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.