TITLE 7. BANKING AND SECURITIES

PART 2. TEXAS DEPARTMENT OF BANKING

CHAPTER 33. MONEY SERVICES BUSINESSES

7 TAC §33.54

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes new §33.54, concerning an exemption for registered securities dealers and agents of securities dealers (securities agents). The new rule is proposed to exempt securities dealers and securities agents from money transmission licensing if they are registered and in good standing with the Texas State Securities Board (the board), to the extent they are operating in their capacity as securities dealers and agents.

Summary of Proposed New Rule

Proposed subsection (a) provides that the terms "agent," "dealer" and "securities" have the meanings assigned by the Texas Securities Act.

Proposed subsection (b) provides that a dealer or an agent of a dealer who, in the course of providing dealer or agent services as to securities, receives or has control over a customer's money or monetary value, is exempt from money transmission licensing requirements if they are: 1) registered and in good standing with the board as a dealer or dealer's agent; 2) only conducting money transmission as defined by the Texas Finance Code to the extent reasonable and necessary to provide securities dealer or securities agent services for contractual customers.

The department regulates money transmission, defined by the Texas Finance Code, §151.301(b)(4) as the receipt of money or monetary value by any means in exchange for a promise to make the money or monetary value available at a later time or different location. A money transmission license is required to engage in the business of money transmission in Texas. See Texas Finance Code, §151.302(a).

Many registered securities dealers and securities agents include money transmission in their business models and as part of the services provided to their clients. Both securities dealers and securities agents, however, are already regulated by, and subject to registration requirements enforced by, the Texas State Securities Board. As such, further regulation by the department would be duplicative to the extent that such persons operate only as securities dealers and securities agents. The department does not intend for this rule to exempt securities dealers and securities agents from money transmission licensing if they perform separate money transmission activities as defined by the Texas Finance Code, unrelated to their operation as securities dealers or agents.

Securities dealers and securities agents whose business includes non-securities related activities, that may constitute money transmission under the Texas Finance Code, should submit their business plan for review and obtain a determination letter from the Texas Department of Banking.

Analysis of Fiscal Impact and Public Benefits

Russell Reese, Assistant Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rule.

Mr. Reese has also determined that, for each year of the first five years the rule as proposed is in effect, the public benefit anticipated as a result of enforcing the rule is potentially decreased administrative costs for securities dealers and securities agents, that may be passed down to Texas consumers doing business with securities dealers and securities agents, as well as to Texans employed by, or doing business as, securities dealers or securities agents. Additionally, this rule will reduce the regulatory burden faced by securities dealers and securities agents, and may decrease regulatory redundancies.

For each year of the first five years that the rule will be in effect, there will be no economic costs to persons required to comply with the rule as proposed. There will be no adverse economic effect on persons required to comply with the rule as proposed.

Government Growth Impact Statement

Pursuant to Government Code, §2001.0221, the department provides the following Government Growth Impact Statement for the proposed rule. During the first five years that the rule will be in effect, the rule will not:

1) create or eliminate a government program;

2) require the creation of new employee positions or the elimination of existing employee positions;

3) require an increase or decrease in future legislative appropriations to the department;

4) require an increase in fees paid to the department - in fact such fees will likely decrease;

5) create a new regulation;

6) increase or decrease the number of individuals subject to the rule's applicability; and,

7) adversely affect this state's economy - in fact, the proposed new rule has the potential to positively affect this state's economy.

Additionally, during the first five years that the rule will be in effect, the rule will limit existing regulation of some entities engaged in money transmission, such as registered securities dealers and securities agents, who are operating as such.

Analysis of Economic Impact

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

Comment Requested

To be considered, comments on the proposed new section must be submitted no later than 5:00 p.m. on January 27, 2020. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

Statutory Authority

The new rule is proposed under Texas Finance Code, §151.102(a), which authorizes the commission to adopt rules necessary or appropriate to preserve and protect the safety and soundness of money services businesses and protect the interests of purchasers of money services and the public.

Texas Finance Code, §151.301(b)(4) and §151.302(a) are affected by the proposed new rule.

§33.54.Exemption for Registered Securities Dealers and Agents.

(a) For purposes of this section, the terms "agent," "dealer," and "securities" have the meanings assigned by the Texas Securities Act.

(b) A dealer or dealer agent who, in the course of providing dealer or dealer agent services as to securities, receives or has control over a customer's money or monetary value, need not obtain a money transmission license if they are:

(1) registered and in good standing with the Texas State Securities Board as a dealer or dealer agent; and

(2) only conducting money transmission as defined by Texas Finance Code, §151.301, to the extent reasonable and necessary to provide dealer or dealer agent services for contractual customers as to securities.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on December 13, 2019.

TRD-201904825

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: January 26, 2020

For further information, please call: (512) 475-1301