HBA-TBM H.B. 2728 77(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 2728
By: Crownover
Pensions & Investments
7/3/2001
Enrolled



BACKGROUND AND PURPOSE 

The federal Securities Act of 1933 provides certain exemptions under
federal law to companies that intend to grant stock options to their
employees.  It also extends these exemptions to consultants, managers,
partners, and others who provide services to a company.  Prior to the 77th
Legislature, Texas law did not provide exemptions for grants of options to
consultants and others who were not traditional employees of an issuer of
securities.  As a result, Texas companies were unable to make certain
option grants even when federal law would have permitted them.  House Bill
2728 amends The Securities Act to correspond to federal law by providing
for the exemption from registration of option grants for consultants,
managers, partners, and others who provide services to a company but who
are not traditional employees of the company.   

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 2728 amends law to modify the circumstances under which sales
made without any public solicitation or advertisements are exempt from The
Securities Act.  The bill provides that the sale or distribution (sale) by
an issuer or a participating subsidiary of the issuer (issuer) of a
security under a bona fide written compensation plan or contract is exempt
from The Securities Act if the sale of the security is established by the
issuer for the benefit of general partners, managers, or officers of the
issuer, for the benefit of its trustees if the issuer is a business trust,
or for the benefit of consultants or advisors who provide to the issuer
bona fide services unrelated to the offer or sale of securities in a
capital-raising transaction.   

EFFECTIVE DATE

September 1, 2001.