. _ .
Hon. Sidney Latham
Secretary of State
Austin 11, Texas
ATTN: Mr. Horace B. Sessions, Securities Commissioner
Dear Sir: Opinion No. O-6020
Re: Under the given facts would
it be necessary‘for the
Insurance Company in ques-
tion to obtain a permit
under the Securities Act in
order for the stock to be
sold to the general public?
Your request for an opinion on the above mat-
ter has been received and carefully considered. The
facts upon which your request is based are stated by
you to be as follows:
"X Insurance Company, a life insurance
company incorporated under the laws of Texas,
desires to increase its capital stock. It
anticipates that its stockholders will not
take all the increase, and that at least some
of such increase will be sold to the public.
The amendment to the charter carnot be filed
until all the stock is subscribed and paid in
full. Accordingly, the procedure contemplated
is for the stockholders of the insurance com-
pany to authorize an increase of the capital
stock; the increase not taken by the stock-
holders to be sold to the general public; the
stock would be $100 par value but would be
sold to present stockholders and the public
at $300.00 per share; when all has been sub-
scribed and paid for, the increase then would
be certified to the proper authorities and
Hon. Sidney Latham, page 2 (o-6020)
the charter amended. The stock wo,uldthen
be issued to those who had subscribed to it.
At the time of subscription, the stockholders
would be given a stock subscription certifi-
cate, stating that he had subscribed and paid
for stock in the company, and that the stoc,k
certificates would be exchanged for the sub-
scription certificates when the increased
capital had all been subscribed and paid for,
and the Charter Amendment filed."
Section 2, Subdivision (a), of Article 600a,
which is known and shall be referred to herein as “The
Securities Act", reads as follows:
"(a) The term 'sec,urity'or securities'
shall include any share, stock, treas,urystock,
stock dertificate under a voting tr,ustagree-
,'ment, 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 rep-
resenting any interest in or under an oil, gas
or mining lease, fee or title, or any certifi-
cate or instr,umentrepresenting or secured by
an interest in any or all of the capital, pro-
perty, assets, profits or earnings of any com-
pany, investment contract, or any other lnstru-
ment commonly known as a security, whether slm-
llar to those herein referred to or not."
Under this definltdon of the term "sec,urlty"or
"sec,uritles",there Is no question but that the stock~re-
ferred to by you 1s subject to the provisions of The Se-
curities Act, unless exempt therefrom by some provision
of the Act.
Section 3 of the Securities Act provides that:
"Except as hereinafter In this Act specifically pro-
vided, the provisions of this Act shall not apply to the
sale of any security when made in any of the following
transactions and under any of the following conditions,"
Hon. Sidney Latham, page 3 (o-6020)
naming various transactions and conditions, companies
and persons to which the same would not apply; but the
sale of the capital stock of a life insurance company
is not mentioned therein.
Section 23 of The Securities Act provides
that: "Except with reference to exempt transactions pro-
vided for in Section 3 of this Act, it shall be unIawfu1
for any dealer, agent or salesman to sell any securities
or to Issue or publish within this State any circular,"
etc., and following with various provlslons concerning
the advertisement of such sale or sales of securities
and ending with the provision that same shall have no
application to any security included within any of the
following classes, which are Subdivision (a) to (I),
inclusive, and Subdivision (g) thereof is as follows:
"(g) Any security issued or guaranteed
by and/or representing an interest in or a
direct obligation of a state bank or trust
company incorporated under the laws of and
subject to the examination, supervision and
control of any state or territory of the
United States or any Insular possession
thereof; or Issued or guaranteed by any
building and loan association or savings
Institution or byany insurance company under
the supervision or control of the Banking or
Insurance Department of this State."
Article 467ga provides for the appointment of
the Board of Insurance Commissioners, and Article 467%
provides that: "Generally, the Life Insurance Commis-
sioner shall have supervision of matters relating to
Life Insurance, to the chartering,of companies, certifi-
cates of authority, and as to the solvency of perso;s
and corporations engaged in the Insurance b,usiness,
while Chapter 3, Title 78, provides for complete super-
vision over s.uchcompanies; therefore, it appears that
the insurance company referred to lnyour inquiry comes
within "any insurance company under the supervision or
control of the . . . Insurance Department of this State"
referred to in Section 23, Subdivision (g), of The
Securities Act above set out.
Section 5 of The Securities Act reads in part
as follows:
Hon. Sidney Latham, page 4 (o-6020)
nN~ dealer, agent or salesman shall sell
or offer for sale any secnrlties issued after
the passage of this Act, except those which
come within the classes enumerated in Sub-
divisions (a) to (q), both inclusive of Sec-
tion 3 of this Act, or Subdivisions ta) to
(I), both inclusive, of Section 23 of this
Act, . . en
It seems clear from a consideration of the
above referred to and quoted parts of The Securities Act
that the Legislature did not Intend to include in said
Act securities Issued and offered for sale by an insurance
company which was under the supervision of the Insurance
Department; therefore, since the insurance company
referred to in your Inquiry would be under the supervi-
sion of the Insurance Department, it is our opinion that
it Is not necessary for such company to obtain a permit
under The Securities Act In order to sell a part of Its
capital stock to the general public.
Trusting that this satisfactorily answers your
Inquiry, we are
Very truly yours
ATTORNEY GENERAL OF TEXAS
By i/s/Jas. W. Bassett
Jas. W. Bassett
Assistant
JWB:jcp:am
APPROVED JUNE 5, 1944
/s/ E. J. Blackburn
(Acting) ATTORNEY GENERAL OF TEXAS
APPROVED
OPINION
COMMITTEE
By /s/ B.W.B.
Chairman