NO.

_______________
IN THE
COURT OF CRIMINAL APPEALS OF TEXAS
EX PARTE WARREN KENNETH PAXTON, JR.

__________________________________________________________________
On Appeal from the 416th Judicial District Court, Collin County, Texas
Cause Nos. 416-81913-2015, 416-82148-2015, 416-82149-2015
__________________________________________________________________

APPELLANTS PETITION FOR DISCRETIONARY REVIEW

__________________________________________________________________
Philip H. Hilder
State Bar No. 09620050
Q. Tate Williams
Paul L. Creech
Hilder & Associates, P.C.
819 Lovett Blvd.
Houston, Texas 77006
(713) 6565-9111 Office
(713) 655-9112 Fax
philip@hilderlaw.com
tate@hilderlaw.com
paul@hilderlaw.com

ORAL ARGUMENT NOT REQUESTED

IDENTITY OF JUDGE, PARTIES, AND COUNSEL

The following is a complete list of the names and addresses of all parties and
counsel in this case:
Trial Judge: Honorable George Gallagher, sitting by appointment; Court of
Criminal Appeals, Supreme Court Building, 201 West 14th Street, Austin,
TX 78701.
Appellant: Warren Kenneth Paxton, Jr., c/o Philip H. Hilder, Hilder &
Associates, P.C., 819 Lovett Blvd., Houston, TX 77006.
Appellants Counsel: Philip H. Hilder, Q. Tate Williams, Paul L. Creech,
Hilder & Associates, P.C., 819 Lovett Blvd., Houston, TX 77006; Dan
Cogdell, Cogdell Law Firm, L.L.C., 402 Main Street, 4th Floor, Houston,
Texas 77002; William Mateja, Polsinelli, P.C., 2950 N. Harwood, Suite
2100, Dallas, Texas 75201; Terri Moore, 300 Burnett St., Ste. 160, Fort
Worth, TX 76102-2755; Heather J. Barbieri, Barbieri Law Firm, P.C., 1400
Gables Court, Plano, Texas 75075; J. Mitchell Little, Byron Henry, Scheef
& Stone, LLP, 2600 Network Blvd., Ste. 400, Frisco, TX 75034
State of Texas: Attorneys Pro Tem Kent A. Schaffer, Nicole DeBorde, 712
Main Street, Ste. 2400, Houston, TX 77002 ; Brian W. Wice, 440
Louisiana, Ste. 900, Houston, TX 77002

TABLE OF CONTENTS
Identity of Judge, Parties, and Counsel...................................................................... i
Index of Authorities ................................................................................................. iv
Statement Regarding Oral Argument ........................................................................1
Statement of the Case.................................................................................................1
Statement of Procedural History ................................................................................2
Issue 1: Paxtons Preemption Issue Was Cognizable By Pre-Trial Writ
Because Whether There is a Valid Statute Under Which Paxton can be
Charged Requires a Legal Deter-mination of Whether the Law Has Been
Preempted. ..............................................................................................................2
Issue 2: The Court of Appeals Erred by Refusing to Address Paxtons
Issue in Writ One Because There are no Fact Issues and Whether Paxton
can be Charged can be Determined as a Matter of Law.........................................7
Issue 3: The Court of Appeals Erred Finding that a Grand Jury Formed
Exclusively from Volunteers was not Void and Challengeable in Pretrial
Habeas Corpus. .......................................................................................................9
Issue 4: Fifth Court of Appeals Erred in Misconstruing Culpable Mental
State Requirement for a Violation of 29(I) of the Texas Securities Act ...........13
Issue 5: .............The Court of Appeals Erred in Not Applying Central Hudson to
Determine Whether 29(I) Unconstitutionally Violates the First Amendment
of the United States Constitution..........................................................................16
Prayer for Relief .......................................................................................................17
Certificate of Service ...............................................................................................18

ii

APPENDIX
TAB A: Opinion of the Court of Appeals
TAB B: 17 C.F.R. 275.203A3
TAB C: List of states and applicable provisions acknowledging and incorporating
federal law

iii

INDEX OF AUTHORITIES
Cases
Anderson Courier Serv. v. State, 104 S.W.3d 121 (Tex. App.Austin 2003) .......17
Antilles Cement Corp. v. Fortuo, 670 F.3d 310 (1st Cir. 2012) ..............................4
Cassell v. Texas, 339 U.S. 282, 70 S.Ct. 629, 94 L. Ed. 839 (1950).......................10
Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of New York, 447
U.S. 557, 100 S. Ct. 2343, 65 L. Ed. 2d 341 (1980) ............................................17
DHL Express (USA), Inc. v. Falcon Express Intl., Inc., 408 S.W.3d 406
(Tex.App.Houston [1st Dist.] 2013, pet. denied) ...............................................3
Elonis v. United States, 135 S. Ct. 2001, __U.S. __, 192 L. Ed. 2d (2015) ............16
Ex Parte Becker, 459 S.W.2d 442, 443 (Tex. Crim. App. 1970) ............................10
Ex Parte Ellis, 309 S.W.3d 71 (Tex. Crim. App. 2010) ......................................3, 14
Ex Parte Mangrum, 564 S.W.2d 751 (Tex. Crim. App. [Panel Op.] 1978) ..........3, 4
Ex Parte Meyer, 357 S.W.2d 754 (Tex. Crim. App. 1962) ...................................4, 9
Ex Parte Perry, 483 S.W.3d 884 (Tex. Crim. App. 2016) ....................................3, 5
Ex Parte Psaroudis, 508 S.W.2d 390, 391 (Tex. Crim. App. 1974) .................... 3, 8
Ex Parte Smith, 185 S.W.3d 887 (Tex. Crim. App. 2006) ........................................3
Ex Parte Weise, 55 S.W.3d 617 (Tex. Crim. App. 2001)......................................3, 4
Hara v. Kunath, Karren, Rinne, & Atkin LLC, No. 71767-7-I, 2015 Wash. App.
LEXIS 1319, at *17 (Wash.Ct.App., June 22, 2015) .............................................6
Martinez v. State, 114 S.W.2d 874 (Tex. Crim. App. 1938) ...................................11
Maryland v. Louisiana, 451 U.S. 725 (1981) ............................................................4
McQueen, 781 S.W.2d 600 (Tex.Crim.App. 1989) .......................................... 13, 16
Murphy v. Reynolds, No. 02-10-00229-CV, 2011 Tex. App. LEXIS 7818,
at *8 (Tex. App.Fort Worth Sept. 29, 2011, no pet.) .........................................6
Robinson v. State, 466 S.W.3d 166 (Tex. Crim. App. 2015)............................ 13, 16

iv

Sorrell v. IMS Health Inc., 131 S. Ct. 2653, 180 L. Ed. 2d 544 (2011) ..................17
Staples v. United States, 511 U.S. 600, 114 S. Ct. 1793, 128 L. Ed. 2d 608
(1994)....................................................................................................................16
Tovar v. State, 978 S.W.2d 584 (Tex. Crim. App. 1998) ........................................16
United States v. Branscome, 682 F.2d 484 (4th Cir. 1982) ......................................10
United States v. Kennedy, 548 F.2d 608 (5th Cir. 1977), cert. denied, 434 U.S.
865, 98 S.Ct. 199, 54 L. Ed. 2d 140 (1977) .........................................................10
United States v. Singleterry, 683 F.2d 122 (5th Cir. 1982) ......................................10
Vasquez v. Hillery, 474 U.S. 254, 106 S.Ct. 617, 88 L. Ed. 2d 598 (1986) ............10
Wilson v. State, 448 S.W.3d 418 (Tex. Crim. App. 2014) ........................................7
Woolen v. State, 150 S.W. 1165 (Tex. Crim. App. 1912) .......................................11
Statutes
15 U.S.C. 80b-3a(b)(1)(A) ......................................................................................6
TEX. CIV. STAT. ART. 581-12(B), (C) (2010)...........................................................14
TEX. CODE CRIM. PRO. ART. 19.01(b) ......................................................................12
TEX. REV. CIV. STAT. ANN. art. 581-4(P).......................................................... 2, 5, 6
TEX. REV. CIV. STAT. ANN. art. 581-12-1(B) .........................................................8, 9
TEX. REV. CIV. STAT. ANN. art. 581-29(I) .................................................... et passim
Rules
Tex. R. App. P. 4.1(a) ................................................................................................2
Tex. R. App. P. 66.3(b), (c), (d), and (f) ................................................................3, 8
Tex. R. App. P. 66.3(b), (c), and (f).........................................................................11
Tex. R. App. P. 66.3(c), (d) and (f)................................................................... 14, 17
Tex. R. App. P. 68.1...................................................................................................1
Tex. R. App. P. 68.2(a) ..............................................................................................2
v

Other Authorities
17 C.F.R. 275.203A-3 .............................................................................................6
17 C.F.R. 275.203A-3(a) & (b) ..............................................................................6
7 TEX. ADMIN. CODE 116.1(b)(2)(A)(ii) ...............................................................15
7 TEX. ADMIN. CODE 116.1(b)(2)(B) ....................................................................14
15 U.S.C. 80b-3a(b)(1) ...........................................................................................5
TEX. GOVT. CODE 551.144 ....................................................................................16
TEX. PEN. CODE 6.02 ............................................................................................ 13

vi

TO THE COURT OF CRIMINAL APPEALS OF TEXAS:

COMES NOW Appellant, Warren Kenneth Paxton, Jr. (Paxton or
Appellant), and pursuant to Tex. R. App. P. 68.1, presents this Petition for
Discretionary Review, and respectfully shows this Honorable Court the following:
STATEMENT REGARDING ORAL ARGUMENT
Paxton does not request oral argument.
STATEMENT OF THE CASE
Paxton was indicted by a Collin County grand jury alleging felony violations
of Sections 29-I and 29-C of the Texas Securities Act. C.R.I., 15-16; C.R.II., 1112; C.R.III., 11-12. Paxton filed four applications for writs of habeas corpus
challenging the formation of the grand jury that returned all three indictments,
whether he can be prosecuted under Section 29-I and the facial constitutionality of
Section 29-I. C.R.I, 17-228. After the assigned District Judge denied relief,
Paxton appealed to the Fifth Court of Appeals. R.R.1, C.R.I., 359-362. That court
denied relief on Appellants first, second, and third issues on cognizability
grounds, and the fourth on the merits.1 Paxton brings this Petition to challenge that
denial.

Tab A at 21.
1

STATEMENT OF PROCEDURAL HISTORY

After en banc oral arguments, Fifth Court of Appeals issued a published
opinion on June 1, 2016.2 Appellant filed a motion for rehearing on June 15, 2016,
which was denied on June 30, 2016. This Petition for Discretionary Review is due
Monday, August 1, 2016. Tex. R. App. P. 4.1(a); Tex. R. App. P. 68.2(a).
ISSUE 1:

PAXTONS PREEMPTION ISSUE WAS COGNIZABLE BY PRE-TRIAL

WRIT BECAUSE WHETHER THERE IS A VALID STATUTE UNDER
WHICH PAXTON CAN BE CHARGED REQUIRES A LEGAL DETERMINATION OF WHETHER THE LAW HAS BEEN PREEMPTED.

