. _ . 

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 question 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 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 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 company to authorize an increase of the capital 

stock; the increase not taken by the stockholders 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 subscribed 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,uld then 

be issued to those who had subscribed to it. 

At the time of subscription, the stockholders 

would be given a stock subscription certificate, stating that he had subscribed and paid 

for stock in the company, and that the stoc,k 

certificates would be exchanged for the subscription 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,ury stock, 

stock dertificate under a voting tr,ust agree- 

,' 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 representing any interest in or under an oil, gas 

or mining lease, fee or title, or any certificate or instr,ument representing or secured by 

an interest in any or all of the capital, property, assets, profits or earnings of any company, investment contract, or any other lnstrument commonly known as a security, whether slmllar 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~referred to by you 1s subject to the provisions of The Securities 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 provided, 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 provided 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 Commissioner shall have supervision of matters relating to 

Life Insurance, to the chartering,of companies, certificates 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 supervision over s.uch companies; 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 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 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 supervision 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