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<div class="ocr">Te ATrOorRNEY GENERAL
Or TES AS

AUSTIN, TEXAS

Taso reemxt seqeiet for an opinies of thie department on the
queetions.o4 art hareta stated bas heen reoeived,

“it eevtaly meceritins whieh quclify usder the previatons
of article OaC74 are promssied te the Yost of Ineermnce Some
sleciousrs fer seizt control Gepoett purpaces, coed the Board
mate the diachation af Geternining waethir eure Gtearttios xe

"If the Kuard haw eich Gliecretion, pleanes advise wiat
factors, ot ¢leaenta, {f eny, mist be tonniderad ey the Board
in determining the convertibility of mich eocariticst ~

“Seoul the Koard Sad wack eeouvities nowecunvertihle,
may it Fretuse to eccapt samt for Joint esutral deposit parpows,
as q part of the guaranty fontt”

Articles SG27 end SOLTA, Yeraanta Amnotated Civil Shatutes, read
ae follows:

"Ke attoracy hull ti licenadt tar toe cudsewrtters at «
Lloyd's vader tile chapter unless the net asente, taclaiing the
guretuty fom etutettuted te fhe attoraty, & coreittad of whder~
writers, trumteceh or othar officers 26 provided for in the arbicies
of eyreeenrnt, ehail be «6 least sixty thousand dellare tn cash,
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<div class="ocr">om

Zonorable Heuben Wilitess, Page 2

or convertible, sdeissible securities; nor Mall any attorney
be licensed for any underwriters at e Linyd‘s to transact

move than one kind of business as defined in the third article
of this chapter, wtlese the met assets, as tivy are herein de-
fined belonging to such underwriters at Licyd's, shell be as
sich of ten thousend dollars additional for each additional kind
of insurance designated fin the application for license.

“Art. SIZ. The asseta of ukutervritere at « Lloyd's
shall be invested im such property and securities as the capitel
or sarplus of a stock insurance company doing the same sort
Ded fa cae ot Taveatad in, excert real estate, or they may
yelé in cash.

or

"Provided, bwever,.that no Lloyd's already ovganined and
Going business weler: licenses from the Departeent ef Iusireace shell
be xequired to comfors to this requirement except as to securities
hereafter acquired whether in evbstitution for securities now bald
or from @d2itiomal seccessor or substitute wierwriters, provided
farther, at least the miniewm requirement for the guaranty fui shall
be invested tu securities adatasibie waher this Act.”

Gnier Article SQ1T, eupre, the nat auscts, including. the guaranty.
fund contributed'te the attomey committee or usderwritera, trustece or other
officers aa provided for iu the articles of agreement, ahell be at least aixty
thousent dollars in cash ox comvertible, adeilasible securities. The statute
does not defines the term “convertible, aiuisaible securities.“ Ve have been
wueble to find any definition of thie term. ownver, the tera “convertible
wacuritiea” ia defined in Webater‘s New International Dictionary, page 544,
as followa:

“A convertible security my be one that ia exchangesble for
another of a different character or, at often in England, ont that
ia rreedily salable.“ ;

We belfieve that the term “cotvertible, adatssible securities"
as uted in the statutes means such securities as mentioned in Articie 50174,
eupra, Which can be readily sald for cash for net less than sixty thousend.
4ollara, assuming that there 19 no cash in the guaerenty fund. In other
words, if there is any anount of cesh in seid guerenty fund lass than aixty
thousand dollere there must be suffic stent “convertible, adulssible securities”
dw said fund thet can be readily sold for cash while together with the ancunt
of cash in said fund will equal at least sixty thousend dollars, because the
guaranty fund must “be at Least sixty thousand dollars in cash, or convertible,
adulosible securities,” euch ef can be readily converted in to cash.
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<div class="ocr">Kooorable Reuben Williams, Page 3

In view of the foregoing statute, you are advised that it is the
opinion ef thié department that the Board of Insurance Commieslonsers mast
determine whether the securities presented to the Board for Joint control
purypoees are convertible, adalasible securities.

Ta camer to your second question, you are advised that the Boeri

may consider vhatever factors or elementa thet are necessary in detersining
the convertibility of such securities.

Your third questions is respectfully anevered in the affirmative.
Trusting that the foregoing fully anewers your inquiry, we are

ANS ls
"approved Mer 1, 1982
jaf GERAID C, MAME
ATTORNSL GEMERAL GF TAXAL
APPROVAD

Cpinice Comittes
By B.W.B. Chairean
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