Paxton argued that the statute under which he was charged for acting as an
unregistered investment adviser representative (TEX. REV. CIV. STAT. ANN. ARTS.
581-29(I), 581-4(P)) is unconstitutionally vague, and therefore, invalid, having
been preempted by the federal securities laws. Paxton has been charged with a
crime that does not exist. The Court of Appeals erred by holding that Paxtons
preemption issue under Writ Two was not cognizable by pre-trial writ of habeas
corpus. This Court should correct this error. Paxton should not be consigned to
stand trial for a non-existent crime under an invalid statute. The writ is designed to
protect against this very wrong.
The Court of Appeals acknowledged that a pre-trial writ is available to
challenge certain issues that would bar prosecution and conviction. (Tab A at 3.)
It is well settled that a pre-trial writ of habeas corpus is available to challenge
2

See Tab A. Two judges filed a concurring opinion. Tab A at 21.

2

whether a defendant is being charged under a valid statute. See, e.g., Ex Parte
Weise, 55 S.W.3d 617, 620 (Tex. Crim. App. 2001) ([W]hen there is a valid
statute or ordinance under which a prosecution may be brought, habeas corpus is
generally not available before trial . . . .); Ex parte Mangrum, 564 S.W.2d 751
(Tex. Crim. App. [Panel Op.] 1978) (holding pretrial habeas permitted if there is
no valid statute under which the prosecution may be brought); Ex Parte Psaroudis,
508 S.W.2d 390, 391 (Tex. Crim. App. 1974) (same). It is equally settled that pretrial habeas is the proper vehicle to challenge a statute that is unconstitutionally
vague. See Ex Parte Perry, 483 S.W.3d 884, 895 (Tex. Crim. App. 2016); Ex Parte
Ellis, 309 S.W.3d 71, 79 (Tex. Crim. App. 2010). Notwithstanding these settled
precedents, the Court of Appeals inexplicably refused to consider Paxtons
preemption argument. This Court should correct that error. Discretionary review
should be granted under Tex. R. App. P. 66.3(b), (c), (d), and (f).
First, preemption is an issue of law for the court. See DHL Express (USA),
Inc. v. Falcon Express Intl., Inc., 408 S.W.3d 406, 410 (Tex.App.Houston [1st
Dist.] 2013, pet. denied) (Whether a claim is preempted is an issue of law we
review de novo.). No additional development of the record will aid courts in
resolving the issue of whether the state statute underlying the unregistered
investment adviser representative charge is valid. See Ex parte Smith, 185 S.W.3d
887, 893 (Tex. Crim. App. 2006) (pretrial writ generally unavailable if resolution

of claim would benefit from additional facts).

Because an analysis and

determination of the validity of the state law in effect at the time of the alleged
conduct will not change, the only question is when to perform the purely legal
analysis of whether the state law is valid.
Second, the Court of Appeals refused to acknowledge that a state statute
preempted by federal law is void ab initio. See Antilles Cement Corp. v. Fortuo,
670 F.3d 310, 323 (1st Cir. 2012). When a state law conflicts with federal law, the
state law is invalid and without effect. Maryland v. Louisiana, 451 U.S. 725, 747
(1981).

Federal preemption of state law effectively repeals the preempted

provisions. See PLIVA, Inc. v. Mensing, 113 S. Ct. 2567, 2579-80 (2011). The
Court of Appeals, however, held that a pre-trial writ is not available to determine
whether a defendant is charged under an effectively repealed statute. That is not
the law. See Mangrum, 564 S.W.2d at 753-54; see also Ex Parte Meyer, 357
S.W.2d 754, 405 (Tex. Crim. App. 1962) (court must determine on this habeas
corpus hearing whether or not the facts set forth in the indictment constitute a
violation of any valid penal statute (emphasis added)).
This Court has also held that a waste of time and judicial resources is a
factor to consider in deciding whether to address an issue by pre-trial writ. See
Weise, 55 S.W.3d at 620 (pretrial habeas reserved for situations where the
conservation of judicial resources would be better served by interlocutory

review). There are no additional facts that could be developed at trial that would
affect the preemption analysis. Hence, there is no reason to decline to address the
purely legal issue now and save the State and Paxton time, dollars, and resources
that would be wasted by conducting a trial based upon an indictment under an
invalid statute.3
Third, the Court of Appeals bemoans the exhaustive review required to
determine whether the state law under which Paxton is charged has been
preempted by federal law. (Tab A at 14.) But the complexity of resolving the
purely legal question of whether a valid statute exists is no reason to deny a writ.
Legal questions, even difficult ones, are within the proper scope of a writ.
It is clear that articles 581-29(I) and 581-4(P) have been preempted by
federal law.

Section 203A(b) of the Advisers Act 4 clearly dictates that state

Additionally, the rationale for resolving legal claims pre-trial discussed in Perry applies equally
to Paxton, the incumbent Texas Attorney General. Perry, 483 S.W.3d at 898 (internal citations
omitted) ([I]t is not too extravagant to suggest that an elected official should be entitled to
pre-trial review of the denial of any legal claim that could be readily resolved before trial and
would, if upheld, prevent trial or conviction on a pending indictment.); id. (The mere issuance
of an indictment has a profound impact on the accused . . . publicity will be widespread and
devastating.).
4
Section 203(A)(b) provides that:
No law of any State or political subdivision thereof requiring the registration, licensing, or
qualification as an investment adviser or supervised person of an investment adviser shall apply
to any person
(A) that is registered under section 203 as an investment adviser, or that is a supervised person of
such person, except that a State may license, register, or otherwise qualify any investment
adviser representative who has a place of business located within that State; or
(B) that is not registered under section 203 because that person is excepted from the definition or
an investment adviser under section 202(a)(11)
15 U.S.C. 80b-3a(b)(1).
5

regulation of investment advisers registered under federal law is entirely

preempted by the federal securities laws, except for the limited ability of states to
require the registration of an investment adviser representative who has a place of
business located within that State and who meet the federal definition of
investment adviser representative. 5 See 15 U.S.C. 80b-3a(b)(1)(A) (preempting
state law); 17 C.F.R. 275.203A-3 (defining investment adviser representative);
Murphy v. Reynolds, No. 02-10-00229-CV, 2011 Tex. App. LEXIS 7818, at *8
(Tex. App.Fort Worth Sept. 29, 2011, no pet.) (mem. op.) (Any entity or person
qualifying for an exemption under the federal definition of investment advisor is
statutorily exempt from state registration.); Hara v. Kunath, Karren, Rinne, &
Atkin LLC, No. 71767-7-I, 2015 Wash. App. LEXIS 1319, at *17 (Wash.Ct.App.,
June 22, 2015) (stating that 15 U.S.C. 80b-3a(b)(1)(A) preempts most state
regulation of investment advisers).
Unlike the vast majority of other states that have amended their laws to
conform to the federal definition, 6 Texas state law purports to require registration
of an investment adviser representative (IAR) without regard to the federal
definition and its multifarious elements. See TEX. REV. CIV. STAT. ANN. arts. 58129(I) (requiring registration of an investment adviser representative), 581-4(P)
5

Compare 17 C.F.R. 275.203A-3(a) & (b) (defining investment adviser representative and
place of business) with TEX. R. CIV. STAT. ANN. ART. 581-4(P) (Apx. Tab B).
6
Apx. Tab C (listing states and applicable provisions acknowledging and incorporating federal
law).
6

(defining the term investment adviser representative without regard to the federal
definition).

The gravamen of a vagueness challenge is whether the statute

provide[s] the kind of notice that will enable ordinary people to understand what
conduct it prohibits. Wilson v. State, 448 S.W.3d 418, 428 (Tex. Crim. App.
2014). The statute under which Paxton was charged has been preempted. The
standard against which his conduct will be judged at trial is unconstitutionally
vague and indeterminate. Without a valid definition of IAR, namely the federal
definition, the statute is vague and there is no valid statute under which Paxton can
be charged.

At a minimum, this Court should reverse and remand for a

determination of whether the statute has been preempted.

ISSUE 2:

THE COURT OF APPEALS ERRED BY REFUSING TO ADDRESS

PAXTONS ISSUE IN WRIT ONE BECAUSE THERE ARE NO FACT
ISSUES AND WHETHER PAXTON CAN BE CHARGED CAN BE
DETERMINED AS A MATTER OF LAW.

Should this Court grant the Petition, Paxton will brief the issue of whether
the Court of Appeals erred by refusing to address Paxtons issue in Writ One as
there are no disputed relevant facts and the issue can be resolved as a matter of
law. Like issue one, the Court of Appeals erred by failing to address Paxtons
issue alleging that the conduct alleged in the indictment does is not a crime. This
Court need not address the preemption issue because the statute as written does not
criminalize Paxtons conduct. Discretionary review should be granted under Tex.

R. App. P. 66.3(b), (c), (d), and (f).

The Court of Appeals erred when it found that there were disputed fact
issues to distinguish it from this Courts ruling in Ex Parte Psaroudis.7 (Tab A at
12, 13.) Assuming Mowery Capital Management (MCM) became registered
with the State in June 2012, it is undisputed MCM remained registered with the
SEC until October 2012. (Tab A at 11.) Paxtons issue revolves around whether he
was required to register with the State so long as MCM was federally registered,
regardless of whether MCM should or should not have been registered with the
SEC. The State argued that MCM should not have been registered with the SEC
after June 28, 2012. But it was registered with the SEC. Whether that registration
was appropriate is a dispute between the SEC and MCM, and has nothing to do
with the case between the State and Paxton.
The plain language of the statute under which Paxton was charged excludes
IARs for federally-covered investment advisers from the registration requirement.
TEX. REV. CIV. STAT. ANN. art. 581-12-1(B).

Paxtons duty to register is

dependent on the fact of MCMs registration with the SEC, which is undisputed, as
opposed to its propriety, which is a question of law that is disputed. Any impact of
MCMs dual registration is a purely legal question, not a factual one.
The Court of Appeals erred by failing to address whether Paxtons alleged

508 S.W.2d 390 (Tex. Crim. App. 1974).

8

conduct was a crime by simply applying the statute to an undisputed set of facts.
See Meyer, 357 S.W.2d at 405. Upon review, the Court should hold that pursuant
to article 581-12-1(B), Paxton cannot be charged with failing to register so long as
MCM was registered with the SEC on July 18, 2012, the date of the relevant
conduct.
ISSUE 3:

THE COURT OF APPEALS ERRED FINDING THAT

FORMED EXCLUSIVELY FROM VOLUNTEERS WAS
CHALLENGEABLE IN PRETRIAL HABEAS CORPUS.

A GRAND JURY
NOT VOID AND

Paxton was indicted by a grand jury formed exclusively of volunteers who

were willing to serve as a result of a judges effort to save everybody a little
time, 8 thereby rendering such grand jury void. The recent amendments by H.B.
2150 to Code of Criminal Procedure Chapter 19 (Amendments) 9 abolishing the
pick-a-pal system make it critical that every district judge in Texas obtain
immediate guidance from this Court whether they may form a grand jury
exclusively of volunteers. The Court of Appeals stated it would not view the
proceedings in a vacuum, but then did exactly that by ignoring the nullifying
effect of its decision on the Amendments which eliminated the pick-a-pal
commissioner system in favor of the random system which was to be used in this
case. (Tab A at 9.) Federal courts have consistently held that the use of volunteers
8

C.R.I., 167-168; C.R.II., 52-53; C.R.III., 52-53.

