HBA-TBM H.B. 2728 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2728 By: Crownover Pensions & Investments 3/18/2001 Introduced 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. 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 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, and the sale is made under a qualified plan under the federal Internal Revenue Code of 1986, or is exempt from the registration requirements of the federal Securities Act of 1933. EFFECTIVE DATE September 1, 2001.