Honorable M. 0. Flowers
Secretary  of state
Austin, Texas

Dear   Sir:                      Attention:    C. P.. Sanders

                                 Opinion No. O-2903
                                 Re:   Is Southwestern  Investment Company
                                       required to comply with the provisions
                                       of the Texas Securities Act relating to
                                      the registration  of dealers as well as
                                      the qualification of the stock under the
                                     ‘issuers’ provisions   of the Act?

                  Your recent request for an opinion of this department        on
the above     stated question has been received.

                 We quote from   your letter   as follows:

                “We would appreciate very much the benefit of your
       opinion with respect to whether the SOUTHWESTERN              IN-
       VESTMENT       COMPANY     of Amarillo,   Texas, a corporation
       organized under Senate Bill No. 165, Forty-Second          Legisla-
       ture, is required to comply with the provisions       of the Texas
       Securities  Act relating to the registration    of dealers as well
       as the qualification  of the stock under the issuers’ provisions
       of the Act.

                 “This c’orporation is offering its stock to the public,
       ,but is regulated by the Banking Department to the extent only
        of filing its’ financial statements   in order that the Banking De-
        partment may determine whether it is offering bonds.         If such
        corporation     is offering bonds, it would of course come under
        the regulations     of the Banking Department and be subject to
        examination      by the Banking Department.

                “The corporation   claims exemption    from both the
       dealers’ provisions   and the registration   provisions of the
       Securities  Act by virtue of the exemption contained in Sec-
       tion 3-O of the Texas Securities   Act which reads in part as
       follows:

                                                                                    .
Hon. M. 0.   Flowers,    Page 2 (o-2903)




               “~‘The sale by the issuer itself of any securities
      that are issued ~ D D Dby a company organized and operat-
      ing under the laws of the State of Texas and subject to the
      supervision   of the Commissioner    of Banking of the State
      of Texas, or a company subject to the supervision       of the
      Banking Commissioner      under Senate Bill No. 165, Forty-
     Second Legislature.’

               “We are in doubt as to whether merely the filing
      of financial statements with the Banking Department in
      order that the Banking Department may determine wheth-
      er this corporation   is selling bonds would bring this com-
      pany under the supervision      of the Banking Commissioner
      and thereby exempt this corporation       from the provisions
      of the Texas Securities    Act.   Ther~e is no doubt in our
      minds that this company would be exempt if it was issu-
      ing bonds and thereby subject to supervision       and examina-
      tion by the Banking Department,       but under the existing sit-
      uation the Banking Department has absolutely no control
      over this corporation    as long as it does not sell bonds but
      sells stock exclusively.

               “Your advice on this matter will be greatly appre-
      ciated by this Department in order that we may determine
      whether any action can be taken by the Securities   Division
      Ianrequiring the Suuthwestern Investment Company to reg-
      ister its stock for sale in Texas.”

                The Southwestern Investment Company of Amarillo,     Texas,
is a corporation   organized under Senate Bill No. 165. Forty-Second   Leg-
islature,  1931, and Section 1 of Senate Bill No. 165, supra. provides in
part that:

               ““This Act shall embrace corporations    heretofore
      created and hereafter created having for their purpose or
      purposes any or all of the powers now authorized in subdi-
      visions 48, 49. or 50 of Article    1302, Revised Civil Statutes,
      1925. and heretofore    or hereafter having in whole or in part
      any purpose or purposes now authorized in Chapter 275, Sen-
      ate Bill No, 232 of the General and Special Laws of the Regu-
      lar Session of the 40th Legislature.     T0 D*

                Subdivisions  48. 49, and 50 of Article   1302 of Vernon”s   An-
notated Civil   Statutes. read as follows:

               “48.     To accumulate   and lend money without banking
      privileges.
Hon. M. 0. Flowers,     Page 3 (o-2903)




              “49. For any one or more of the following pur-
      poses:  To accumulate   and lend money, purchase,      sell
      and deal in notes, bonds and securities,    but without bank-
      ing and discounting privileges;  to act as trustee under
      any lawful express trust committed     to them by contract
      and as agent for the performance    of any lawful act.

               “50.  To subscribe    for, purchase, invest in, hold,
      own, assign, pledge and otherwise deai in and dispose of
      shares of capital stock, bonds, mortgages,        debentures,
      notes other securities,    obligations,  contracts and evidences
      of indebtedness   of foreign or domesticcorporations       not com-
      peting with each other in the same line of business;        provid-
      ed the powers and authority herein conferred shall in no
      way affect any provision of the anti-trust      laws of this State.”