H.B. 2150, 84th Leg., eff. Sept 1, 2015, at
http://www.capitol.state.tx.us/tlodocs/84R/billtext/pdf/HB02150F.pdf#navpanes=0 (last viewed
July 22, 2016).
9

improperly un-randomizes a randomly selected venire. See e.g., United States v.

Branscome, 529 F.Supp. 556 (E.D.Va.1982) affirmed, 682 F.2d 484, 485 (4th Cir.
1982) citing United States v. Kennedy, 548 F.2d 608, 612 (5th Cir. 1977), cert.
denied, 434 U.S. 865, 98 S.Ct. 199, 54 L. Ed. 2d 140 (1977), overruled on other
grounds by United States v. Singleterry, 683 F.2d 122 (5th Cir. 1982).10 So too
should this Court. This manipulation of the random process to un-randomize the
grand jury was harm per se to Paxton.
Absent guidance from this Court at this time, every judge will call for
volunteers and select grand juries from that pool, rendering the recent legislative
reforms meaningless. Paxton is entitled to pre-trial habeas relief because the
district judges violations of the grand jury formation were arbitrary and deprived
it of the power to indict according to this Courts jurisprudence. Ex Parte Becker,
459 S.W.2d 442, 443 (Tex. Crim. App. 1970).
The Court of Appeals erred in finding, contrary to precedents of this Court,
that Paxton claims were not cognizable in pre-trial habeas. Paxtons complaint
relates to the judges discretion and would not render the grand jury without the
authority to proceed. (Tab A. at 9.) In its cognizability analysis under Becker, the
Court of Appeals misapplied several decisions of this Court that reached the
10

The United States Supreme Court has also treated some errors which affect the composition of
grand juries as structural error. See e.g., Vasquez v. Hillery, 474 U.S. 254, 263-64, 106 S.Ct. 617,
88 L. Ed. 2d 598 (1986); Cassell v. Texas, 339 U.S. 282, 283-84, 70 S.Ct. 629, 94 L. Ed. 839
(1950) (grand jury).
10

opposite conclusion. (Tab A. at 6-7.)11 The intentional and arbitrary violation of

Texas statutory grand jury empanelment scheme, to try to save everybody a little
bit of time, closely resembles the situations in both Martinez v. State and Woolen
v. State, in which this Court found that the grand juries were illegally constituted.
See fn. 5 and 8. These precedents render the grand jury without authority to indict.
Paxtons claim is, therefore, cognizable in pre-trial habeas. Discretionary review
should be granted under Tex. R. App. P. 66.3(b), (c), and (f).
Moreover, by its erroneous application of precedent, the Court of Appeals
avoided considering whether the formation of the grand jury exclusively from
volunteers12 for the sake of expediency, deprived it of the statutorily intended
random character.13 Immediate guidance from this Court whether that practice is
allowed by law is critical to district judges implementation of the recent
legislation eliminating the key-man or commissioner system of grand jury
selection in favor of the random process.14 Allowing judges to qualify and select
11

In Martinez v. State, 114 S.W.2d 874, 875-77 (Tex. Crim. App. 1938) the judge did not
appoint commissioners each term of court in order to save money. Id. 875. Similarly, in Woolen
v. State, 150 S.W. 1165 (Tex. Crim. App. 1912), the judge violated the grand jury statutes to
draw commissioners for the next several terms of court because it would be more expedient. Id.
at 1167.
12
The empaneling judge repeatedly described those selected as volunteers. C.R.I., 189, 193194; C.R.II., 74, 78-79; C.R.III., 74, 78-79.
13
The grand jury was formed exclusively of volunteers. C.R.I., 167-171, 189-191, 196; C.R.II.,
52-56, 74-76, 81; C.R.III., 52-56, 74-76, 81.
14
The random system was originally created with the express intent to create a random
alternative to the key-man system. See Act of May 3, 1979, 66th Leg., ch. 184, Sec. 2, 1979
Tex. Gen. Laws 391-393 available at http://www.lrl.state.tx.us/scanned/sessionLaws/660/HB_1436_CH_184.pdf (last viewed July 20, 2016); HOUSE STUDY GROUP, BILL ANALYSIS,
11

grand jurors from volunteers negates the randomness built into Article 19.01(b) in
three clear ways: i) volunteer grand jurors self-select; ii) the number of volunteers
to be impaneled is left to the impaneling judge; and iii) the judge may place the
volunteers in preferential positions for selection rather than their previous position
on the panel. This effectively allows a district judge to re-create the commissioner
system by hand selecting volunteers willing to serve from the randomly
summoned panel. In less populated counties where those summoned are more
likely to be known to the judge, this effect is exacerbated and a return to pick a
pal invited. That ability to un-randomize grand jury formation is precisely what
the legislature eliminated and which the Court of Appeals declined to address.15 It
is harm per se to Paxton and absent guidance from this Court will be repeated by
judges across the state inflicting harm on countless others.

Tex. HB 1436, 66th Leg., R.S. (1979) ( This bill allows the selection of the grand jury panel
on a random basis in the same manner as juries are selected for civil cases.) available at
http://www.lrl.state.tx.us/scanned/hroBillAnalyses/66-0/HB1436.pdf (last viewed July 20, 2016).
15
One of the many criticisms of the grand jury commissioner system was that it allowed the
courts to compose grand juries of prosecution friendly volunteers. See Langford, Terri, Is it
Time to Ditch Texas Key Man Grand Jury System, TEXAS TRIBUNE, September 15, 2014,
available at http://www.texastribune.org/2014/09/15/time-ditch-key-man-grand-jury-system/ (last
viewed July 20, 2016); Balko, Radley, Houston Grand Juries: too white, too law-and-order, and
too
cozy
with
cops.
WASHINGTON
POST,
August
1,
2014,
at
https://www.washingtonpost.com/news/the-watch/wp/2014/08/01/houston-grand-juries-toowhite-too-law-and-order-and-too-cozy-with-cops/ (last viewed July 20, 2016).
12

ISSUE 4:

FIFTH COURT OF APPEALS ERRED IN MISCONSTRUING CULPABLE

MENTAL STATE REQUIREMENT FOR A VIOLATION OF 29(I) OF THE
TEXAS SECURITIES ACT

The Court of Appeals rendered an advisory opinion erroneously construing

the mens rea applicable to 581-29(I) of the Texas Securities Act (Act).
Although the Court of Appeals correctly held that Section 29(I) is not a strict
liability statute and that Section 6.02 of the Penal Code is applicable to the Act, it
unnecessarily went further in its analysis and misinterpreted this Courts
jurisprudence, including the recent decision in Robinson v. State, 16 to apply 6.02
to the wrong element of 29(I). It is crucial that this error be corrected. This error
prejudices Paxton at any subsequent trial and undermines the clarity created by this
Courts decision in Robinson for this and other prosecutions.
The Court of Appeals properly determined Paxtons facial challenge was an
appropriate habeas challenge, yet erred in concluding that 581-29(I) does not
require a culpable mental state as to the circumstance that makes the conduct
therein illegal. See McQueen, 781 S.W.2d 600, 603 (Tex.Crim.App. 1989);17
Robinson 466 S.W.3d at 171-72. After determining that 6.02 applied to the Act,
the court went further and turned this Courts decision in Robinson around
concluding, [t]he Texas Securities Act does not require one to know he must
16

Robinson v. State, 466 S.W.3d 166, at 171-72 (Tex. Crim. App. 2015).
The Texas Penal Code delineates three conduct elements to which the required culpable
mental state applies: (1) the nature of the conduct; (2) the result of the conduct; and (3) the
circumstances surrounding the conduct. McQueen at 603.
17

13

register if he intends to serve as an investment adviser representative. (Tab A. at

20.) The Court of Appeals having chosen to construe that element incorrectly,
discretionary review should be granted under Tex. R. App. P. 66.3(c), (d) and (f).
At issue was the existence of mens rea, not its application. Neither party
requested that the Court of Appeals construe the meaning and application of mens
rea in 29(I). Nor was the issue raised at oral argument on Paxtons appeal.
Indeed, as the Court of Appeals noted, pre-trial habeas is generally not available
to construe the meaning and application of the statute defining the offense
charged. (Tab A. at 12.) 18

Compounding this error, the Court of Appeals

proceeded to further deviate from the jurisprudence of this Court to suggest that
that no mens rea was required as to the circumstance rendering the otherwise legal
conduct in the statute illegal. (Tab A. at 12-13.)
Being registered as required by this Act is the only circumstance that turns
the innocent act of rendering services as an investment advisor or investment
advisor representative into a crime. See TEX. CIV. STAT. ART. 581-12(B), (C)
(2010).19

Specifically, 29(I) provides that rendering services as an IAR is

18

Citing Ex Parte Ellis, 309 S.W.3d at 79.

The Texas Securities Act itself provides for registration exemptions and authorizes the Texas
Securities Board to adopt additional exemptions.); 7 TEX. ADMIN. CODE 116.1(b)(2)(B)
(Pursuant to Texas Securities Board rules, an investment adviser representative need not register
if he renders advice in Texas but does not have a place of business in Texas and is a
representative of an investment adviser that is not required to register with the Texas Securities
Board.); 7 TEX. ADMIN. CODE 116.1(b)(2)(A)(ii) (One example of an investment adviser that
need not register with the Texas Securities Board is an adviser that is registered with the U.S.
19

14

criminal only if done without being registered as required by this Act. TEX. CIV.
STAT. 581-29(I)(emphasis added).
Like the duty to register under CCP Chapter 62 in both the Robinson opinion
and concurrence, 29(I)s registration requirements are triggered only by a
persons duty to register. Robinson at 172 and 177. Acting as an investment
advisor or IAR may require guilt of violating 29(I) only if two circumstances are
present: (1) he is not registered, and (2) he was required by the Act to register.
Under this Courts precedents, guilty knowledge must be proven as to each of
those circumstances. See e.g., McQueen, supra at 603; Robinson v. State, 466
S.W.3d 166, 171-73 (Tex. Crim. App. 2015)([t]o sustain [Defendants] failure-tocomply conviction, the statute requires that [Defendant] (1) knew or was reckless
about whether he had a duty to register . . ., and (2) failed to report in person to the
local law-enforcement authority.)(emphasis added).20 Nevertheless, the Court of
Appeals grossly misinterpreted Robinson v. State, to reach the opposite
conclusion.21 That logic would hold that Robinson need not be aware of his duty
to register to be convicted of failing to register a Kafkaesque conclusion this
Securities and Exchange Commission.).
20
This is consistent with the approach of the Supreme Court. See, e.g., Elonis v. United States,
135 S. Ct. 2001, __U.S. __, 192 L. Ed. 2d (2015)([O]ur cases have explained that a defendant
generally must know the facts that take his conduct fit the definition of the offense. citing
Staples v. United States, 511 U.S. 600, 608, n.3, 114 S. Ct. 1793, 128 L. Ed. 2d 608 (1994)).
21
The Court of Appeals attached misplaced reliance on Tovar v. State, 978 S.W.2d 584, 586
(Tex. Crim. App. 1998) as the statutory analysis used in that case is inapposite because the
interpreted statute expressly provided for the culpable mental state. See TEX. GOV. CODE
551.144.
15

Court did not and would not reach.

ISSUE 5:

THE COURT OF APPEALS ERRED IN NOT APPLYING CENTRAL

HUDSON TO DETERMINE WHETHER 29(I) UNCONSTITUTIONALLY
VIOLATES THE FIRST AMENDMENT OF THE UNITED STATES
CONSTITUTION.

