. _ .




        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
