.‘. ,_
Hon. John Osorlo, Chairman.
Board of Insurance Commissioners
International ,Life Building
Austin, Texas
Opini,on No. ww-90
Ret Is a ,person, firm, or partnership
which is for part or all the time
directly or tnrougn an agent en-
gaged In activities described In
Article, 580-2(c) V.C.S., exempt
from the dealer i icenslng provi-
,,sions of such Ac.t when dealing in
~insurance securities as described
in Article 580-3(c).
Dear Sir:
You have requested our opinion concerning whether
a person, firm, corporation, or partnership which is for all
or a part of the time directly or through an a ent engaged
in the activities described In Article 580-2(c f , Vernon’s
Civil Statutes of Texas, denominated “the Insurance Securi-
ties Act,” exempt from the dealer licensing provisions of
such Act when dealing In insurance securities as described
in kticle 580-3(c). You state in your opinion request that
th-ee security dealers who do not have licenses under the
Insurance Securities Division of the Board but do have li-
censes as a dealer through the Securities 6 ommissloner of
the Secretary of State’s office, have asserted that they are
nut required to seaure an insurance dealer’s license for such
secondary sales as are set out In Article 580-3(c). They con-
tend that they are acting only as agent for vendor or seller
under Section 3(c) and therefore no insurance securities deal-
er’s license is required of them as such agent.
4rticle 5,9:2(c), defines a ttdealer18:
“The term ‘dealer I shall include every person
or company, other, than ,a salesman, who engages in
this state, either for ,a11 or part of his or fts
time, directly or through an agent, in selling,
Hen. John Osorlo, page 2 (W-90)
offering for sale or delivery or soliciting
subscriptfons to or orders for, or undertak-
ing to dispose of, or to invite offers for, or
rendering services as an investment adviser,
or dealing 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 com-
ply with the provisions hereof; provided, how-
ever9 this Section or provision shall not
apply to such Issuer when such security or se-
curities 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 con-
tained in the provisions of Section 3 of this
Act 0”
The initial paragraph of subsection 3 of Article
580 providesl
“Except as hereinafter in this Act speci-
fically provided the provisions of this Act
shall not apply co the sale of any security
when made in any of the following transactions
and ‘under any of the following oonditions and
the company or person engaged therein sha 1 1 not
be deemed a dealer within the meaning of this
Act; that is to say, the provisions of this Act
shall not apply to any sale, offer for sale? so-
licitation, subscription, dealing in or delivery
of any security under any of the following trans-
aetfcns or conditionsa
”s . . n
Amongst the transactions exempted by subsection 3
is the transaction set forth in sub-paragraph (c) thereof,
which states8
"(~1 Sales of securities made by or In be-
ha&c’ a ,vendor, whather br na
in the ordinary course of bona fide per-
sonal’lnvestment of j&e aeru of suc&
Hon. John Osorio, page 3 (~~-90);
vendor, or change in such investment, if
such vendor Is not otherwise ,engaged either
permanently or temporarily in selling securi-
ties; provided, that in no’ event shall such
sales or offering be exempt from the provi-
sions of this Act when made or intended bP
mdor or his m, for the benefit, either
directly or indirectly, of any aompany or cor-
poration except the individual vendor (other
than a usual commission to said agent) ;
‘1. . . ”
The issue, then,, is whether a dealer who makes a
sale for a vendor, which sale would be exempt under the pro-
visions of subsection 3 of Article 580, would himself be
exempt from obtaining a license under the Insurance Securi-
ties Act of such dealer engages only in transactions exempt
under Article 580-3(c).
The Insurance Securities Act Is su stantially iden-
tical to the language of the Securities Act. !i The language
of both acts was derived from &ticle 6OOa, V.C.S., popularly
known as the “Blue Sky Law,” as amended. Accordingly, cases
construing the provisions of old, Article 600a will be control-
ling where applicable.
In construing Article 600a, Subsection 3(c) $ which
is substantially identical tp Article 580-3(c), the courts
have repeatedly held that a dealer engaged in such a transas-
tion must obtain a dealer’s license. In tier v . Hancock,
the court stated:
‘IWe think involved in that language is the
construction that Section 3(c) applies to the
A,/ Article 579-l through Article 579-42.
&’ 14gES.W.2d 239 (Tex.Civ.App. 1941, error dism.) This
was a suit for a’brokerts commission for the sale of an oil
payment by the plaintiff. Defendant defended on the basis
that plaintiff had no dealer’s license while plaintiff claimed
to be exempt from the provisions of the Securities Act requi.r-
ing a dealer Is license by virtue of Section 3(c) g and was
therefore entitled to recover, notwithstanding the fact that
he had no dealer’s license.
. . ’
Hon. John Osorio, page 4 (WV-90)
owner of the seaur,ity; that he is not a dealer
if he sells for the purposes named, either in
person’or through another a personally owned
seaurity-, provided, of course, he is not in
that general business. The ,sale or, contract
of sale made under such circumstances, whether
by the owner or another, is In all respects
legal and enforceable. It is not held, ‘however,
we think, that if the one effecting the sale for
such a vendor is an unlicensed dealer under the
Securities hct that he would be entitled to com-
pensation :‘or his services.11
This ruling has been adhered to in a nwnber of
,~‘ases..‘3
Adollttedly there have been several amendments to
hrcicle 600a, Section 3(c) since the time of 3hese decisions.
(The additional language added by ‘amendment is underlined in
ihe excerpt 02’ si.zbsection 3(a) set, out’ above.)
It ~:an readily be seen that the amendments are not
substantial and do not materially change the lan uage of the
act with respect to the issue raised. Section 3 t c) of Arti-
s.;le 600a certainly contemplated sales by agents, for how else
;o,old a sale Abemade on behalf of a vendor except by another
person?
The Insuranae Seourlties Pot hae no proVislC% ex-
sllipt ing 18dea.Lers” licensed by the Securities Commissioner of
cae Secretary of State’s office from obtaining a license pur-
s’.iant: to the l’Insurance Securitiee Attn. Therefore the deal-
dtx in, question are not exempted !Yom ,the Act.
,A’ &)&Jr v. c
rrr.‘r.r
re%. n.r.e.
Civ.App. l.9+5 err0
3~77 (Tex.Sup.&. 1953) i
g;W.2d 197 (Tex.
-. _
Hon. John Osorio, page 5’ m-90)
.
SUMMURY
A person, firm, or corporation or partnership
which is for part or all of the time directly or
tnrougn an a ent engaged In activities described.
in Article 5 %0-2(c), V.C.S., is not exempt from
the dealer’s licensing provisions of such Act when
dealing in insurance securities as described in
Article 580-3(c).
Very truly yoursr
WILL WILSON
Attorney Gen.eral
Wallace P. Finfrock
Assistant
WPF:wb
APPROVED:
OPINION COMMITTEE
H. Grady Chandler
Chairman