R-95 

OFFICE OF 

THE ATTORNEY GENERAL 

PRICE DANIEL 

ATTORNEY GENERAL March 10, 1947 

Honorable Paul B. Drown 

Secretary of State 

Austin, Texas 

Opinion NO. v-81 

Re: Whether certain 

foreign securities 

"registered" with 

the Securities and 

Exchange Commission 

of the United States 

are 'on the list approved by the Securities and Exchange 

Commission", as contemplated by subdivlsion (b) of Sec. 23, 

of the Texas Securities Act, and therefore exempt from the 

Dear Sip: 

provisions of the Act. 

You request advice as follows: 

"Subdivision (b) of Section 23 of the 

Texas Securities Act, under exemptions, provides as follows: 

"'Any security Issued OP guaranteed by 

any foreign government with which the United 

States is at the time of the sale, or offer 

of sale thereof, maintaining diplomatic relations, OP by any State, province OF political subdivision thereof having the power 

of taxation or assessment, which security is 

recognized at the time it is offered for sale 

in this State as valid obligation by suah 

foreign government OP by such State, province, 

or political subdivision thereof issuing the 

same, provided however, that such securities 

must be on the list approved by the Securities 

and Bchange Commission of the United States.' 

"We have had several requests for information In regard to possible exemptions under 
Hon. Paul I-i. Brown, page 2 - v-81 

this provision. The trouble seems to be 

that the Securities and Exchange Commission does not approve an issue but simply 

registers the same. It would appear that 

the Legislature had in mind sn actual 

approval by this Commission before an exemption could be claimed. In the registration of these Issues by the Securities and 

Exchange Commission they always state that 

this should not be considered as an approval. 

"The question is, shall we consider 

a security, which meets all other requirements of'this-exemption as exempt when the 

same is simply registered with the Securities anrf. Exchange Commission and not approved. 

The authority and duties of the Securities 

end Exchange Commission as they pertain to the type of 

securities inquired about are set out in Title 15, Chapter 2A of the United States Code Annotated. As we construe the provisions of Chapter 2A, the Conznisslon has 

no authority OP duty to 'approve" any of the securities 

inquired about. We have also directed an Inquiry to 

the Chief Counsel, Corporations Finance Division, Securities and Exchange Commission, requesting confirmation of 

our construction of the Federal Act. The reply received 

by this office is to the effect that the Commission 

does not and has not approved, nor has it been authorized to approve any such securities since the creation 

of the Commission. 

The only authority granted the Commission by 

Federal law, in this connection, Is to allow securities 

to be "registered' upon application by the issuer after 

submission by, the issuer of extensive data disclosing 

matters of Interest to Investors as required by the Act. 

Apparently, the only decision required of the Commission 

is a determination that the application contains the data 

required by law. Ho authority or duty is placed upon the 

Commission by the Federal act to pass upon the investment 

merits of the securities so "registered , nor upon whether 

OP not the securities have investment value. 

On the other hand, the Texas Securities Act, 

which is published as Art. 600a of Vernon's Civil Statutes 

of Texas, contemplates a determination hy the Secretary of 
. 

1 

Eon. Paul H. Brown, page 3 - v-81 

State that "the plan of business of the applicant 

appears to be fair, just and equitable, and that 

the secuPities which it proposes to issue and the 

method to be used by it in issuing and disposing 

of the same ar8 not su% as will work a fraud upon 

the purchasers thereof. This determination is made 

in the form Of a "finding". Without a permit, the 

sale of such securities is unlavful. Th8 issuance 

of the permit contemplated depends upon a favorable 

"finding". See Sections 8 and 9 of the Securities 

Act. 

It Will be noted that the word "approved" 

Is also used in paragraph (f) of Sec. 23 of Art. 

600a, which exempts securities listed on recognized 

and responsible stock exchanges, which exchanges have 

been I'approved" by the Secretary of State. Such approval under paragraph (f) is conditioned that the 

exchanges supply to the Secretary OS State facts and 

data which "shall b8 found to establish: 

'I* * * 

"(2) That the governing constitution, 

by-laws, and/or regulations of such exchanges shall require: 

"* * * 

"3rd. Securities listed and traded in 

on such 8XChange to be restricted to those 

of ascertained, sound asset and/or income 

value." 

Thus, consistent with the scheme of the Act, 

the "approval" under paragraph (f) contemplates more 

than a mere disclosure of true facts as a condition 

precedent to engaging in the issuance and Sale of securities in Texas. As a safeguard to the investor, it 

contemplates that qualifications be imposed on the 

issuer tending to guarantee value. And 'appPovaln 

appears to mean that ,the Secsy of State has ascertained that the saf8gtIards exist. 

It thus appears that "approval" as used in 

the Texas seCUPiti8S Act means more than "registration" 

under the Federal Act, and no reason appear8 tOnoonstrue 

val" 

"registration" to mean the same thing as appPoor to hold that a list of registered securities is 
Hon. Paul H. Brown, page 4 - v-81 

a 'list approved" b the Conmtission within the meaning of subdivision 9 b) of Sec. 23 of the Texas Securitie8 Act. 

Since the Securities and Exchange Commission 

could haV8 been given powers by Congress of a nature 

leading to an approval substantially similar to that 

contemplated by the Texas Act, and since such may yet 

be done by Congress at its pleasure, it is our opinion 

that the exemption contained In paragraph (b) of Section 23 of the Texas Securities Act is and will remain 

inoperative until actual approval by the Securities 

and Exchange Conaaission of such securities is authorized or required by Congressional enactment. 

Certain foreign securities "registered" 

with the Securities and Exchange COnunissiOn 

of the United States are not "on the list 

approved by the Securities and Exchange Commission" as contemplated by the exemption 

contained in subdivision (b) of Section 23 

of the Texas Securities Act. (Art. 60Oa, 

V.C.S.) 

Very truly yours 

ATTORREX GENERAL OF TEXAS 

NM:rt;djm 

BY 

N&d McDaniel 

Assistant