The Court of Appeals erred by ignoring the States failure to even attempt to
carry its burden under the test set out by the Supreme Court in Cent. Hudson Gas
& Elec. Corp. v. Pub. Serv. Comm'n of New York. 22 After correctly finding that
29(I) regulates commercial speech, the Court of Appeals failed to apply the final
three prongs of the Central Hudson test. (Tab A. at 15-16.) To avoid the result
compelled by Central Hudson the Court of Appeals decided the First Amendment
claim by converting it to an overbreadth doctrine argument never briefed by
Paxton or the State. Id. The Court of Appeals then decided that the overbreadth
doctrine did not apply and failed to complete the analysis of the applicable Central
Hudson test. Id. Discretionary review should be granted under Tex. R. App. P.
66.3(c), (d) and (f).

22

Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of New York, 447 U.S. 557, 100 S. Ct.
2343, 65 L. Ed. 2d 341 (1980). See also, Anderson Courier Serv. v. State, 104 S.W.3d 121, 124
(Tex. App.Austin 2003); Sorrell v. IMS Health Inc., 131 S. Ct. 2653, 2667, 180 L. Ed. 2d 544
(2011).
16

PRAYER FOR RELIEF

WHEREFORE, PREMISES CONSIDERED, Paxton respectfully prays that

this Court grant discretionary review, establish an expedited briefing schedule, and
thereafter reverse the judgment of the Court of Appeals denying relief.
Respectfully submitted,
Dan Cogdell
Co-Lead Counsel
Cogdell Law Firm, L.L.C.
402 Main Street
Fourth Floor
Houston, Texas 77002
Telephone: (713) 426-2244
Facsimile: (713) 426-2255
dan@cogdell-law.com
Terri Moore
300 Burnett St., Ste. 160
Fort Worth, TX 76102-2755
Telephone: (817) 877-4700
moore@terrimoorelaw.com

Heather J. Barbieri
Barbieri Law Firm, P.C.
1400 Gables Court
Plano, Texas 75075
Telephone: (972) 424-1902
Facsimile: (972) 208-2100
hbarbieri@barbierilawfirm.com

HILDER & ASSOCIATES, P.C.

/s/ Philip H. Hilder

Philip H. Hilder
State Bar No. 09620050
Co-Lead Counsel
Q. Tate Williams
State Bar No. 24013760
Paul L. Creech
State Bar No. 24075578
819 Lovett Blvd.
Houston, Texas 77006
Telephone: (713) 655-9111
Facsimile: (713) 655-9112
philip@hilderlaw.com
tate@hilderlaw.com
paul@hilderlaw.com
Bill Mateja
Polsinelli, P.C.
2950 N. Harwood, Suite 2100
Dallas, Texas 75201
Telephone: (214) 292-4008
mateja@polsinelli.com

17

Byron Henry
J. Mitchell Little
Scheef & Stone, LLP
2600 Network Blvd., Ste. 400
Frisco, TX 75034
Telephone: (214) 472-2100
Facsimile: (214) 472-2150
mitch.little@solidcounsel.com
OF COUNSEL
ATTORNEYS FOR APPELLANT
WARREN KENNETH PAXTON, JR.

CERTIFICATE OF SERVICE
I hereby certify that on August 1, 2016, a true and correct copy of the above
and foregoing Petition for Discretionary Review was served on all counsel of
record via the electronic case filing service provider contemporaneous with
electronic filing.
/s/ Philip H. Hilder
Philip H. Hilder

18

TAB A
Opinion of the Court of Appeals

AFFIRMED and Opinion Filed June 1, 2016

S
In The

Court of Appeals
Fifth District of Texas at Dallas
No. 05-16-00004-CR
No. 05-16-00005-CR
No. 05-16-00006-CR
EX PARTE WARREN KENNETH PAXTON JR.
On Appeal from the 416th Judicial District Court
Collin County, Texas
Trial Court Cause Nos. 416-81913-2015, 416-82148-2015, 416-82149-2015

OPINION
Before the Court En Banc1
Opinion by Chief Justice Wright
The question before us in this accelerated appeal is whether the trial court properly
denied Warren Kenneth Paxton, Jr. the relief sought in his applications for writ of habeas corpus
challenging the States ability to prosecute him.2 We conclude three of appellants claims are not
cognizable by pretrial writ of habeas corpus and the fourth does not entitle him to relief.
Consequently, we affirm the trial courts orders denying the relief sought by appellant.
Background
The Collin County Grand Jury returned three felony indictments against appellant. One
indictment charged appellant with acting as an investment advisor representative without being

1
2

Justices Myers, Evans, Lewis, and Whitehill not participating.

An appeal in a habeas corpus will be heard at the earliest practicable time. See TEX. R. APP. P. 31.2.

registered with the Texas Securities Board; and the other two indictments alleged appellant
committed securities fraud. Appellant challenged the three indictments in four applications for
pretrial writs of habeas corpus. Specifically, appellant argued (1) he could not be charged under
the Texas Securities Act because he was not required to register under the act; (2) he could not
be charged under the Texas Securities Act for failing to register as an investment advisor
representative because there is no valid definition of investment adviser representative, rendering
article 581-29(I) of the Texas Securities Act unconstitutionally vague; (3) all three indictments
are void because the grand jury that returned the indictments was illegally constituted; and (4)
article 581-29(I) is facially unconstitutional because it is overbroad and vague. After a hearing,
the trial court denied appellants applications. In four issues on appeal, appellant challenges each
of the trial courts determinations.
Pretrial Habeas
Pretrial habeas, followed by an interlocutory appeal, is an extraordinary remedy. Ex
parte Perry, 483 S.W.3d 884, 895 (Tex. Crim. App. 2016).

This remedy is reserved for

situations in which the protection of the applicants substantive rights or the conservation of
judicial resources would be better served by interlocutory review. Id. Neither trial courts nor
appellate courts should entertain an application for writ of habeas corpus when there is an
adequate remedy by appeal. Ex parte Weise, 55 S.W.3d 617, 619 (Tex. Crim. App. 2001).
Whether a claim is cognizable on pretrial habeas is a threshold issue that should be addressed
before the merits of the claim may be resolved. Ex parte Ellis, 309 S.W.3d 71, 79 (Tex. 2010);
see Perry, 483 S.W.3d at 895 (addressing cognizability of as-applied challenge).

When

determining whether an issue is cognizable by pretrial habeas, we consider a variety of factors,

including whether the rights underlying the claims would be effectively undermined if not
vindicated before trial and whether the alleged defect would bring into question the trial courts
2

power to proceed. Perry, 483 S.W.3d at 89596; Weise, 55 S.W.3d at 619. A defendant may
use a pretrial writ of habeas corpus only in very limited circumstances. Ex parte Smith, 178
S.W.3d 797, 801 (Tex. Crim. App. 2005). The accused may challenge the (1) States power to
restrain him at all, i.e., the existence of probable cause, (2) the manner of his restraint, i.e., the
denial of bail or conditions attached to bail, and (3) certain issues that would bar prosecution or
conviction. Id. Designating a particular complaint as one that is cognizable is not enough; if the
complaint is in fact one that is not cognizable, we should refuse to consider the merits of the
claim. See Ellis, 309 S.W.3d at 7980.
When reviewing the trial courts decision to grant or deny habeas corpus relief, we view
the facts in the light most favorable to the trial courts ruling. Ex parte Wilson, 171 S.W.3d 925,
928 (Tex. AppDallas 2005, no pet.). We will uphold the trial courts ruling absent an abuse of
discretion. Id. In conducting our review, we afford almost total deference to the trial courts
determination of the historical facts that are supported by the record, especially when the fact
findings are based on an evaluation of credibility and demeanor. Id. We afford the same amount
of deference to the trial courts application of the law to the facts if the resolution of the ultimate
question turns on an evaluation of credibility and demeanor. Id. If the resolution of the ultimate
question turns on an application of legal standards, we review the determination de novo. Id.
Grand Jury
In his third issue, appellant contends the trial court erred by denying his third application
for writ of habeas corpus because the grand jury that returned the indictments was improperly
formed, rendering all three indictments void. Specifically, appellant alleges the grand jury was
impaneled in arbitrary violation of the code of criminal procedure because the trial court added
an impermissible, additional qualification for grand jury service, willingness to serve prior to

qualifying anyone on the venire. Appellant contends this issue is appropriate for review on
pretrial habeas under Ex parte Becker, 459 S.W.2d 442 (Tex. Crim. App. 1970).
In response, the State first contends this Court is not bound by Becker, because that case
has been eroded by time and intervening authority. Even if, as the State argues, the court of
criminal appeals habeas corpus jurisprudence has taken a path that will likely prompt the
higher court to reexamine Becker, that is for the court of criminal appeals, not this Court, to
decide. See Patterson v. State, 654 S.W.2d 825, 827 (Tex. AppDallas 1983, pet. refd). We
acknowledge the Becker court, on appeal from the trial court,3 addressed Beckers complaint
without first determining whether the complaint was cognizable on pretrial habeas. We likewise
recognize that in Becker, unlike in this case, the court of criminal appeals was addressing an
immediate existing problem in that the grand jury was still in session and presumably continuing
to return indictments. Becker, 459 S.W.2d at 442 (The question presented by this appeal is a
rather difficult one requiring a prompt reply since the Dallas County Grand Jury involved is still
in session.). However, since Becker, the court of criminal appeals has increasingly placed
importance on determining cognizability as a threshold issue, and has cautioned courts that
addressing the merits of a non-cognizable claim on pretrial habeas is a misuse of the writ. Ellis,
309 S.W.3d at 79; see also Perry, 483 S.W.3d at 89597 (addressing cognizability of separation
of powers claim as a threshold matter). Thus, we follow the courts instruction in Ellis and first
determine whether appellants particular claim is cognizable on pretrial habeas corpus.
When there is a valid statute or ordinance under which a prosecution may be brought,
pretrial habeas is generally not available to test the sufficiency of the charging instrument.
Perry, 483 S.W.3d at 895; Weise, 55 S.W.3d at 620. A few exceptions to this rule exist, but they

At the time, intermediate courts of appeals did not have jurisdiction over criminal matters. Criminal jurisdiction was obtained by the
intermediate courts of appeals in 1981.

