84(R) - 2015
House Investments & Financial Services
House Investments & Financial Services
Investment & Financial Services
Relating to the self-directed and semi-independent status of the State Securities Board; authorizing fees.
A fiscal note dated April 13, 2015 anticipates a two-year negative net impact to General Revenue Related Funds of $38,390,818 through the biennium ending August 31, 2017 for CSHB2493.
House Bill 2493 would grant the status of Self-Directed Semi-Independent agency to the Texas State Securities Board.
As such, the State Securities Board would operate independently from the legislative appropriations process. It would set up its own budget and would be able to set and keep the fees, penalties, charges asked of regulated persons to be able to operate and administer the agency. The State Securities Board would be responsible for all direct and indirect costs of the agency's existence and operations.
Fees and funds collected by the agency would have to be deposited in interest-bearing deposit accounts in the Texas Treasury Safekeeping Trust Company. All funds other than those collected under Subsection A, Section 35 of the Securities Act in the Vernon's Texas Civil Statutes would have to be deposited into the General Revenue Fund.
A report would have to be submitted to the legislature and the governor at the beginning of each regular session. It would need to describe the agency's activities in the previous biennium and include an audit, a financial report for the preceding two fiscal years, a description of changes on fees imposed on regulated persons, changes in the regulatory jurisdiction of the Board and a list of new rules adopted and repealed.
Another report would have to be submitted to the governor, the committee responsible for appropriations in each house of the legislature, and the Legislative Budget Board, notably detailing salaries of and expenses for Board employees, trend performance data for the preceding five fiscal years, and the agency's operating plan.
The agency would be able to enter into contracts, acquire, lease and sell property, construct and maintain property, and borrow money. Should the State Securities Board lose its status in the future, the agency would remain liable for expenses and debts incurred during the time it was a self-directed semi-independent agency.
Employees of the State Securities Board would remain members of the Employees Retirement System of Texas.
The State Securities Board would remain subject to the Sunset process of the Sunset Advisory Commission and would have to pay the cost for the review.
Vote Recommendation Notes
An amendment, and an amendment to the amendment were introduced and adopted on the House floor.
The aim and result would be the same goal as in HB 2493 as originally filed, but it would place the legislation under chapter 472 of the Government Code relating to self-directed semi-independent agencies.
As a consequence the Securities Act would only be amended in order to codify the self-directed and semi-independent status of the State Securities Board, to require that the commissioner report to the State Securities Board on receipts and expenditures of the agency, to provide for the refund of registration fees if necessary, and the attorney general could assess and collect from the Commissioner or the Board reasonable attorney’s fees associated with any legal representation requested by the Commissioner and provided by the attorney general.
We continue to oppose this bill.
The second chamber sponsor is Senator Brandon Creighton.
First chamber recommendation:
The Self-Directed Semi-Independent (SDSI) status allows agencies to operate outside the appropriations process. In other words, SDSI agencies have more operational and budgetary control.
The argument given to support the SDSI status is that it frees the legislature from having continually to set appropriations and performance measures since the agencies are responsible for raising their own revenue and creating their own measures.
The argument given by the statement of intent of House Bill 2493 to support granting SDSI status to the Texas State Securities Board is that the Board "has been unable to obtain adequate levels of funding necessary to maintain an appropriate salary structure and career ladder for its financial examiners and attorneys." The agency has to compete with the private sector and other regulators for such professionals.
The mission of the State Securities Board includes protecting Texas investors and ensuring a free and competitive securities market for Texas. In order to fulfill its mission, the State Securities Board is "responsible for regulating the securities industry in Texas."
The Self-Directed Semi-Independent status is problematic: all agencies should be subject to appropriations review because it makes the legislature as a whole responsible for the actions of that agency, not the agency itself.
In fact, a 2015 report by the Sunset Advisory Commission recommends increased oversight and additional requirements to apply for the SDSI status. One of the Commission's recommendation was indeed that the Senate Finance and House Appropriations committees consider establishing a moratorium on expanding the status during the current Legislature until the Legislature is able to adopt a more comprehensive and consistent approach for managing the SDSI process.
Granting SDSI status to the State Securities Board would go against the notion of limited government. We oppose House Bill 2493.