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# T~~A~TORNEYGISNERAL OF TEXAS AUSTIN. **.,?SXAS** 78711

August 21, 1974 The Honorable Roy W. Mouer Securities Commissioner State Securities Board 704 State Finance Building Austin, Texas Opinion No. H- 376 Re: Whether person making secondary sale ofsavings association stock is required tobe registered as dealer under Securities Act and related questions. Dear Mr. Mouer:

You have requested our opinion onthe following questions regarding permanent reserve fund stock issued by savings association:

1. Is aperson or company making secondary sales (i.e., sales other than **by** the issuer) of savings association [permanent reserve fund] stock required to be registered as adealer or salesman under The Securities Act, (Article 591-1, et seq., V.T. C.S.), ifnot otherwise exempted from registration by Section 5of The Securities Act? 2. Are sales ofsayings association [permanent reserve fund] subject tothe anti-fraud provisions (Sections 23.A, 29. C, 32and 33.A) ofthe Securities Act? Section 11.bl ofArticle 85Za, the Savings and Loan Association Act, reads:

p. 1766The Honorable Roy W. Mouer page 2 (H-376)
Savings associations, the officers, employees or agents, savings accounts and the permanent reserve stock thereof, and the sale issuance or offering of savings accounts and permanent reserve fund stock ofany association or Federal savings and loan association are hereby exempted from all provisions oflaw ofthis State, other than this Act, which provide for supervision, registration or regulation in connection with the sale, issuance or offering ofsecurities, andthe sale, issuance or offering ofany such accounts or stock shall be legal without any action or approval whatsoever onthe part ofany official, other than the Commissioner, authorized tolicense, regulate, or supervise the sale, issuance or offering ofsecurities. (Emphasis added) Your questions are prompted by anapparent conflict between this provision ofthe Savings and Loan Act (Acts 1963, 58 Leg., ch. 113, p.269) and its caption.

The Texas Constitution, Art. 3, Section,5, requires that the title or caption ofabill give notice ofits contents. This provision insures that the Legislature and the public will not be misled and inadvertently allow the passage ofunintended legislation.

The caption tothe Savings and Loan Act reads in part:

. . . exempting savings accounts from securities laws;
. . . providing that outstanding shares, stock, share accounts and i,nvestment certificates (excep_t Permanent Reserve Fund Stock) shall be considered as savings accounts; . . . (emphasis added). Notwithstanding the emphasi,zed language, Section 11.01 also purports to exempt reserve fund stock from the securities laws ofthe state. Inour opinion, the caption and aporti,on ofSection 11.01 are inirreconcilable conflict.

p. 1767The Honorable Roy W. Mouer page 3 (H-376)
Only that part ofthe act in direct conflict with the title is void unless the “invalid parts are inextricably interwoven in the **texture** oftheAct so as to render the entire Act invalid. ” Fletcher v. State, 439 S.W. 2d656, 659 (Tex. 1969); Hayman Construction Co. v. American Indemnity Co.., 471 S.W. 2d 564 (Tex. 1971); State v. Blackwell, 500 S.W. 2d 97 (Tex. Crim. 1973). The inclusion or exclusion ofpermanent reserve fund stock in the exemption provision does not affect the rest oftheAct.

,Ifhaving struck the unconstitutional part, the result ia broader legislation than originally enacted, thewhole act must fail. Texas-Louisiana Power Co. v. City ofFarmersville, 67 S.W. 2d 235 (Tex. Comm. App. 1933). Inthe present case the removal ofpermanent reserve fund **stock** from the exemption ofSection 11.01 results in narrower legislation. The Act contains a severance clause. We think the courts would view the caption defect as voiding only that which is in conflict with the caption, but as not affecting the rest oftheAct.

The Securities Act, Article 581-1, et seq., V.T. C.S., applies to all transactions involving permanent reserve fund stock. Persons making secondary sales of savings association permanent reserve fund stock may be required to register thereunder, and the anti-fraud provisions ofthat Act may be applied to such sales unless specifically exempted by Sections 5and 6ofthe Securities Act. SUMMARY Section 11.01 ofthe Savings and Loan Act, Article 852a, does not exempt savings andloan permanent reserve fund stock from otherwise applicable provisions ofthe Securities Act. Article 581-1, et seq., V. T. C.S. Very truly yours.

p. 1768The Honorable Roy W. Mouer page 4 (H-376)

APPROVED:

DAVID M
. KENDALL, Chairman Opinion Committee

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