have usually been found only when the complaint is such that it would render the proceedings
void from the outset. Ex parte Smith, 152 S.W.3d 170, 171 (Tex. AppDallas 2004), affd, 185
S.W.3d 887 (Tex. Crim. App. 2006). One such exception is a complaint that the composition of
the grand jury is illegal. See Becker, 459 S.W.2d at 44344. When there has been an arbitrary
disregard of statutes regarding the selection and organization of a grand jury, a grand jury is
without authority to return an indictment. See id. at 444. But not all complaints about the
methods used to empanel a grand jury rise to the level of rendering the grand jury without
authority to return an indictment. See id. at 445.
For example, the complained-of grand jury in Becker was impaneled using the jury
commissioner system. See Becker, 459 S.W.2d at 442. Under that system, the grand jury
commissioners submitted a list of names to the district judge in a sealed envelope, and the list
was given to the sheriff. Id. at 443. Before the grand jury was impaneled, the district judge
reordered the names and moved a number of people down the list including Rene Martinez and
Lola Darby. Id. The district judge explained that Martinez was too young and did not reflect
the beliefs and opinions held by the majority of Dallas County and Darby, as a fourth woman on
the grand jury, would make a predominance of women. Id. Becker complained that the grand
jury was illegally formed because the district judge did not select the first twelve names on the
list prepared by the commissioners. The court of criminal appeals determined that although
custom and tradition dictated the requirement that the district judge take the first twelve
qualified persons on the list prepared by the commissioners, the statute contained no such
requirement. Because it was not statutorily required, the court concluded it was an irregularity
and the district judges method was not of sufficient gravity to warrant holding the grand jury
illegally constituted, particularly without any showing of harm or prejudice. Id. at 445.
Similarly, in a post-conviction challenge to the grand jury, the court of criminal appeals
5

determined the trial court did not abuse its discretion by denying a motion to quash the
indictment because the language in the code of criminal procedure mandating that grand jury
commissioners be selected from different portions of the county was directory and not
mandatory, and having four of the five grand jury commissioners from the City of Denton was
sufficient compliance with the statute when the record did not show the proportion of residents
of that county as compared to the population of the City of Denton. Gentry v. State, 770 S.W.2d
780, 794 (Tex. Crim. App. 1988).
In contrast, the court of criminal appeals has determined certain grand juries were
illegally constituted, rendering them without authority to return an indictment. For example, in
Ex parte Bustamente, 137 S.W.2d 29, 3132 (Tex. Crim. App. 1940), the district judge
discharged a twelve-member grand jury and later reconvened the grand jury with only eleven
members. The court of criminal appeals determined the eleven-member grand jury was illegally
formed because the Texas Constitution and the code of criminal procedure required a grand jury
to be composed of twelve members. See id. In another case, the district judge did not appoint
jury commissioners to select a grand jury for each term of court. See Martinez v. State, 114
S.W.2d 874, 87577 (Tex. Crim. App. 1938). Instead, he did so only when necessary to save
the county the expense of having a grand jury unless it became necessary to have one. Id. at
875. The court of criminal appeals determined that because the district judges method of
selecting the grand jury was a plain violation of the express command of the statute without
reason or justification, the grand jury was without authority to return the indictment. See id. at
877. Nor can jury commissioners appointed by the district judge during a court term draw
three grand juries for three separate terms of court. Woolen v. State, 150 S.W. 1165, 1165 (Tex.
Crim. App. 1912). Even though the district judge thought it more expedient and would save
the county money, because the district judge intentionally violated the statute regarding the
6

manner and selection of the grand jury, the second grand jury was illegal and without authority
to return the indictment. Id. at 1167.
At the time the indictments in the cases before us were returned, the code of criminal
procedure provided that the district judge could appoint jury commissioners to select grand
jurors or could summon prospective grand jurors and, after trying the qualifications for and
excuses from service, impanel a grand jury. See Act of May 25, 2001, 77th Leg., R.S., ch. 344,
1, 2001 Tex. Gen. Laws 630, 630 (amended 2015) (current version at TEX. CODE CRIM. PROC.
ANN. arts. 19.01 (West Supp. 2015)).4 When the required number summoned to serve are in
attendance, the district judge shall proceed to test their qualifications. TEX. CODE CRIM. PROC.
ANN. art. 19.21. To be qualified, a prospective grand juror must (1) be a citizen of Texas and the
United States; (2) be able to read and write; (3) not have been convicted of misdemeanor theft or
any felony; and (4) not be under indictment or other legal accusation for misdemeanor theft or
any felony. See id. art. 19.23. And, the code of criminal procedure provides for qualified
persons to be excused from grand jury service. In particular, a qualified person may ask to be
excused from jury service if they are (1) older than 70 years; (2) responsible for the care of a
child younger than 18 years; (3) a student of a public or private secondary school; (4) enrolled
and in actual attendance at an institution of higher education; or (5) for any other reason the trial
court determines is reasonable. Id. art. 19.25.
Here, the record shows the prospective grand jurors were randomly summoned by
drivers licenses. After the clerk swore in the 80 or 85 prospective grand jurors who were
summoned to serve on a grand jury in Collin County for the July 2015 term, the district judge
addressed the prospective grand jurors as a group. He explained the duties of the grand jury,
including that the grand jury sits for one day a week for a period of six months. The district
4

For convenience, we will cite to the current code of criminal procedure, as the amendments do not impact our analysis of appellants issue.

judge also stated the statutory requirements to be qualified as a grand juror and asked any person
who did not meet those requirements to come forward. At that time, several people came
forward; some were not qualified, and some wanted to be excused. The district judge explained
the difference between a disqualification and an excuse from service, told the prospective jurors
the statutory excuses from service, and explained that some of the reasons he had already heard
(moving to another state in a short time, sister was very ill and not expected to live) would
qualify as a very good reason not to serve. The district judge then asked anyone who would
like to invoke an excuse to come forward. At that time, because there was a very long line and
the district judge knew some of the prospective jurors in line had a statutory excuse, the district
judge asked the prospective jurors who had remained seated because they did not believe they
had a disqualification or an excuse to indicate if they were willing to serve. After questioning
the prospective grand jurors in that group, the district judge verified they resided in various parts
of Collin County and individually interrogated the prospective jurors regarding their
qualifications to serve as grand jurors. The district judge again explained the grand jurors time
commitment and excused two of the remaining prospective grand jurors because the time
commitment for serving on the grand jury would be a burden on their businesses.
The district judge then asked for any challenges to the remaining prospective grand
jurors. Because no challenges were made, the district judge excused all of the prospective grand
jurors except for the fourteen remaining prospective grand jurors, identified two of the fourteen
as alternates, and impaneled the other twelve as the grand jury for the July 2015 term of court.
After reviewing the record and, in particular, the process used by the district judge, we
conclude the complained-of method of selecting the grand jury is not a complaint that would
render the grand jury illegally formed, i.e., void, and thus it is not cognizable on pretrial habeas.
Appellant complains the grand jury was illegally constituted because the district judge
8

impermissibly added an additional qualification for prospective grand jurorswillingness to

serveand, by doing so, undermined the randomness intended and imposed by chapter 19.
However, it is clear from this record the district judge and prospective grand jurors understood
this term to mean that, in light of the significant time commitment involved in serving on a grand
jury, a person that was willing to serve was a person able to commit one day a week for six
months. To conclude otherwise requires us to view the proceedings in a vacuum. Regardless of
the wording of appellants complaint, it relates to the district judges discretion to excuse any
person summoned for a reasonable excuse. See TEX. CODE CRIM. PROC. ANN. art. 19.25.
Because appellants complaint does not relate to an intentional and arbitrary disregard of the
means and methods provided by the Legislature in the selection of grand juries, we conclude
appellants particular complaint regarding the selection of the grand jury, even if meritorious,
would not render the grand jury without authority to proceed. Consequently, his particular
complaint does not fall within the narrow exception allowing him to challenge his indictments
prior to trial. Because appellants particular complaint is not cognizable on pretrial habeas, we
overrule appellants third issue.
Failure to Register
In his remaining issues, appellant contends the trial court erred by denying his first,
second, and fourth applications for writ of habeas corpus. Each of these applications challenges
his indictment for failure to register as an investment adviser representative under article 58129(I) of the Texas Securities Act.

In particular, appellant contends: (1) article 581-29(I) does

not prohibit him from rendering services as an investment adviser representative without
registering in Texas, because the registration requirement of article 581-29(I) does not apply to
federally covered investment adviser representatives; (2) article 581-29(I) does not contain a

valid definition of investment adviser representative, rendering it unconstitutionally vague;

and, (3) article 581-29(I) is facially unconstitutional because it is overly broad and vague.
Article 581-12 provides that a person may not act or render services as an investment
adviser representative for a certain investment adviser in this state unless the person is registered
or submits a notice filing as an investment adviser representative for that particular investment
adviser as provided in Section 18 or 12-1 of this Act. See TEX. REV. CIV. STAT. ANN. art. 58112(B) (West 2010). Article 581-4(P) defines an investment adviser representative as each
person or company who, for compensation, is employed, appointed, or authorized by an
investment adviser to solicit clients for the investment adviser or who, on behalf of an investment
adviser, provides investment advice, directly or through subagents, as defined by Board rule, to
the investment advisers clients. See TEX. REV. CIV. STAT. ANN. art. 581-4(P). Article 581-121 provides an exception to the registration requirement for representatives of federally covered
investment advisers. A representative of a federally covered investment adviser is authorized to
render services as an investment adviser representative upon filing a notice with the
Commissioner and paying a fee. See TEX. REV. CIV. STAT. ANN. art. 581-12-1.
The registration required includes filing a written application with such information as
the representatives name, address, previous history, record, and associations. See TEX. REV.
CIV. STAT. ANN. art. 581-18. Article 581-13 fleshes out the registration requirements, which
may include a written examination to test an applicants qualifications and competency to deliver
investment advice. See TEX. REV. CIV. STAT. ANN. art. 581-13. Article 581-23-1 grants the
Commissioner power to issue an order assessing an administrative fine for violations of the Act.
See TEX. REV. CIV. STAT. ANN. art. 581-23-1 (West Supp. 2015). The fine is in addition to any
other remedies. Id. Most importantly for resolution of this appeal, article 581-29(I) provides
that any person who shall [r]ender services as an investment adviser or an investment adviser
10

representative without being registered as required by this Act shall be deemed guilty of a felony
of the third degree. See TEX. REV. CIV. STAT. ANN. art. 581-29(I).
Evidence submitted in connection with the writ applications shows that appellant referred
several of his legal clients to Mowery Capital Management, L.L.C. which, in turn, paid appellant
a commission on the fees the client generated for Mowery. Between 2008 and June of 2012,
Mowery was registered as an investment adviser with the Securities and Exchange Commission.
As a result of changes in federal law, the SECs jurisdiction was changed from regulating
investment advisers with $25,000,000 or more under management to regulating investment
advisers with $100,000,000 or more under management. See DoddFrank Wall Street Reform
and Consumer Protection Act, Pub. L. No. 111-203, 410, 124 Stat. 1376 (2010) (amending 15
USCA 80b-3a (West Supp. 2015)). Because Mowery managed less than $100,000,000, it was
no longer eligible for SEC registration. The federal government gave institutions until June 28,
2012, to make the transition from federal to state registration. See 17 C.F.R. 275.203A-5
(2011). Mowerys registration with the State of Texas was approved on June 25, 2012. Mowery
did not file its form to withdraw from federal registration until October 11, 2012. Appellant is
charged with referring clients to Mowery on July 18, 2012. At that time, appellant was not
registered with the State nor had he filed a notice with the State indicating that he was federally
covered. On May 2, 2014, appellant and Texas Securities Commissioner John Morgan entered
into a Disciplinary Order fining appellant $1,000 for soliciting clients without being registered
with the Securities Board. As part of the agreed findings of fact in the Disciplinary Order, the
parties agreed that Mowery transitioned back to state regulation on June 25, 2012.
In his first issue, appellant contends the trial court erred in denying his first application
for writ of habeas corpus because he was at all relevant times a representative of a federally
covered investment adviser, he was not required to register under the Texas Securities Act, and
11

