.
THEA ORNEY GENERAL
OF TEXAS
Honorable Wm. J';Lawson
Secretary of State
Austin, Texas
Dear Mr. Lawson: Opinion NO. 0-3367
Re: Whether or not hearings under
the Securities Act, to~'be,hXd
by the Secretarg,of State, are
to be conducted by the,.S@cre-,
tary; or his Assistant, alane,
or inaythe Secretary of State
legally appoint the Securities
Commissioner, or another per-
son, to preside over and con-.
duct such hearings?
You request an opinion from this Department with respect
to the construction of H. B. No. 521 Acts of the 44th Legisla-‘
ture,"'RegularSession, knbwn as the 'Securitfes Act", with respect
to'hearings by the Secretary of State, your letter being as fol-
lows:
"Under the provisions of House Bill Num-
ber 521, Acts of the Forty-fourth Legislature,
Regular Session, as amended, known as 'The Se-
curlties Act' applicants ,for licenses under the
provisions thereof, if their application'is
denied or rejected, are entitled to a hearing
rslativ6 to such application. Under Sections
24, 25 and 26 the Secretary of State is author-
iced to hold other heerihgs for the purpose of '
determInIng whether certain securities ,shiill
be abld anB.whether the"lloenas of the dealer
OF a~lesnmn ahoulslbe oanoelled for fraud or
vlolatlon of some provlslona of the Aot.
“Thla dspartmetit would 8gpreOlate having
the banelit of your advice ea to whethor'or not
thbse hearings o&n be held by the Seorekary of
State or the Assistant SeoiWary of State alone
or whether rruoh hearings may be oonduoted by
the Seouritles Cornmlsslonsr provided for Ln !&oh
Act or whether the Seorstary of State mhg legally
appoint the Seourltles Commissioner or any other
Honorable Wm. J, Lawson, page 2 O-3367
individual to preside over and conduct such
hearings.
"In the event that you should answer
thls'questlon that the-Securities CommLssion-
6r inayconduct such heapings-or that the S&c-
retary bf State may legally appoint the S‘ecur' ,
lties"Cotiissioher OP some other lrid1vldual.'to
c&duct such hearing, we woiildals'bappreciate
having the benefit.of your advice as to'whether
such appointment carries with It the power to
render decisions In the matters Involved."
,,. _' Section 34 of the Securities Act 'tI3.B. No. 521, oh.
100, Laws of 44th Legislature, p. 255) declares:
"The kidministrationof the praviijionsof
thIa Act shall be vested in the Secretary of
State." .,
Th6 Act prbvides for certaFn hearings before the Sec-
retary of State, notably Section 8, as follows:
"Any Issuer a&the same is defined here-
in who is diesatiafi&l wLth any rullingor de-
cision of the SecFetarg of.'Stat&;m&g filki
withyn t&n (10) days thereafter'an appllbation
for a hearing before the, ecFetai?yof State
tiho,shall,within teii (107 'days~'after"there-
beipt of siichepPllci%tions&t sald~'hearlhgfor
such tlineand plade as he ma fiXand shall
give skid apfllicantten (107.days' notlce of
such hearing.
Section 24 8eclars:
"The Secretary of State may, Ln the eii-
Wcise of reasonable drscretlon hereunder, at
any tUne, require a'dealer to file with the
Seor"etaryof State a'llst of""seburitleswhich
h‘ehas offered for sale or has advertised for
sale within this State duringthe preceding six
(6) months, br?which he'ia at the time offering
for sale oi+adve'i%lsing,oFany portibn there-
3f. No dealer, agent, or salesman shall sell
,ans &eiiurlttesotiia.&ueor publish within thie
State-'anycircular,".advertlaement.;prospectus;
program, OF othei mattep In the.nature thereof,
&fter notibe in writing has been given hiWbg
the Secretary of State that,In the Seoretary'of
Honorable Wm. J. Lawson, page 3 o-3367
State's'opinion, the same
.- contains
_. any state-
.
