. _ .

Hon. Sidney Latham Secretary of State Austin 11, Texas

ATTN: Mr. Horace B. Sessions, SecuritiesCommissioner

Dear Sir: Opinion No. O-6020

Re: Under the given factswould it be necessary‘for the InsuranceCompany in question to obtain a permit under the SecuritiesAct in order for the stock to be sold to the general public?

Your request for an opinion on the above matter 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 incorporatedunder the laws of Texas, desires to increase its capital stock. It anticipates that its stockholderswill not take all the increase,and that at least some of such increasewill be sold to the public. The amendment to the charter carnot be filed until all the stock is subscribedand paid in full. Accordingly, the procedure contemplated is for the stockholdersof the insurance company to authorize an increase of the capital stock; the increasenot taken by the stockholders to be sold to the general public; the stockwould be $100 par value but would be sold to present stockholdersand the public at $300.00per share;when all has been subscribed and paid for, the increase thenwould be certified to the proper authoritiesandHon. Sidney Latham, page 2 (o-6020)

the charter amended. The stockwo,uldthen be issued to thosewho had subscribed to it. At the time of subscription,the stockholders would be given a stock subscriptioncertificate, stating that he had subscribedand paid for stock in the company, and that the stoc,k certificateswould be exchanged for the subscription certificateswhen the increased capital had all been subscribedand 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,ury stock, stock dertificateunder a voting tr,ust agree- ,' ment, collateral trust certificate,equipment trust certificate,preorganizationcertificate or receipt, subscriptionor reorganization certificate,note, bond, debenture,mortgage certificate or other evidence of indebtedness, any form of commercialpaper, certificate in or under a profit sharing or participation agreement, certificate or any instrumentrepresenting any interest in or under an oil, gas or mining lease, fee or title, or any certificate or instr,ument representing or securedby an interest in any or all of the capital, property, assets, profits or earnings of any company, investment contract, or any other lnstrument commonlyknown as a security,whether slmllar to those herein referred to or not."
Under this definltdonof the term "sec,urlty" or "sec,uritles",

there Is no question but that the stock~referred to by you 1s subject to the provisions of The Securities Act, unless exempt therefromby some provision of the Act.

Section 3 of the SecuritiesAct provides that: "Except as hereinafter In this Act specificallyprovided, the provisions of this Act shall not apply to the sale of any securitywhen made in any of the following transactionsand under any of the following conditions,"Hon. Sidney Latham, page 3 (o-6020)

naming various transactionsand 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 SecuritiesAct provides that: "Exceptwith reference to exempt transactionsprovided 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 publishwithin this State any circular," etc., and followingwith various provlslons concerning the advertisementof such sale or sales of securities and endingwith the provision that same shall have no application to any security includedwithin 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 incorporatedunder the laws of and subject to the examination,supervisionand control of any state or territory of the United States or any Insularpossession thereof; or Issued or guaranteedby any building and loan association or savings Institutionor byany insurance company under the supervision or control of the Banking or InsuranceDepartment of this State."
Article 467ga provides for the appointment of the Board of InsuranceCommissioners,and Article 467% provides that: "Generally,the Life InsuranceCommissioner shall have supervisionof matters relating to Life Insurance, to the chartering,ofcompanies, certificates of authority, and as to the solvency of perso;s and corporationsengaged in the Insurance b,usiness, while Chapter 3, Title 78, provides for complete supervision over s.uch

companies; therefore, it appears that the insurance company referred to lnyour inquiry comes within "any insurance company under the supervisionor control of the

. . . InsuranceDepartment of this State" referred to in Section 23, Subdivision (g), of The SecuritiesAct above set out.

Section 5 of The SecuritiesAct 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 comewithin the classes enumerated in Subdivisions (a) to (q),both inclusive of Section 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 SecuritiesAct that the Legislaturedid not Intend to include in said Act securities Issued and offered for sale by an insurance companywhich was under the supervisionof the Insurance Department; therefore, since the insurance company referred to in your Inquirywould be under the supervision of the InsuranceDepartment, it is our opinion that it Is not necessary for such company to obtain a permit under The SecuritiesAct In order to sell a part of Its capital stock to the general public.

Trusting that this satisfactorilyanswers 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