thus there is no valid statute under which he could be charged. The State responds that the issue
is not cognizable on a pretrial habeas appeal because it (1) seeks to test the sufficiency of the
evidence, (2) attempts to construe the meaning and application of article 581-29(I), and (3) needs
the development of a trial record to be resolved. We agree with the State.
Appellant acknowledges that pretrial habeas is not generally available to construe the
meaning and application of the statute defining the offense charged. Ellis, 309 S.W.3d at 79.
He contends, however, that construing the statute is unnecessary because we would be applying
the statute to an undisputed set of facts. As support for his position, he cites a single caseEx
parte Psaroudis, 508 S.W.2d 390 (Tex. Crim. App. 1974). In Psaroudis, the court of criminal
appeals considered on pretrial habeas whether hashish was excluded from the Texas Controlled
Substances Act. Id. at 390. The court reasoned that if there was no valid statute prohibiting
Psaroudiss admitted conduct, then he was entitled to be discharged. See id. at 391. Appellant
contends that, like Psaroudis, he should be entitled to a pretrial determination of whether the
Texas Securities Acts registration requirements apply to him because if they do not, then there is
no valid statute under which he can be charged.
However, unlike Psaroudis, the facts in this case are in dispute, and we would be
required to construe the meaning of article 581-29(I), as well as federal statutes and regulations.
Appellant contends it is undisputed that Mowery was federally covered on July 18, 2012. But
appellant agreed to a finding of fact in his settlement with the securities commissioner that
Mowery transitioned back to state regulation on June 25, 2012. Furthermore, the State disputes
the effect of Mowerys federal registration during the period between June 25, 2012, when it reregistered with the State and October 11, 2012, when it withdrew its federal registration. We
note that SEC regulations provided that during the transitions triggered by the DoddFrank
reforms, investment advisers were required to comply with both applicable state and federal
12

laws. See 17 C.F.R. 275.203A-1(b)(2), 275.203A-5(c)(1) (2011). We conclude Psaroudis is

distinguishable from the current case.
Finally, we briefly address appellants contention in his reply brief that the disposition of
Perry supports his position.

We conclude it does not.

Perry reaffirms that as applied

challenges are not cognizable on pretrial habeas except for certain carefully limited exceptions.
See Perry, 483 S.W.3d at 89598. The court concluded that cases involving criminal charges
arising from an elected officials performance of his duties and implicating the separation of
powers qualify as such an exception. See id. at 898. In contrast, appellants charges do not arise
out of his duties as an elected official but rather from his conduct as a private citizen.
In light of the clear and recent pronouncements from the court of criminal appeals
detailing the limits of pretrial habeas review, we conclude appellants first issue is not cognizable
on appeal of a pretrial writ because resolving it would require that we construe the statute under
which appellant is charged, it would require us to resolve disputed factual controversies, and it
would require us to apply the statute to appellants particular circumstances notwithstanding the
existence of an adequate remedy by appeal after trial. See Perry, 483 S.W.3d at 895; Weise, 55
S.W.3d at 619. We overrule appellants first issue.
In his second issue, appellant contends the trial court erred in denying his second
application for writ of habeas corpus because article 581-29(I) has been rendered
unconstitutionally vague by changes in federal law that have preempted the definition of
investment adviser representative incorporated from article 581-4(P). Appellant contends the
federal governments definition of investment adviser representative, found at 17 C.F.R.
275.203A-3(a)(1) (2011), has preempted the definition of investment adviser representative
found in article 581-4(P) of the Texas Securities Act. Thus, according to appellant, because
there is either no definition of investment adviser representative that applies for article 58113

29(I), or else there are competing state and federal definitions, article 581-29(I) is
unconstitutionally vague. Again, the State counters that the issue is not cognizable. We again
agree with the State.
A facial vagueness challenge to the constitutionality of a statute is cognizable in pretrial
habeas proceedings. Perry, 483 S.W.3d at 895; Ellis, 309 S.W.3d at 79. In this case, however,
appellant cannot reach the issue of unconstitutional vagueness without first obtaining a finding
that the federal definition of investment adviser representative preempts the state definition.
Appellant cites no authority showing that issues of alleged federal preemption are cognizable on
appeal in pretrial habeas proceedings. He also fails to present authority allowing an appellate
court to construe and apply statutes if the end result would be to create a constitutional issue that
would be reviewable on pretrial habeas appeal. Appellant requests a far-reaching and exhaustive
review of federal and state statutes and regulations that exceeds our role as a court of review on a
pretrial habeas writ. See Perry, 483 S.W.3d at 895. Appellant admits as much in his brief
wherein he explains: [t]he definition at Rule 203A-3 to the Investment Advisers Act of 1940
not the definition at Section 4(P) of the Actis the definition that applies to this case. . . .
Consequently, the crux of the issue, and the basis for the vagueness challenge, is determining
which definition applies.
In light of the mandates from the court of criminal appeals limiting the extraordinary
remedy of pretrial habeas review, we decline to construe the various statutes at issue to
determine which definition applies to appellants case. See Perry, 483 S.W.3d at 895; Weise, 55
S.W.3d at 619. We overrule appellants second issue.
In his fourth issue, appellant contends the trial court erred by not granting his fourth
application for writ of habeas corpus because article 581-29(I) of the Texas Securities Act is so
overbroad and vague that it is facially unconstitutional. A defendant may file a pretrial
14

application for a writ of habeas corpus to conduct a facial challenge to the constitutionality of a
statute that defines the offense charged. Ex parte Thompson, 442 S.W.3d 325, 333 (Tex. Crim.
App. 2014). A facial challenge attacks the statute itself rather than the statutes application to the
defendant. Peraza v. State, 467 S.W.3d 508, 514 (Tex. Crim. App. 2015). Facial constitutional
challenges are a matter of law that we review de novo. Ex parte Lo, 424 S.W.3d 10, 14 (Tex.
Crim. App. 2013). When an appellant brings both overbreadth and vagueness facial
constitutional challenges, we address the overbreadth challenge first. Duncantell v. State, 230
S.W.3d 835, 843 (Tex. App.Houston [14th Dist.] 2007, pet. refd).
As to overbreadth, appellant specifically asserts that article 581-29(I) is unconstitutional
because it incorporates an overly broad definition of investment adviser representative from
article 581-4(P) of the securities statute, thereby regulating commercial speech. He further
argues that because the statute regulates commercial speech protected by the First Amendment it
must, but does not, satisfy the test for such regulations outlined by the United States Supreme
Court in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447
U.S. 557 (1980).
When it implicates the First Amendment, a law may be invalidated as overbroad if a
substantial number of its applications are unconstitutional judged in relation to the statutes
plainly legitimate sweep. United States v. Stevens, 599 U.S. 460, 473 (2010). Commercial
speech is speech which does no more than propose a commercial transaction. Va. State Bd. of
Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 762 (1976). We agree with
appellant that a statute requiring one to register with the State before soliciting clients for an
investment adviser constitutes a regulation of purely commercial speech.
Commercial speech enjoys a lesser standard of constitutional protection. Orharlik v.
Ohio State Bar Assn, 436 U.S. 447, 45556 (1978). It is given a limited measure of protection,
15

commensurate with its subordinate position in the scale of First Amendment values, while
allowing modes of regulation that might be impermissible in the realm of noncommercial
expression. Id. at 456. Government regulation of commercial speech does not abridge First
Amendment rights merely because the conduct regulated is initiated, evidenced, or carried out by
means of spoken, written, or printed language. Id. Among the communications that can be
regulated without offending the First Amendment is the exchange of information about
securities. Id.
In their briefs, the parties focus their analysis on whether the test detailed in Central
Hudson has been met in determining whether the statute is facially overbroad.

But the

overbreadth doctrine does not apply to commercial speech. Vill. of Hoffman Estates v. Flipside,
Hoffman Estates, Inc., 455 U.S. 489, 49697 (1982); see also Bates v. State Bar of Ariz., 433
U.S. 350, 380 (1977) (stating overbreadth analysis applies weakly, if at all, in ordinary
commercial context). In fact, the court in Central Hudson disclaimed any intent to apply the
overbreadth doctrine in its discussion of the commercial speech at issue. See Cent. Hudson, 447
U.S. at 565 n.8.

Because overbreadth challenges do not apply to commercial speech, we

conclude appellants overbreadth challenge to article 581-29(I) lacks merit.

Having done so, we turn to appellants argument that article 581-29(I) is
unconstitutionally vague because the statute (1) relies on the undefined term solicit in article
581-4(P), and (2) lacks a scienter requirement. Because of these alleged deficiencies, appellant
contends article 581-29(I) fails to give fair notice to those whose conduct is covered by the
statute and allows for arbitrary enforcement. We disagree.
The Due Process Clause of the Fourteenth Amendment requires that penal statutes define
a criminal offense with sufficient specificity to inform an ordinary person whether their conduct
is prohibited and to provide minimal guidelines for law enforcement so as to prevent arbitrary
16

and discriminatory enforcement. State v. Edmond, 933 S.W.2d 120, 125 (Tex. Crim. App.
1996). A statute is unconstitutionally vague if persons of common intelligence must necessarily
guess at its meaning and differ about its application. Hoffman Estates, 455 U.S. at 498. The
statute does not require mathematical precision, only that it give fair warning in light of common
understanding and practices. Ex parte Anderson, 902 S.W.2d 695, 699 (Tex. App.Austin
1995, pet. refd). When a statute implicates First Amendment rights, the law must be sufficiently
definite to avoid chilling protected expression. Long v. State, 931 S.W.2d 285, 287 (Tex. Crim.
App. 1996). A defendant may raise a facial challenge to the vagueness of a law involving the
First Amendment even though the law may not be unconstitutional as applied to the defendants
conduct. Id. at 288.
Appellant first contends article 581-29(I) is vague because the definition of investment
adviser representative incorporated into article 581-29(I) from article 581-4(P) does not define
the word solicit. Appellant argues the use of the word solicit without a limiting definition
renders article 581-29(I) unconstitutionally vague because solicit does not indicate what forms
of communication are regulated, what limitations exist, and what content will trigger criminal
liability. In support of this argument, appellant cites an online dictionary that defines solicit
simply as to ask for (something, such as money or help) from people, companies, etc.; to ask (a
person or group) for money, help, etc.; to offer to have sex with (someone) in return for money.
See Solicit, Merriam-Webster, http://www.merriam-webster.com/dictionary/solicit (last
visited June 1, 2016). As a fuller definition, Merriam-Webster offers: to make petition to; to
approach with a request or plea; to urge (as ones cause) strongly; to entice or lure especially into
evil; to proposition (someone) especially as or in the character of a prostitute; to try to obtain by
usually urgent request or pleas. See id. We note that other dictionaries offer similar definitions.
See, e.g., Solicitation, BLACKS LAW DICTIONARY (10th ed. 2014) (solicitation is [t]he act or an
17

instance of requesting or seeking to obtain something; a request or petition . . . . An attempt or

