Issue #1911

System Rigging, Family Style

State Senator Angela Paxton has proposed a bill (SB 860)

which would remove the felony-level prohibition on Texans working as investment advisors without registering with the Great State. You know, to break through all that red tape and allow for the marketing of “innovative financial products or services.”


Oh, and which would get her husband, Texas Attorney General and Chief Levitical Lawman Ken Paxton, off the hook for the third-degree felony he’s been charged with for violating that law. Here in the newsroom, we’re certain that’s simple coincidence. Don’t be such a cynic.


See, back in 2015, Paxton was indicted and arrested on two counts of securities fraud and one of failing to register; first- and third-degree felonies respectively. Later on, the Securities and Exchange Commission came after him for seducing members of his investment club into buying shares of Severgy, Inc without disclosing that the company was paying him in company stock to do so.


Paxton went to great lengths to cover for the payments, at different times falsely claiming them to be legal fees, gifts, or only paid to him after he personally invested in the company, but which the company itself classified on its books as “payment for services”. Paxton also described all of the charges against him as a “witch hunt”. Between that and the multiple made-up cover stories it shouldn’t be long before Ken lands himself a sweet gig in the big leagues.


The SEC charges didn’t stick; not because Paxton didn’t do what the SEC said he did, but because the judge didn’t think the investment club was a club at all, but instead an "ad hoc arrangement where, from time to time, good friends might invest in the same transaction". Ok, fair enough.


The judge ruled that Paxton wasn’t obligated to disclose that he was getting paid to recruit investors for a company he at-the-time owned no stock in, because it wasn’t a formal club. The other club members disagree. Whatevs.


But the state charges remain in play. Paxton’s trial has been postponed because the Texas Court of Criminal Appeals ruled that the special prosecutors on those cases are getting paid too much. So this thing will go forward after they work out the payroll or stop dead if Mrs Paxton can file enough bills to get her husband off the hook.


ANYWAY, the great thing about SB 860 is that it wouldn’t completely remove the restrictions—rather, it would create a “regulatory sandbox” in the AG’s office. Ken Paxton would then decide who is and isn’t bound Texas securities law as it stands. This would have the dual benefit of getting Ken out of harm’s way while allowing him the flexibility to let his bros do things the rest of the populace will go to jail for should Paxton himself decide to prosecute them.


Read that again.


This is how we do things now. Hooray.