ment that is false or mlsleaalng, or OChemJlse
likely to deceive a reader thereof, or that the
sale of,such security would be unfair, unjust
or inequitalbe,?OP fraudulent, provided, however,
that In each case covered by such notice in
writing the dealer,,egent'or salesman to whom
such notice Is given shall be entitled to B
hearing and an appeal as provided for in this
Act. * + i"
Section 25 is In part as follows:
"If the Secretary of State at any time
h&s reason to believe any dealer has Ln any
w&y violated, or is violating, or about to vio-
late any of the'provisions of this Act, or ties
been guilty of any fraud'or fraudulent practice,
then the Secretary of State may, after hearing,
and having reasonable cause to believe.the
dealer has been guilty of such offense, revoke
saia dealer's registration, Notice of the time
and place of'any such hearing shall be sent to
such+dza;e;,,etleast seven (7) days prior there-
to.
Section 26 is as follows:
"If the Secretary of State at any time
has reason to believe any salesman or agent of
any dealer has In any way violated or is vio-
lating, Is about to violate any of the provi-
sions of this Act, or has been guilty of any
fraud OP fraudulentpractfce, then"the Secre-
tary of State may, after hearfng, and having
reasonable'ceuse to believe that the agent,or
salesman has been guelty of such offense, revoke
said agent's OP salesmen's registration,
Notice of the time and place of such hearing
shall be sent to such dealer and to suoh agent
or s~l~s~~,,at least seven (7) days prior there-
to.
By the terms of Section 27 it is required that "All
decisions of the Secretary of State shall:be in writing signed
by the Secretary of State, and shall fully state the',grounds
therefor,"
As a means to the effectiveness of those heelrings,Sec-
tion 29 clothes the Secretary of State wfth the following powers:
Honorable Wm. J, Lawson, page 4 O-3367
"The Secretary of State may require, by
subpoena OP summons issued by the Secretary
of'state, addressed to the sheriff or any con-
stable,"the attendance and testimony of wlt-
nesses and'tbe production of any books, accounts,
records, papers end correspondence or other re-
cords or indices showing the names end addresses
bf the stockhblders (except such books of eccount
as are necessary to the continued conduct of '
the business, which books the Secretary of State
shall have the right to examine or cause to be
examined at the office of the concern ahd to
requlre copies of such portion thereof as may
be deemed necessary touching the matter In '~
qiiestion,~whFchcopies shall be verified by affi-
davit of an officer of such concern and shall
be admissible in evidence as Provided in Section
31 hereof], relistingto'any matter which the
Sectieteryof Stete has authority by this Act .to
consider or investigate, and for this purpose
the Secretary of St&te may sign subpoenas, ad-
minister oaths and efflrmations, examine wit-
ne$s& and receive evidence, provided however,
that.&11 Information;of every kind and nature
contained therein shall be treated as confiden-
tial by the Secretary of State and shell not
be disclosed to the public except under order
of court, but nothing in this section shallbe
Interpreted to prohibit CIP limit the publiba-
tion of rulings'or decisions of the Secretary
of State, In case of disobedience of any sub-
poena, 01"of ,tRecont~umaeyof any witness ep-
pearing before the Seere,taryof State, the Sec-
retary of State may invoke the aid of the Dis-
trict Court within whose jurisdiction any wlt-
ness may be found9 and such court may thereupon
issue an order requfrirg the person subpoenaed
to obey the subpoena or give evidence, 'or pro-
duce books, accounts9 records, papers, and cor-
respondence touching t’he mat.ter in question,
Any failure to obey such,order of the court may
be punished by such court,es e contempt thereof.