effort to gain business . . . .).
But words are not vague and indefinite if they are defined in dictionaries and have
meanings so well known as to be understood by a person of ordinary intelligence. Watson v.
State, 369 S.W.3d 865, 870 (Tex. Crim. App. 2012). And, in particular, a statute is not rendered
unconstitutionally vague for using the word solicit without providing a definition. See Page v.
State, 492 S.W.2d 573, 57576 (Tex. Crim. App. 1972); Coutlakis v. State, 268 S.W.2d 192, 198
(Tex. Crim. App. 1954) (op. on rehg). The word solicit is one of common usage and its
meaning is simple and not subject to any peculiar usage. Coutlakis, 268 S.W.2d at 198.
Because the word solicit is not vague, indefinite, or uncertain and its import is a matter
understood by people who understand the meaning of the language, we conclude article 58129(I) is not rendered vague by the legislatures decision not to provide a definition of solicit.
See Page, 492 S.W.2d at 57576; Coutlakis, 268 S.W.2d at 198.
Second, appellant contends article 581-29(I) fails to establish a culpable mental state and,
exacerbated by the alleged vagueness of the definition of investment adviser representative in
article 581-4(P), the lack of a scienter requirement renders article 581-29(I) unconstitutionally
vague. Whether subsection (I) requires a culpable mental state, and if so, the level of culpability
required to constitute an offense, is an issue of first impression.
A scienter requirement, such as a requirement that the prohibited conduct be done
knowingly and intentionally, can mitigate problems with vague statutory language. See Hoffman
Estates, 455 U.S. at 499; Garcia v. State, 212 S.W.3d 877, 889 (Tex. App.Austin 2006, no
pet.). Unless the statute defining the offense provides otherwise, Titles 1, 2, and 3 of the Texas
Penal Code generally apply to offenses defined by other statutes. See TEX. PENAL CODE ANN.
1.03(b) (West 2011). The Texas Securities Act does not state that Titles 1, 2, and 3 of the penal
18

code are inapplicable to offenses created under the Act. Within Title 2, section 6.02(b) provides:
If the definition of an offense does not prescribe a culpable mental state, a culpable mental state
is nevertheless required unless the definition plainly dispenses with any mental element. Id. at
6.02(b). The legislatures intent to dispense with a culpable mental state must be manifest, and
mere silence of a statute about whether a culpable mental state is an element of the offense
leaves a presumption that one is required. Aguirre v. State, 22 S.W.3d 463, 472 (Tex. Crim.
App. 1999). Section 6.02(c) goes on to provide the necessary mental state: If the definition of
an offense does not prescribe a culpable mental state, but one is nevertheless required under
Subsection (b), intent, knowledge, or recklessness suffices to establish criminal responsibility.
TEX. PENAL CODE ANN. 6.02(c).
Other subsections of article 581-29 have been interpreted as requiring a culpable mental
state. See Koah v. State, 604 S.W.2d 156, 160 (Tex. Crim. App. [Panel Op.] 1980) (holding
penal code section 6.02 applies to article 581-29(A) and (C) and that article 581-29 neither
prescribes nor plainly dispenses with culpable mental state). Appellant contends that the failure
of the statute to articulate a culpable mental state indicates that strict liability must have been
intended. We agree that the failure-to-register element of the offense does not require a culpable
mental state. See Shappley v. State, 520 S.W.2d 766, 769 (Tex. Crim. App. 1974) (finding the
legislature clearly intended to impose criminal sanctions for almost any dealing in securities
without a license.).
The question, however, remains as to whether a culpable mental state is required as to the
element of rendering services as an investment adviser representative while unregistered. There
are three possible conduct elements that may trigger a required mental state for an act to
constitute an offense: (1) the nature of the offense; (2) the result of the conduct; or (3) the
circumstances surrounding the conduct. See TEX. PENAL CODE ANN. 6.03; McQueen v. State,
19

781 S.W.2d 600, 603 (Tex. Crim. App. 1989). The State must prove a culpable mental state only
as it relates to the action prohibited by the statute. See Cook v. State, 824 S.W.2d 634, 637 (Tex.
App.Dallas 1991), pet. refd, 828 S.W.2d 11 (Tex. Crim. App. 1992).
This Court has concluded previously that selling securities by fraudulent means is the
type of offense that requires a culpable mental state involving the circumstances surrounding the
conduct. See id. at 638. We further conclude that rendering services as an investment adviser or
investment adviser representative in violation of article 581-29 requires a culpable mental state
involving the circumstances surrounding the conduct.
The act prohibited by article 581-29(I) is the rendering of services as an investment
adviser representative without being registered. The Texas Securities Act does not require one to
know he must register if he intends to serve as an investment adviser representative. It is
sufficient for the State to show that one knowingly rendered services as an investment adviser or
investment adviser representative without being registered. See Robinson v. State, 466 S.W.3d
166, 17172 (Tex. Crim. App. 2015) (concluding failure to register as sex offender is
circumstances of conduct offense requiring proof of culpable mental states of knowledge or
recklessness only on duty-to-register element of offense); Tovar v. State, 978 S.W.2d 584, 587
(Tex. Crim. App. 1998) (concluding defendant could be convicted of violating Open Meetings
Act upon showing he knowingly called closed meeting even without proof defendant knew
closed meeting was prohibited). Because a culpable mental state is required on the rendering
services element, the law is not unconstitutionally vague on this ground. We overrule appellants
fourth issue.

20

Having concluded that appellants first, second, and third issues are not cognizable on
pretrial habeas and that appellants fourth issue lacks merit, we affirm the trial courts orders
denying the relief sought by appellant.

/Carolyn Wright/
CAROLYN WRIGHT
CHIEF JUSTICE

Fillmore, J., concurring, joined by Schenck, J.

Publish
TEX. R. APP. P. 47
160004F.P05

21

Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
EX PARTE WARREN KENNETH
PAXTON, JR.

On Appeal from the 416th Judicial District

Court, Collin County, Texas
Trial Court Cause No. 416-81913-2015.
Opinion delivered by Chief Justice Wright,
before the Court En Banc.

No. 05-16-00004-CR

Based on the Courts opinion of this date, the trial courts orders denying relief on
appellants applications for writ of habeas corpus are AFFIRMED.

Judgment entered June 1, 2016.

22

Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
EX PARTE WARREN KENNETH
PAXTON, JR.

On Appeal from the 416th Judicial District

Court, Collin County, Texas
Trial Court Cause No. 416-82148-2015.
Opinion delivered by Chief Justice Wright,
before the Court En Banc.

No. 05-16-00005-CR

Based on the Courts opinion of this date, the trial courts order denying appellants third
application for writ of habeas corpus is AFFIRMED.

Judgment entered June 1, 2016.

23

Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
EX PARTE WARREN KENNETH
PAXTON, JR.

On Appeal from the 416th Judicial District

Court, Collin County, Texas
Trial Court Cause No. 416-82149-2015.
Opinion delivered by Chief Justice Wright,
before the Court En Banc.

No. 05-16-00006-CR

Based on the Courts opinion of this date, the trial courts order denying appellants third
application for writ of habeas corpus is AFFIRMED.

Judgment entered June 1, 2016.

24

TAB B
275.203A3 Definitions, 17 C.F.R. 275.203A3

 275.203A3 Definitions., 17 C.F.R. 275.203A3

Code of Federal Regulations

Title 17. Commodity and Securities Exchanges
Chapter II. Securities and Exchange Commission
Part 275. Rules and Regulations, Investment Advisers Act of 1940 (Refs & Annos)
17 C.F.R. 275.203A3
275.203A3 Definitions.
Effective: September 19, 2011
Currentness
For purposes of section 203A of the Act (15 U.S.C. 80b3a) and the rules thereunder:

(a)(1) Investment adviser representative. Investment adviser representative of an investment adviser means a
supervised person of the investment adviser:

(i) Who has more than five clients who are natural persons (other than excepted persons described in paragraph
(a)(3)(i) of this section); and

(ii) More than ten percent of whose clients are natural persons (other than excepted persons described in paragraph
(a)(3)(i) of this section).

(2) Notwithstanding paragraph (a)(1) of this section, a supervised person is not an investment adviser representative
if the supervised person:

(i) Does not on a regular basis solicit, meet with, or otherwise communicate with clients of the investment adviser; or

(ii) Provides only impersonal investment advice.

(3) For purposes of this section:

(i) Excepted person means a natural person who is a qualified client as described in 275.2053(d)(1).

(ii) Impersonal investment advice means investment advisory services provided by means of written material or
oral statements that do not purport to meet the objectives or needs of specific individuals or accounts.

(4) Supervised persons may rely on the definition of client in 275.202(a)(30)1 to identify clients for purposes
of paragraph (a)(1) of this section, except that supervised persons need not count clients that are not residents of
the United States.

2016 Thomson Reuters. No claim to original U.S. Government Works.

 275.203A3 Definitions., 17 C.F.R. 275.203A3

(b) Place of business. Place of business of an investment adviser representative means:

(1) An office at which the investment adviser representative regularly provides investment advisory services, solicits,
meets with, or otherwise communicates with clients; and

(2) Any other location that is held out to the general public as a location at which the investment adviser
representative provides investment advisory services, solicits, meets with, or otherwise communicates with clients.

(c) Principal office and place of business. Principal office and place of business of an investment adviser means the
executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct,
control, and coordinate the activities of the investment adviser.

(d) Assets under management. Determine assets under management by calculating the securities portfolios with respect
to which an investment adviser provides continuous and regular supervisory or management services as reported on the
investment adviser's Form ADV (17 CFR 279.1).

(e) State securities authority. State securities authority means the securities commissioner or commission (or any
agency, office or officer performing like functions) of any State.

Credits
[62 FR 28133, May 22, 1997; 63 FR 39715, July 24, 1998; 69 FR 72088, Dec. 10, 2004; 76 FR 43012, July 19, 2011]
SOURCE: 50 FR 42909, Oct. 23, 1985; 50 FR 48561, Nov. 26, 1985; 51 FR 32907, Sept. 17, 1986; 53 FR 32034, Aug.
23, 1988; 59 FR 21661, April 26, 1994; 62 FR 28132, May 22, 1997; 63 FR 39027, July 21, 1998; 65 FR 57448, Sept.
22, 2000; 69 FR 41707, July 9, 2004; 72 FR 55042, Sept. 28, 2007; 76 FR 39701, July 7, 2011; 76 FR 43011, July 19,
2011, unless otherwise noted.

AUTHORITY: 15 U.S.C. 80b2(a)(11)(G), 80b2(a)(11)(H), 80b2(a)(17), 80b3, 80b4, 80b4a, 80b6(4), 80b6a,
and 80b11, unless otherwise noted.; Section 275.203A1 is also issued under 15 U.S.C. 80b3a.; Section 275.203A2 is
also issued under 15 U.S.C. 80b3a.; Section 275.203A3 is also issued under 15 U.S.C. 80b3a.; Section 275.203A5 is
also issued under 15 U.S.C. 80b3a.; Section 275.2041 is also issued under sec. 407 and 408, Pub.L. 111203, 124 Stat.
1376.; Section 275.2042 is also issued under 15 U.S.C. 80b6.; Section 275.2044 is also issued under sec. 407 and 408,
Pub.L. 111203, 124 Stat. 1376.; Section 275.2053 is also issued under 15 U.S.C. 80b5(e).

Current through July 29, 2016; 81 FR 50277.

