that under the terms of the certificatethe company hd agreedthat at maturitythe face value shouldbe payablein cash or stock of the companyat the electionof the certificateholder. Thus, under the terms of the certificateat maturity,each certificateholder of a full $600.00 certificatewould have been entitledto elect to re- ceive six shares of stock. Since the issuanceof these certificates the corporatestructureof the CitizensStandardLife InsuranceCompany has been changedresultingin 8 ten-for-onesplit.. i Prior to the charteramendmentcreatingthe stock here in ques- tion, the companyhad issuedstock to other certificateholderswho had paidyinfull the amount of their certificate.The generalplan of the companyhas been to Obtain charteramendmentsincreasingtheir capital stock periodicallyto accommodatethese certificateholders.
The SecuritiesAct statesthat securitiesas definedtherein must be registeredunder Section7 if sold or offeredfor sale unless the sale or offer of sale of such securitiesconstitute"exempttrans- actions"as definedby Section5, or such securitiesare "exemptsecuri- ties" as &fined by Section6. The term "sale"and relatedterms are definedin great detail in Section4(E) and it is only necessaryto re- fer to 8 portionof this definitionto ascertainthat the contemplated exchsngein this case would constitutea sale or offer to sell of securi- ties requiringregistrationunless exempted. Section4(E) is 8s follows:
"The terms 'sale'or 'offerfor sale' or 'sell'shall includeevery disposition,or attemptto disposeof a se- curity for 8 value. The term 'sale'means and includes contractsand agreementswhereby securitiesare sold, traded or exchangedfor money, property,or other things of value, or anyJtrensferor agreementto transfer,in trust or other- wise . , . The sale of 8 securityunder conditionswhich en- title the purchaser. . . to exchangethe same for, or to purchasesome other security,shsll not be deemed8 sale or offer fbr sale of such other security;but no exchangefor or sale:of such other securityshall ever be msde unless and ." until the sale thereof shall have been first authorizedin Texas under this act, if not exempt hereunder,or by other provisjonsof law. . .' Hon. WilliamM. King, page 5 (WW-504)
Clearly,the consummationof the prospectiveplan would fall within this definition.
You have requestedin your letter the opinionof this office whether or not the transactionin questionis exempt from registration under the provisionsof The SecuritiesAct. It has been suggestedthat the transactionmay be exempt eitherunder the provisionsof 5(D)(E)(G) exemptingcertaindistributions by a corporationof securitiesdirectly to its stockholders, or the provisionsof 5(F) relatingto transfers in the courseof reorganization.We shall take up the exemptionunder 5(D)(E)(G)first.
Section5 of The SecuritiesAct is, in part, 88 follows:
"Section5. ExemptTransactions.
"Exceptas hereinafterin this Act specificallypro- vided, the provisionsof this act shallnot apply to the sale of any securitywhen made in any of the following transactionsand under any of the followingconditions, and the companyor person engagedthereinshall not be deemeds dealerwithin the meaning of this act; that is to say, the provisionsof this act shall not apply to any sale, offer for sale, solicitation,subscription, dealingin or deliveryof any securityunder any of the followingtransactionsor conditions:
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"I). The distributionby a corporationof securities directto its stockholdersas a stock dividendor other distributionpaid out of earningsor surplus.
'73. The sale of sn increaseof capitalstock of a corporationonly to its stockholdersand withoutpayment of any commissionor expenseto any officer,employee, broker or agent;
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"CL