1. (a) Definitions. Words and terms used in this chapter are also defined in §107.2 of this title (relating to Definitions). The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Applicant--A person who submits an application for registration as an investment adviser or an investment adviser representative.
   2. (2) Branch office--Each office in Texas in which either records are maintained or control over and review of the activities of registered persons exists.
   3. (3) Branch office manager--The person named by the investment adviser to supervise the activities of a branch office.
   4. (4) Control--The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or company, whether through the ownership of voting securities, by contract, or otherwise.
   5. (5) In this state--As used in the Texas Securities Act, §12, has the same meaning as the term "within this state" as defined in §107.2 of this title (relating to Definitions) and paragraph (10) of this subsection.

   6. (6) Investment adviser--Any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include:

      1. (A) a bank, or any bank holding company as defined in the federal Bank Holding Company Act of 1956, which is not an investment company;
      2. (B) any lawyer, accountant, engineer, teacher, or geologist, whose performance of such services is solely incidental to the practice of his or her profession;
      3. (C) any broker or dealer whose performance of such services is solely incidental to the conduct of his or her business as a broker or dealer and who receives no special compensation therefor;
      4. (D) the publisher of any bona fide newspaper, news magazine, or business or financial publication of general and regular circulation; or
      5. (E) any person whose advice, analyses, or reports relate to no securities other than securities which are direct obligations of or obligations guaranteed as to principal or interest by the United States, or securities issued or guaranteed by corporations in which the United States has a direct or indirect interest which shall have been designated by the Secretary of Treasury, pursuant to the Securities Exchange Act of 1934, §3(a)(12), as exempted securities for the purposes of that Act.
   7. (7) Investment adviser representative--Any person or company employed or appointed or authorized by an investment adviser who, for compensation, solicits clients for the investment adviser or provides investment advice on behalf of the investment adviser to clients of the investment adviser, whether by direct act or through subagents; provided that the officers of a corporation or other entity, or partners of a partnership, shall not be deemed investment adviser representatives solely because of their status as officers or partners, where such corporation, entity, or partnership is registered as an investment adviser hereunder.
   8. (8) Rendering services as an investment adviser--Any act by which investment advisory services are provided for compensation.
   9. (9) Solicitor--Any investment adviser representative who limits their activities to referring potential clients to an investment adviser for compensation.

   10. (10) Within this state--

       1. (A) A person is an "investment adviser" who engages "within this state" in rendering services as an investment adviser as set out in the Texas Securities Act, §4.C, if either the person or the person's agent is present in this state or the client/customer or the client/customer's agent is present in this state at the time of the particular activity. A person can be an investment adviser in more than one state at the same time.
       2. (B) Likewise, a person is an "investment adviser representative" who engages "within this state" in rendering services as an investment adviser as set out in the Texas Securities Act, §4.C, whether by direct act or through subagents except as otherwise provided, if either the person or the person's agent is present in this state or the client/customer or the client/customer's agent is present in this state at the time of the particular activity. A person can be an investment adviser representative in more than one state at the same time.
   11. (11) Federal covered investment adviser--An investment adviser who is registered under the Investment Advisers Act of 1940 (15 U.S.C. §80b-1 et seq.), as amended. A federal covered investment adviser is not required to be registered pursuant to the Texas Securities Act.
   12. (12) Registered investment adviser--An investment adviser who has been issued a registration certificate by the Securities Commissioner under the Texas Securities Act, §15. (A federal covered investment adviser is not prohibited from being registered with the Securities Commissioner. If a federal covered investment adviser elects to register with the Securities Commissioner, it is subject to all of the registration requirements of the Act.)

2. (b) Registration of investment advisers, investment adviser representatives, and branch offices.

   1. (1) Requirements of registration.

      1. (A) Any person who renders services as an investment adviser, including acting as a solicitor, may not engage in such activity for compensation without first being registered as an investment adviser under the provisions of the Texas Securities Act or notice-filed under the provisions of paragraph (2) of this subsection. Likewise, every person employed or appointed, or authorized by such person to render services, which include the giving of investment advice or acting as a solicitor, cannot conduct such activities unless registered as an investment adviser or an investment adviser representative under the provisions of the Act, or notice-filed as an investment adviser or an investment adviser representative under the provisions of paragraph (2) of this subsection.
      2. (B) Each branch office of a registered investment adviser in Texas must be registered. A registered officer, partner, or investment adviser representative must be named as branch office manager.

   2. (2) Exemption from the registration requirements. The Board pursuant to the Texas Securities Act, §§12.C and 5.T, exempts from the registration provisions of the Act, §12, persons not required to register as an investment adviser or an investment adviser representative on or after July 8, 1997, by act of Congress in Public Law Number 104-290, Title III.

      1. (A) Registration as an investment adviser is not required for the following:

         1. (i) an investment adviser registered under the Investment Advisers Act of 1940, §203;
         2. (ii) an investment adviser registered with the Securities and Exchange Commission pursuant to a rule or order adopted under the Investment Advisers Act of 1940, §203A(c);
         3. (iii) a person not registered under the Investment Advisers Act of 1940, §203, because such person is excepted from the definition of an investment adviser under the Investment Advisers Act of 1940, §202(a)(11); or
         4. (iv) an investment adviser who does not have a place of business located within this state and, during the preceding 12-month period, has had fewer than six clients who are Texas residents.
      2. (B) Registration as an investment adviser representative of an investment adviser described in subparagraph (A) of this paragraph is not required for an investment adviser representative who does not have a place of business located in Texas but who otherwise engages in the rendering of investment advice in this state.

      3. (C) Notice filing requirements and fees for investment advisers and investment adviser representatives exempted from registration pursuant to this subsection only.

         1. (i) Initially, the provisions of subparagraphs (A) and (B) of this paragraph are available provided that the investment adviser files:

            1. (I) Form ADV through the IARD designating Texas as a jurisdiction in which the filing is to be made; and
            2. (II) an initial fee equal to the amount that would have been paid had the investment adviser and each investment adviser representative filed for registration in Texas.
         2. (ii) Annually, the investment adviser files renewal fees which would have been paid had the investment adviser and each investment adviser representative been registered in Texas.
      4. (D) Persons not required to register with the Securities Commissioner pursuant to subparagraphs (A) and (B) of this paragraph, are reminded that the Texas Securities Act prohibits fraud or fraudulent practices in dealing in any manner in any securities whether or not the person engaging in fraud or fraudulent practices is required to be registered. The Agency has jurisdiction to investigate and bring enforcement actions to the full extent authorized in the Texas Securities Act with respect to fraud or deceit, or unlawful conduct by an investment adviser or investment adviser representative in connection with transactions involving securities in Texas.

3. (c) Types of registrations.

   1. (1) General registration. A general registration is a registration to render advisory services regarding all categories of securities, without limitation.
   2. (2) Restricted registration. A restricted registration as an investment adviser or as an investment adviser representative may be issued based upon the qualifying examination(s) passed by the investment adviser or investment adviser representative.
   3. (3) In restricted registration, the evidence of registration shall indicate that the holder thereof is entitled to act as an investment adviser, investment adviser representative, or solicitor only in the restricted capacity.

Source Note:The provisions of this §116.1 adopted to be effective August 12, 2001, 26 TexReg 5799; amended to be effective November 26, 2001, 26 TexReg 9582.