"The Seoreterg of State may In any in-
vestigation cause the deposition of witnesses
residingwithin OP without the State to be taken
in the-manner prescribed 'fordepositions in
civil actions under the laws of Texas,
. -
Honorable Wm. J. Lawson, page 5 O-3367
By the terms of Article 4340, Revised Civil Statutes,
as amended by the 40th Legislature, 1927, the office?of Assis-
tant Secretary of State is created, and such Assistant is author-
ized to "perform all the duties required by law to be performed
by the Secre%ary of State when thensaid Secretary of'Sta.te"is
absent or unable to act for any reason. Such Assistant shall per-
form such other duties as shall be required of hlm,bg,the Sec-
retary of State and his compensation shall be $4,000,00 per
annum."
The proper construction of these statutes requires
the holding that no person fs authorized to hold the hearings
mentioned in the Securities Act except the Secretary of State
and the Assistant Secretary of S%a%e.
It is elementary law that a public officer may no%
delegate to another the authority to perform those offlclaS duties
involving official discretion, which have been imposed upon'him.
,,
Where, ashere, there 15 a deputy offfcer or assistant
who"is clothed with the power to perform the duties of his prin-
clpal, such deputy or assistant does not perform such duties by
virtue of any principle bf delegation of powers, but in hisown
right in virtue of the same authority Investing his principal
with power --'tha% is, the Legislature,
'Pfefferv, Mahnke, 260 3-W. 1033, by our Supreme Court,
definitely settles thfs questfon, It is there said:
.,
'The service of the secretary of State
and the comptroller on %he board of education
is the performance by each of a duty attached
by the statute to the office held by each.
The duties are no% personal, They are dutfes
attached to the offfces, Any holder of the
office of secretary of s%e.teor comptroller
must serve as a member'of the board of educa-
tion as a part of the duties of those offices
respectively. S,incethe statutes provide that
the chief clerks may respectively perform the
duties attaching to those offices, the chief
clerks'may, in the contfngenctes mentioned in
the'~
statutes, perform the pa~ticu1a.rduties
attaching to the offices of secretary of state
and comptroller by vfrtue bf the statu%es mak-
lng them'members of the board'of educatfon.
In such cases the chi'efclerks"do not perform
those duties by delegation of authority from
their chiefs. They perform them by vfrtue"of
authority of the Legislature in the same way
- .
Honorable Wm, J. Lawson, page 6 o-3367
that their chiefs are authorized to perform
them. The Legislature could have provided
that, in the absence, etc,, of the secretary
of state and comptroller, the chief clerks of
either 6~ each should be members'of the board
of education. The Legislature has done the
same thing In a different way by prescribing
that the chief clerks provided by statute
shall~and may, in the absenc,eof the secretary
of state and the comptro'ller,performthe ,du-
ties of those officers, among which are duties
arislng from their membership on the state -~
board of education, Thus the chief clerks are
officers provided by statute, and authorized
by statute, to perform the duties attaching to
the~officers of secretary of state and comptrol-
ler, making those officers members of the board
of education. The full authority of the chief
clerks thus to act arises from the aces of the
Legislature Investing them with such au%horlty
when the contingencies mentioned in the statu-
tes arise. There Is no delegation of authority
to the chief clerks by the secretary of state
and'the comptroller. In trzr.tS,k
and in fa,ct,,
the
secretary of state and the comp%roller are impo-
tent to prevent the chief clerks from thus per-
forming the duties of those offices in the eon-
tingencies of the statutes authorfzing them %o
act e The chief clerks have ,thesame authority
to perform the duties of %hose offices in those
contingencies that the secre,%aryof state and
comptroller have to perform them at all other
times - the authorfty of the Legislature, The
chief clerks are public officers fn the same
sense and created by the same legal aythority
as other statutory officers of state.
