Regulatory Authority (FINRA).
Registration Requirements
Broker-dealers, investment advisors, securities agents, and securities issuers must either register in Texas or qualify for an exemption. This registration process involves submitting financial disclosures, legal documents, and fees. The goal is to ensure that investors have all the information they need to make informed decisions.
This process may involve:
- Complete Application: Submit the required forms for registration (such as Form BD for broker-dealers or Form ADV for investment advisers).
- Background Check: All applicants undergo a background check to ensure there are no prior legal or regulatory issues. The background check process is conducted through both state and federal databases to identify any history of securities violations or financial crimes.
- Pass Exams: Certain applicants, like agents or advisers, must pass relevant exams to demonstrate their knowledge and qualifications.
- Submit Documentation: Provide supporting documents such as financial statements, organizational records, and other required disclosures.
- Pay Fees: Pay the necessary application and registration fees, which vary depending on the type of registration.
- Approval or Denial: The TSSB reviews the application and either approves or denies the registration based on compliance with Texas securities laws.
- Annual Renewal: Registrations must be renewed annually, including the payment of renewal fees and updated documentation if necessary.
More information and guidance are available on the TSSB’s official website.
Relationship to Federal Regulators
The Texas State Securities Board collaborates with federal agencies to enforce securities laws and protect investors. While the board primarily regulates securities transactions within Texas, it works closely with national regulators to address fraud and misconduct that cross state lines.
Coordination with the SEC
The Securities and Exchange Commission (SEC) is the primary federal agency overseeing the U.S. securities markets. The Texas State Securities Board shares information with the SEC regarding fraudulent schemes, unregistered securities offerings, and violations of federal securities laws. In cases where federal jurisdiction applies, the board may refer matters to the SEC or work jointly on enforcement actions.’
Certain firms and advisors may be required to register with both the SEC and the Texas State Securities Board, depending on their size and scope of operations.
Collaboration with FINRA
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization overseeing brokerage firms and their registered representatives. While the Texas State Securities Board directly regulates state-registered investment advisers and non-FINRA-member firms, it cooperates with FINRA on broker-dealer examinations and disciplinary actions. The board also enforces state laws complementing FINRA’s oversight.
Joint Investigations and Enforcement Actions
The board frequently collaborates with federal authorities, including the SEC, FINRA, and the U.S. Department of Justice, on investigations involving securities fraud, insider trading, and Ponzi schemes. When fraudulent activity spans multiple states, the board may participate in multi-agency task forces to ensure coordinated enforcement efforts.
Regulatory Overlap and Distinctions
While federal agencies establish nationwide securities regulations, the Texas State Securities Board enforces state-specific laws under the Texas Securities Act. It has authority over intrastate transactions, smaller investment firms, and certain exemptions from federal oversight. This state-level enforcement allows for more direct action against localized fraud and misconduct.