               Senate Bill No. 232.    Ch. 275, Acts    of the 40th Legislature,
provides:

                “1. A private corporation      may be formed for any-
       one or more of the following purposes,       without banking or
       insurance privileges:     to accumulate    and loan money, to
       sell and deal in notes, bonds and securities;       to act as trustee
       under any lawful express trust committed         to it by contract,
       and as agent for the performance       of any lawful act; to sub-
       scribe for, purchase,    invest in, hold, own, assign. pledge
       and otherwise deal in and dispose of shares of capital stock.
       bonds, mortgages.     debentures,   notes and other securities       or
       obligations,  contracts   and evidences of indebtedness       of for-
       eign or domestic corporations       not competing with each other
       in the same line of business,     to borrow money or issue de-
       bentures for carrying out any or all purposes above enumer-
       ated.   Provided that the powers and authority herein conferred
       shall in no way affect any of the provisions       of the anti-trust
       laws of this state.

                “Sec. 2. Whereas~, there are no laws now existing in
       Texas, authorizing    private corporations      to be formed for all
       of the purposes hereinbefore       stated~, and whereas,    it would be
       for the public good to have such corporations         chartered for
       such purposes and would stimulate and authorize           Texas com-
       panies to compete with foreign companies          so authorized now
       doing business   in the State of Texas; therefore,      is an emer-
       gency and imperative     nec,essity for the immediate       passage of
       this bill and the constitutional     rule requiring bills to be read
       on three several days is hereby suspended and this act shall
       be in force and effect from and after its passage,         and it is so
       enacted.”
Hon. M     0.   Flowers,    Page 4 (O-2903)




                    Section 3 of Article   6OOa. Vernon”s   Annot-zted Giva,l L;t.nt-’
utes.   provides,     in part. that:

                 ‘Exempt    transactions.   Except as hereinafter     in
        this Act specifically    provided. the provisions   of t.his Act
        shall not apply to the sale of any security when m,nadein
        a,ny of the following transactions    and under any of t.he fax;
        lowing conditions,    and the company or person enga,gerx
        therein shall not be deemed a dealer within tlze rne~&~g
        of this Act; that is to say, the provisions    of this A,ct &all
        not apply to any sale, offer for ,sale. solicitat~f~on, f:ubc:~:ri,l:,.
        tion, dealing in or delivery of any security under ;rny of
        the following transactions     or conditions:                  .’




                 I(o) The sale by the issuer,    itsel,f, of any sesuri~-
        ties that are issued by a State or National Banks, by rptxur*t
        company, or building and loan association         organized and
        operating under the laws of the State of Texas and subject
        to the supervision   of the Commissioner      of Banking of the
        State of Texas, or Federal Loan and Savings Associ.ation.
        or a company subject to the supervision        of the Banking Corn
        missioner    under Senate Bill No, 165, Forty-second        I.~@-
        latuIe.   Provided however, that all sal,esmen acting fo~z any
        bank. trust company. or company subject to the suyervi::+ion
        of the Banking Commissioner       under Senate Bill No. 1.65,
        Forty-second    Legislature,  in the sale of such securit.ier-,
        within this State. shall be licensed as provided in tb,is k~:t.~

               It will be noted that subdivision    (o) of A,rti.cJe 6Wa, suyr;‘%,
specifically  protides   that all salesmen   acting for any coml~ny      r:ub&c~t
to the supervision    of the Banking Commissioner       under Sen:%te ?%<.EI b:o,
165, Forty-second      Legislature,  in the sale of such securities    ~ith,nnr,khi::
State. shall be licensed as provided in this Act,

               The above mentioned company merely files finr?n~:i~~l state-,,
ments with the Banking Department      in order that said Departmehk map
determine whether the company is selling bonds,       The Mawkin,~ “iep,ri _)
ment does not have supervision    of all companies   organized unlic;r Ch;i$,-’
ter 165, supra, and makes no examination      of companies   that are not un;’
der its supervision.   Clearly the company named above i0= not unnda?rt,are
supervision   of the Banking Department and i,c- not subject to the s~elrn;i-
tions set forth in paragraph 0 of Section 3 of Article 600~~ wupr::n,

                  In view of the foregoing statutes, you a.se rsnpectfuii,ly -.*a&
vised   ,tbat it is the opinion of this Department that the Ciuufhweste~x~
Hon. M. 0.   Flowers,     Page 5 (B-2903)



Investment Company is required to comply with the provisions        of the
Texas Securities Act relating to the registration   of dealers and the
qualification of the stock under the issuers’ provisions   of the Act.

               Trusting    that the foregoing    fully answers        your inquiry.
,we are

                                            Yours      very   truly

                                            ATTORNEY          GENERAL          OF TEXAS




                                            By   /s/    Ardell    Williams

                                                                      Ardell     Williams
                                                                               Assistant

AW:BBB/cm

               APPROVED        DEC   16, 1940

               /s/   Gerald   C. Mann

               ATTORNEY        GENERAL      OF TEXAS




                                                                 APPROVED
                                                                   Opinion
                                                                 Committee

                                                               By /s/  BWB
                                                                  Chairman