The word “hearing”, as used in the Securities Act, and
as used in this opinion, contemplates that proceeding wherein
evidence Is heard and considered by the officer clothed with the
power of decision, and .wherethe finding or decision is made by
that officer and no% anothe:r. It does not necessarily exclude
the ministerial or admInistrative ald of others in the assembling
of testimony for the consfderation of the officer clothed with
dupisdiction %,cf hear, but the judicial~conception of the word
heartng" necessarily requires that that officer must consider
the testimony, make his findings thereon, and render his order,
judgment or decree in respect the matter in confroversy.
Chief Justice Hughes, In the case of Morgan v. United
States, has writden what may well be considered the last Word
Honorable Wm. J. Lawson, page 7 O-3367
upon that subject. He says:
“A proceeding of this sort requiring the
taking and weighing of evidence; determinations
of fact based upon the consideration of the
evidence, and the making ,o’fan order supported
by such findings, has a quality resembling that
of a judicial’proceeding. Hence it Is frequently
described as a-proceeding of a buasl-.iudlcial
character. The reauirement of a 'full hearing' '-
has obvious reference to the tradition of ‘jud?cial
proceedings in which evidence’is received and
weighed by the trier of the-facts. The ’hearing ’
is designed to afford the safeguard that the one
who decides shall be bound in good conscience
to consider the evidence, to be guided by that
alone, ,and to reach his conclusion uninfluenced
by ex%raneous"consldera%ion which in other fields
might have play in determining .purely executive
action. The ‘hearing’ Is the hearing of evi-
dent8.and argument e If the one who determines
the facts which underlie the order has not con-
sidered ,evldence~or argument, It is manifest
that the hearing has no% been given.
“There is thus no basis for the contention
that the"'authorityconferred by B 310 of the
Packers and Stockyards Act is given to the De-
partment of Agriculture, as a department in the
administrative sense, so that one official may
examine evidence, and anotherofficial who has
not cbnsLdered the evidence may make the find-
ings and order. 'In such a view, it would be ."
possible, for example, for one official to hear
the evI.denceand argument and arrive at certain
cbnclusions of fact, and another official who
had not heard or consIdered either evidence or
argument to overrule those conclusions and for
reasons of policy to announce entirely different
ones. It is no answer to say that the question
for the court"is whether the evidence supports
the findings and the findings support‘the order.
For the wefght ascribed by the law to the find-
ings -- their conclusiveness when made within
the sphere of the authbrlty conferred -- rests
upon the assumption that the officer who makes
the findings has addressed himself to the
evidence and upon that evidence has conscien-
tiously reached the conclusions which he deems
it to justify. That duty cannot be performed
Honorable Wm. J, Lawson, page 8 o -3367
by one who has no% considered evidence or argu-
ment. It is no% an impersonal obligation. It
is a duty akfn to that of a judge, The one who
decides must hear.
"This necessary rule does not preclude
prac%lcable,administra%ive procedure in obtal.n-
ing the aid of assistants in the department.
Assistants may prosecui:einquiries. Evidence
may be taken by an examiner, Evidence thus
taken may be sif%ed and analyzed by competent
subordinates. Argument msy be oral or written.
The requirements are not technical. But there
must be a hearing in a substantial sense. And
to give the substance of a hearing; which is
for the purpose of making determinations upon
evidence, the officer who makes the determina-
tions must con~tiderand appraise t'heevidence
which jus%ifZes t.hem, T!-d duty c;ndoubtedly
may be an or.ePousone, b;~'?
the performance of
it in a subsfan?:lalmanner is inseparable from
the exercise of the importai:;i,
aut"lori%ycon-
ferred.
"+ * x *"'I s/z98I,T.
s. 468)
Very truly yours,
ATTORNEY GENERAL OF TEXAS
By s/Ocie Spee:?
Ocie Speer
Assis%ant
OS -MR-WC
APPROVED APR 12, 3.941
s/Glenn R, Lewis
(Acting) ATTORNEY GENERAL OF TEXAS
Approved Opinion Comml.t%eeBy s/MB Chai:rman
Untitled Texas Attorney General Opinion
Combined Opinion