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


Office of House Bill AnalysisC.S.H.B. 2728
By: Crownover
Pensions & Investments
4/4/2001
Committee Report (Substituted)



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.  Texas law does not
currently provide exemptions for grants of options to consultants and
others who are not traditional employees of an issuer of securities. As a
result, Texas companies are unable to make certain option grants even when
federal law would permit them.  C.S.H.B. 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

C.S.H.B. 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.

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 2728 differs from the original by removing provisions requiring a
sale of security to be made under a qualified plan under the federal
Internal Revenue Code of 1986 or be exempt from the registration
requirements of the federal Securities Act of 1933.