State Sen. Ken Paxton, a Republican candidate for Texas attorney general, violated the Texas Securities Act by soliciting investment clients without being registered as required by law, according to a disciplinary order made public Friday.
Under the order from the Texas State Securities Board, Paxton was “reprimanded” and fined $1,000. He is also required from now on to disclose in writing his paid solicitor relationship to any clients he refers to an investment adviser.
In at least one instance investigated by The Texas Tribune, a legal client Paxton solicited on behalf of an investment adviser had no idea the senator was getting paid for the referrals, according to court documents.
The State Securities Board, which regulates the securities industry in Texas, released a written statement about the order on Friday.
“In any action the State Securities Board undertakes, the only consideration is the facts of the case. The agency does not consider any extrinsic factors,” said board spokesman Robert Elder. “The order speaks for itself.”
According to state regulations, any enforcement activities related to the assessment of an administrative fine must be “commenced within five years after the violation occurs.”
The state’s investigation of Paxton’s solicitor activities revealed that the McKinney Republican engaged in unregistered solicitation activities at least three times — in 2004, 2005 and 2012. But only the most recent one occurred within the past five years, so the $1,000 fine assessed against him pertains to only the 2012 violation.
The disciplinary order must be disclosed in a filing to securities regulators within 30 days, meaning it will be part of Paxton’s official record as a registered investment adviser representative.
See here for the background, and here for the disciplinary order. For an “oversight” that occurred three times over an eight year period, this feels awfully light to me. Something along the lines of an amount equal to the 30% commission he got in 2012 for his illegal solicitations would be more appropriate, if only to ensure that he didn’t profit from breaking the law. If the fines for not following the rules cost less than the money you can make by being a scofflaw, then what’s the incentive to comply? If my kid steals three candy bars and I punish her by making her pay for one of them, I don’t think I’m sending the right message. There’s still a chance of federal enforcement, so perhaps Paxton hasn’t fully gotten away with it just yet.