How to Stay Safe from Texas Securities Fraud Laws
- The Spencer Law Firm
- Sep 9
- 4 min read
Updated: Sep 29
What Texas Law Calls “Securities Fraud”
Texas defines fraud/fraudulent practice to include misrepresenting relevant facts, dishonest promises about the future, intentional non-disclosure of a material fact, and unconscionable fees or schemes—applied to securities.
Under Gov’t Code §4007.203, a person commits an offense if they, directly or indirectly, (1) engage in fraud, make material misstatements/omissions, or run a fraudulent scheme and (2) do so in connection with (A) selling, offering, purchasing, or otherwise dealing in a security, or (B) providing investment-adviser services.
What counts as a “security”? Texas includes shares/stock, notes, bonds, investment contracts, limited partnership interests, interests in oil & gas, and instruments “commonly known as a security.” (Certain insurance contracts are excluded.)
Criminal Penalties in Texas (Quick Table)
Amount involved | Charge level (Gov’t Code §4007.203) | Prison range (Penal Code) | Potential fine |
< $10,000 | Third-degree felony | 2–10 years | Up to $10,000 |
$10,000–< $100,000 | Second-degree felony | 2–20 years | Up to $10,000 |
≥ $100,000 | First-degree felony | 5–99 years or life | Up to $10,000 |
Violate cease-and-desist | State-jail felony | 180 days–2 years | Up to $10,000 |
Limitations (criminal): The State has 5 years from the offense to bring an indictment under §4007.203(c).
Aggregation: Amounts from one scheme or continuing course of conduct aggregate to set the felony level.
Civil Remedies for Investors (Texas Securities Act, Ch. 4008)
Even if there’s no criminal case, investors may sue for:
Rescission (get your consideration back + legal interest, minus income received) or damages (price paid + legal interest minus value/consideration on disposition), and attorney’s fees (per statute).
Aider/Controlling-Person liability (joint and several) for those who materially aid or control sellers/buyers/issuers, subject to defenses.
Civil limitations: generally up to 3 years from discovery and no more than 5 years from the sale/purchase, depending on the claim type.
Texas vs. Federal Law (Quick Context)
Texas prosecutes under Gov’t Code Ch. 4007. Federally, the SEC and DOJ use Section 10(b) of the Exchange Act and Rule 10b-5, which prohibit schemes to defraud, material misstatements/omissions, or fraudulent practices in connection with the purchase or sale of securities.
Insider-trading and misappropriation theories also fall under 10b-5 and related rules.
Red Flags & How to Report (Protect Yourself)
Common red flags: guaranteed returns; high-pressure “act now”; secrecy or “insider” tips; unregistered seller or product. The Texas State Securities Board (TSSB) highlights these warning signs.
Verify before you invest:
BrokerCheck (brokers) & IAPD/Investor.gov (advisers).
TSSB’s Registration Checks page links to IAPD.
Report suspected fraud in Texas:
File a written TSSB complaint (English/Español) and attach documents.
TSSB can pursue admin action, refer for civil relief, or coordinate criminal prosecution with local DAs or the Attorney General; AG can seek injunctions, restitution, civil penalties, and even receiverships.
Real-World Note (Texas News)
High-profile Texas securities-fraud matters underline how these cases resolve (restitution, community service, legal-ethics courses, and dismissal upon completion under agreements), reminding both investors and professionals that outcomes vary by facts and prosecutorial discretion.
Defenses & Practical Tips
Truth/no material omission, good-faith statements, or lack of scienter (depending on charge/theory). See statutory defenses and burden shifting in civil claims.
Registration compliance (or exemption) issues go to some offenses; violations of cease-and-desist orders are independently chargeable.
Move fast on deadlines: criminal 5 years; civil discovery window + 5-year outer limit in many claims.
FAQs
Is insider trading “securities fraud” under Texas law?
Yes—if it involves fraud, misstatements/omissions, or deceit in connection with a securities transaction or adviser services, federal 10b-5 also applies.
What’s the prison time for Texas securities fraud?
Third-degree: 2–10 years; second-degree: 2–20 years; first-degree: 5–99 years or life; fines up to $10,000. The degree depends on the amount involved.
How long do I have to sue in Texas?
Civil claims under Chapter 4008 carry discovery-based limits (often 3 years from discovery) with a 5-year outside bar in many claims (details vary by section).
Where do I report suspected securities fraud in Texas?
To the Texas State Securities Board (complaint form) and verify the professional via BrokerCheck/IAPD.
Author & Editorial Note
Prepared by a legal research editor at the Spencer Law Firm focused on Texas financial crime content. This article cites primary sources and official guidance. It is general information, not legal advice. If you’re facing charges or losses, consult a Texas-licensed attorney.
Last updated: September 9, 2025
Suspect fraud—or under investigation? Book a confidential Texas securities-law consult today.
Texas State Securities Board – complaints, rules, warnings (official).
FINRA BrokerCheck and SEC Investor.gov / IAPD – verify registrations.
Disclaimer: This article is provided for informational and educational purposes only. It does not constitute legal, financial, medical, or professional advice. Laws and regulations change frequently, and the information may not reflect the most current developments.
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