End of Document

2016 Thomson Reuters. No claim to original U.S. Government Works.

2016 Thomson Reuters. No claim to original U.S. Government Works.

Art. 581-4. Definitions, TX CIV ST Art. 581-4

Vernon's Texas Statutes and Codes Annotated

Civil Statutes (Refs & Annos)
Title 19. Blue Sky Law--Securities (Refs & Annos)
Vernon's Ann.Texas Civ.St. Art. 581-4
Art. 581-4. Definitions
Effective: September 1, 2003
Currentness
The following terms shall, unless the context otherwise indicates, have the following respective meanings:

A. The term security or securities shall include any limited partner interest in a limited partnership, share, stock,
treasury stock, stock certificate under a voting trust agreement, collateral trust certificate, equipment trust certificate,
preorganization certificate or receipt, subscription or reorganization certificate, note, bond, debenture, mortgage
certificate or other evidence of indebtedness, any form of commercial paper, certificate in or under a profit sharing or
participation agreement, certificate or any instrument representing any interest in or under an oil, gas or mining lease,
fee or title, or any certificate or instrument representing or secured by an interest in any or all of the capital, property,
assets, profits or earnings of any company, investment contract, or any other instrument commonly known as a security,
whether similar to those herein referred to or not. The term applies regardless of whether the security or securities
are evidenced by a written instrument. Provided, however, that this definition shall not apply to any insurance policy,
endowment policy, annuity contract, optional annuity contract, or any contract or agreement in relation to and in
consequence of any such policy or contract, issued by an insurance company subject to the supervision or control of the
Texas Department of Insurance when the form of such policy or contract has been duly filed with the Department as
now or hereafter required by law.

B. The terms person and company shall include a corporation, person, joint stock company, partnership, limited
partnership, association, company, firm, syndicate, trust, incorporated or unincorporated, heretofore or hereafter
formed under the laws of this or any other state, country, sovereignty or political subdivision thereof, and shall include
a government, or a political subdivision or agency thereof. As used herein, the term trust shall be deemed to include
a common law trust, but shall not include a trust created or appointed under or by virtue of a last will and testament
or by a court of law or equity.

C. The term dealer shall include every person or company other than an agent, who engages in this state, either for all
or part of his or its time, directly or through an agent, in selling, offering for sale or delivery or soliciting subscriptions to
or orders for, or undertaking to dispose of, or to invite offers for any security or securities and every person or company
who deals in any other manner in any security or securities within this state. Any issuer other than a registered dealer
of a security or securities, who, directly or through any person or company, other than a registered dealer, offers for
sale, sells or makes sales of its own security or securities shall be deemed a dealer and shall be required to comply with
the provisions hereof; provided, however, this section or provision shall not apply to such issuer when such security or
securities are offered for sale or sold either to a registered dealer or only by or through a registered dealer acting as fiscal
agent for the issuer; and provided further, this section or provision shall not apply to such issuer if the transaction is
within the exemptions contained in the provisions of Section 5 1 of this Act.

2016 Thomson Reuters. No claim to original U.S. Government Works.

Art. 581-4. Definitions, TX CIV ST Art. 581-4

D. The term agent shall include every person or company employed or appointed or authorized by a dealer to sell,
offer for sale or delivery, or solicit subscriptions to or orders for, or deal in any other manner, in securities within this
state, whether by direct act or through subagents; provided, that the officers of a corporation or partners of a partnership
shall not be deemed agents solely because of their status as officers or partners, where such corporation or partnership
is registered as a dealer hereunder.

E. The terms sale or offer for sale or sell shall include every disposition, or attempt to dispose of a security for
value. The term sale means and includes contracts and agreements whereby securities are sold, traded or exchanged
for money, property or other things of value, or any transfer or agreement to transfer, in trust or otherwise. Any security
given or delivered with or as a bonus on account of any purchase of securities or other thing of value, shall be conclusively
presumed to constitute a part of the subject of such purchase and to have been sold for value. The term sell means
any act by which a sale is made, and the term sale or offer for sale shall include a subscription, an option for sale,
a solicitation of sale, a solicitation of an offer to buy, an attempt to sell, or an offer to sell, directly or by an agent, by
a circular, letter, or advertisement or otherwise, including the deposit in a United States Post Office or mail box or in
any manner in the United States mails within this State of a letter, circular or other advertising matter. Nothing herein
shall limit or diminish the full meaning of the terms sale, sell or offer for sale as used by or accepted in courts
of law or equity. The sale of a security under conditions which entitle the purchaser or subsequent holder to exchange
the same for, or to purchase some other security, shall not be deemed a sale or offer for sale of such other security; but
no exchange for or sale of such other security shall ever be made unless and until the sale thereof shall have been first
authorized in Texas under this Act, if not exempt hereunder, or by other provisions of law.

F. The terms fraud or fraudulent practice shall include any misrepresentations, in any manner, of a relevant fact;
any promise or representation or predication as to the future not made honestly and in good faith, or an intentional
failure to disclose a material fact; the gaining, directly or indirectly, through the sale of any security, of an underwriting
or promotion fee or profit, selling or managing commission or profit, so gross or exorbitant as to be unconscionable;
any scheme, device or other artifice to obtain such profit, fee or commission; provided, that nothing herein shall limit
or diminish the full meaning of the terms fraud, fraudulent, and fraudulent practice as applied or accepted in
courts of law or equity.

G. Issuer shall mean and include every company or person who proposes to issue, has issued, or shall hereafter issue
any security.

H. Broker shall mean dealer as herein defined.

I. Mortgage shall be deemed to include a deed of trust to secure a debt.

J. If the sense requires it, words in the present tense include the future tense, in the masculine gender include the feminine
and neuter gender, in the singular number include the plural number, and in the plural number include the singular
number; and may be read or and or may be read and.

K. No par value or non-par as applied to shares of stock or other securities shall mean that such shares of stock
or other securities are without a given or specified par value. Whenever any classification or computation in this Act

2016 Thomson Reuters. No claim to original U.S. Government Works.

Art. 581-4. Definitions, TX CIV ST Art. 581-4

mentioned is based upon par value as applied to shares of stock or other securities of no par value, the amount for
which such securities are sold or offered for sale to the public shall be used as a basis of such classification or computation.

L. The term include when used in a definition contained in this Act shall not be deemed to exclude other things or
persons otherwise within the meaning of the term defined.

M. Registered dealer shall mean a dealer as hereinabove defined who has been duly registered by the Commissioner
as in Section 15 of this Act provided.

N. Investment adviser includes a person who, for compensation, engages in the business of advising another, either
directly or through publications or writings, with respect to the value of securities or to the advisability of investing in,
purchasing, or selling securities or a person who, for compensation and as part of a regular business, issues or adopts
analyses or a report concerning securities, as may be further defined by Board rule. The term does not include:

(1) a bank or a bank holding company, as defined by the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841
et seq.), as amended, that is not an investment company;

(2) a lawyer, accountant, engineer, teacher, or geologist whose performance of the services is solely incidental to the
practice of the person's profession;

(3) a dealer or agent who receives no special compensation for those services and whose performance of those services
is solely incidental to transacting business as a dealer or agent;

(4) the publisher of a bona fide newspaper, news magazine, or business or financial publication of general and regular
circulation; or

(5) a person whose advice, analyses, or report does not concern a security other than a security that is:

(A) a direct obligation of or an obligation the principal or interest of which is guaranteed by the United States
government; or

(B) issued or guaranteed by a corporation in which the United States has a direct or indirect interest and designated by
the United States Secretary of the Treasury under Section 3(a)(12), Securities Exchange Act of 1934 (15 U.S.C. Section
78c(a)(12)), as amended, as an exempt security for purposes of that Act.

O. Federal covered investment adviser means an investment adviser who is registered under the Investment Advisers
Act of 1940 (15 U.S.C. Section 80b-1 et seq.), as amended.

P. Investment adviser representative or representative of an investment adviser includes each person or company
who, for compensation, is employed, appointed, or authorized by an investment adviser to solicit clients for the
investment adviser or who, on behalf of an investment adviser, provides investment advice, directly or through subagents,
2016 Thomson Reuters. No claim to original U.S. Government Works.

Art. 581-4. Definitions, TX CIV ST Art. 581-4

as defined by Board rule, to the investment adviser's clients. The term does not include a partner of a partnership or an
officer of a corporation or other entity that is registered as an investment adviser under this Act solely because of the
person's status as an officer or partner of that entity.

Q. Registered investment adviser means an investment adviser who has been issued a registration certificate by the
Commissioner under Section 15 of this Act.

Credits
Acts 1957, 55th Leg., p. 575, ch. 269, 4. Amended by Acts 1971, 62nd Leg., p. 1085, ch. 235, 1, eff. May 17, 1971; Acts
1979, 66th Leg., p. 348, ch. 160, 1, eff. May 15, 1979; Acts 1989, 71st Leg., ch. 733, 1, eff. Sept. 1, 1989; Acts 1993,
73rd Leg., ch. 917, 3, eff. Jan. 1, 1994; Acts 1995, 74th Leg., ch. 228, 3, eff. Sept. 1, 1995; Acts 2001, 77th Leg., ch.
1091, 2.01, eff. Sept. 1, 2001; Acts 2003, 78th Leg., ch. 108, 1, eff. May 20, 2003.

Footnotes
Vernons Ann.Civ.St. art. 581-5.
1
Vernon's Ann. Texas Civ. St. Art. 581-4, TX CIV ST Art. 581-4
Current through the end of the 2015 Regular Session of the 84th Legislature
End of Document

2016 Thomson Reuters. No claim to original U.S. Government Works.

2016 Thomson Reuters. No claim to original U.S. Government Works.

TAB C
List of states and applicable provisions acknowledging and incorporating federal
law.

The following thirty-two states have incorporated by reference the

federal definition of investment adviser representative from Rule
203A-3 to the Investment Advisers Act of 1940: 1
Alaska
Connecticut
Colorado
California
Georgia
Hawaii
Idaho
Indiana
Illinois
Iowa
Kansas
Kentucky
Maine
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
North Carolina
New Mexico
North Dakota
Ohio
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee

Vermont
Virginia
Wisconsin

ALASKA STAT. ANN. 45.55.990(15)

CONN. GEN. STAT. ANN. 36b-3(12)(B)
COLO. REV. STAT. 11-51-201(9.6)(a)
CAL. CORP. CODE 25009.5
GA. CODE ANN. 10-5-2(19) (2010)
HAW. REV. STAT. 485A-102
IDAHO CODE ANN. 30-14-102(16)
IND. CODE 23-19-1-2(16)
ILL. COMP. STAT. 815 / 5/2.12(b)
IOWA CODE 502.102(16)
KAN. STAT. ANN. 17-12a102(16)
KY. REV. STAT. ANN. 292.310(12)
ME. REV. STAT. tit. 32, 16102(16)
MASS. GEN. LAWS ch. 110A, 201(d); 401(n)
MICH. COMP. LAWS 451.2012a(f)
MINN. STAT. 80A.41 102(16) (2015)
MISS. CODE ANN. 75-71-102(16) (2013)
MO. REV. STAT. 409.1-102(16)
MONT. CODE ANN. 30-10-103(12)
N.C. GEN. STAT. 78C-2(3)
N.M. STAT. ANN. 58-13C-102(Q)
N.D. CENT. CODE 10-04-02(11)
OHIO REV. CODE ANN. 1707.01(CC)
OR. REV. STAT. 59.015(8) (2013)
70 PA. STAT. ANN. 1-102(j.1)
R.I. GEN. LAWS 7-11-101(12) (2013)
S.C. CODE ANN. 35-1-102(16)
S.D. CODIFIED LAWS 47-31B-102(16)
TENN. COMP.R. & REGS. 0780-04-03-.01(j)

VT. STAT. ANN. tit. 9, Ch. 150, 5102(16)

VA. CODE ANN. 13.1-501(A)
WIS. STAT. 551.102(16)

An additional four states (Florida, New Jersey, New York, and Wyoming) have no
registration scheme at all for investment adviser representatives (presumably,
because of federal preemption) and do not define the term at all.