.‘. ,_ 

Hon. John Osorlo, Chairman. 

Board of Insurance Commissioners 

International ,Life Building 

Austin, Texas 

Opini,on No. ww-90 

Ret Is a ,person, 

which is for 

firm, or partnership 

part or all the time 

directly or tnrougn an agent engaged In activities described In 

Article, 580-2(c) V.C.S., exempt 

from the dealer i icenslng provi- 

,,sions of such Ac.t when dealing in 

~insurance securities as described 

in Article 580-3(c). 

Dear Sir: 

You have requested our opinion concerning whether 

a person, firm, corporation, or partnership which is for all 

or a part of the time directly or through an a ent 

in the activities described In Article 580-2(c f 

engaged 

, Vernon’s 

Civil Statutes of Texas, denominated “the Insurance Securities Act,” exempt from the dealer licensing provisions of 

such Act when dealing In insurance securities as described 

in kticle 580-3(c). You state in your opinion request that 

th-ee security dealers who do not have licenses under the 

Insurance Securities Division of the Board but do have licenses as a dealer through the Securities 6 ommissloner of 

the Secretary of State’s office, have asserted that they are 

nut required to seaure an insurance dealer’s license for such 

secondary sales as are set out In Article 580-3(c). They contend that they are acting only as agent for vendor or seller 

under Section 3(c) and therefore no insurance securities dealer’s license is required of them as such agent. 

4rticle 5,9:2(c), defines a ttdealer18: 

“The term ‘dealer I shall include every person 

or company, other, than ,a salesman, who engages in 

this state, either for ,a11 or part of his or fts 

time, directly or through an agent, in selling, 
Hen. John Osorlo, page 2 (W-90) 

offering for sale or delivery or soliciting 

subscriptfons to or orders for, or undertaking to dispose of, or to invite offers for, or 

rendering services as an investment adviser, 

or dealing in any other manner in any security 

or securities within this state. Any issuer 

other than a registered dealer, of a security 

or securities, who, directly or through, any 

person or company, other than, a registered 

dealer, offers for sale, sells or makes sales 

of its own security or securities shall be 

deemed a dealer and shall be required to comply with the provisions hereof; provided, however9 this Section or provision shall not 

apply to such Issuer when such security or securities are offered for sale or sold either 

to a registered dealer or only by or through a 

registered dealer acting as fiscal agent for 

the issuer; and provided further, this Section 

or provision shall not apply to such issuer if 

the transaction is within the exemptions contained in the provisions of Section 3 of this 

Act 0” 

The initial paragraph of subsection 3 of Article 

580 providesl 

“Except as hereinafter in this Act specifically provided the provisions of this Act 

shall not apply co the sale of any security 

when made in any of the following transactions 

and ‘under any of the following oonditions and 

the company or person engaged therein sha 1 1 not 

be deemed a dealer within the meaning of this 

Act; that is to say, the provisions of this Act 

shall not apply to any sale, offer for sale? solicitation, subscription, dealing in or delivery 

of any security under any of the following transaetfcns or conditionsa 

” s . . n 

Amongst the transactions exempted by subsection 3 

is the transaction set forth in sub-paragraph (c) thereof, 

which states8 

"(~1 Sales of securities made by or In beha&c’ a ,vendor, whather br na 

in the ordinary course of bona fide personal’lnvestment of j&e aeru of suc& 
Hon. John Osorio, page 3 (~~-90); 

vendor, or change in such investment, if 

such vendor Is not otherwise ,engaged either 

permanently or temporarily in selling securities; provided, that in no’ event shall such 

sales or offering be exempt from the provisions of this Act when made or intended bP 

mdor or his m, for the benefit, either 

directly or indirectly, of any aompany or corporation except the individual vendor (other 

than a usual commission to said agent) ; 

‘1. . . ” 

The issue, then,, is whether a dealer who makes a 

sale for a vendor, which sale would be exempt under the provisions of subsection 3 of Article 580, would himself be 

exempt from obtaining a license under the Insurance Securities Act of such dealer engages only in transactions exempt 

under Article 580-3(c). 

The Insurance Securities Act Is su stantially identical to the language of the Securities Act. !i The language 

of both acts was derived from &ticle 6OOa, V.C.S., popularly 

known as the “Blue Sky Law,” as amended. Accordingly, cases 

construing the provisions of old, Article 600a will be controlling where applicable. 

In construing Article 600a, Subsection 3(c) $ which 

is substantially identical tp Article 580-3(c), the courts 

have repeatedly held that a dealer engaged in such a transastion must obtain a dealer’s license. In tier v . Hancock, 

the court stated: 

‘IWe think involved in that language is the 

construction that Section 3(c) applies to the 

A,/ Article 579-l through Article 579-42. 

&’ 14gES.W.2d 239 (Tex.Civ.App. 1941, error dism.) This 

was a suit for a’brokerts commission for the sale of an oil 

payment by the plaintiff. Defendant defended on the basis 

that plaintiff had no dealer’s license while plaintiff claimed 

to be exempt from the provisions of the Securities Act requi.ring a dealer Is license by virtue of Section 3(c) g and was 

therefore entitled to recover, notwithstanding the fact that 

he had no dealer’s license. 
. . ’ 

Hon. John Osorio, page 4 (WV-90) 

owner of the seaur,ity; that he is not a dealer 

if he sells for the purposes named, either in 

person’or through another a personally owned 

seaurity-, provided, of course, he is not in 

that general business. The ,sale or, contract 

of sale made under such circumstances, whether 

by the owner or another, is In all respects 

legal and enforceable. It is not held, ‘however, 

we think, that if the one effecting the sale for 

such a vendor is an unlicensed dealer under the 

Securities hct that he would be entitled to compensation :‘or his services.11 

,~‘ases ..‘3 

This ruling has been adhered to in a nwnber of 

Adollttedly there have been several amendments to 

hrcicle 600a, Section 3(c) since the time of 3hese decisions. 

(The additional language added by ‘amendment is underlined in 

ihe excerpt 02’ si.zbsection 3(a) set, out’ above.) 

It ~:an readily be seen that the amendments are not 

substantial and do not materially change the lan uage of the 

act with respect to the issue raised. Section 3 t c) of Artis.;le 600a certainly contemplated sales by agents, for how else 

;o,old a sale Abe made on behalf of a vendor except by another 

person? 

The Insuranae Seourlties Pot hae no proVislC% exsllipt ing 18dea.Lers” licensed by the Securities Commissioner of 

cae Secretary of State’s office from obtaining a license purs’.iant: to the l’Insurance Securitiee Attn. Therefore the dealdtx in, question are not exempted !Yom ,the Act. 

,A’ &)&Jr v. c 

rrr.‘r.r re%. n.r.e. 

Civ.App. l.9+5 err0 

3~77 (Tex.Sup.&. 

g;W.2d 197 (Tex. 

1953) i 
-. _ 

Hon. John Osorio, page 5’ 

. 

m-90) 

SUMMURY 

A person, firm, 

which is for part or 

or corporation or partnership 

all of the time directly or 

tnrougn an a ent engaged In activities described. 

in Article 5 % 0-2(c), V.C.S., is not exempt from 

the dealer’s licensing provisions of such Act when 

dealing in insurance securities as described in 

Article 580-3(c). 

Very truly yoursr 

WILL WILSON 

Attorney Gen.eral 

Wallace P. Finfrock 

Assistant 

WPF:wb 

APPROVED: 

OPINION COMMITTEE 

H. Grady Chandler 

Chairman