Articles Tagged with Texas Securities Board

In a letter dated December 11, 2015, the Texas State Securities Board (“Board”) granted a no-action request by Managed Financial Service Corporation, Inc. (“MFSC”) that paves the way for a retiring investment adviser representative to receive continuing compensation after retirement. The Board confirmed that it would not commence or seek enforcement proceedings against either MFSC or a specified retiring investment adviser representative if certain procedures were followed. MFSC and its retiring representative requested the no-action letter in order to implement a plan under which the retiring representative would continue to receive compensation derived from the residual value of the work as an investment adviser for certain accounts.

The no-action was requested based on a concern, predominant in the investment adviser industry, that receipt by a retired adviser representative of ongoing advisory fees or a portion of advisory fees received by a successor adviser or firm would subject the retired representative to discipline for conducting business without registration.

The no-action relief granted by the Board is similar to the practice in the brokerage industry that has been codified in FINRA Rule 2040 (b) in which, prior to that date, was sanctioned by a FINRA no-action letter issued to Merrill Lynch in March 2012.
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The Texas State Securities Board has recently proposed amending Section 116.2 of the Texas Securities Regulations to add a new requirement that each investment adviser seeking to register under the Texas Securities Act submit to the Board a balance sheet prepared in accordance with generally accepted accounting principles that reflects the current financial condition of the investment adviser.

One of the stated reasons for proposal of the rule is that, in the experience of the Securities Board, applicants have been having some difficulty in locating and completing the suggested balance sheet template contained on the Board’s website. The Board believed that providing an actual form and requiring its use will be more helpful to potential applicants and will make administrative of the requirement simpler for the Board itself.
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