con- nectionwith the propertyinvolved."
Cur attentionla calledto the case of Utility InvestingCorpo- rationv. Stewart,11 Fed. Supp. 391 by the FederalDistrictCourt in Pennsylvania,which opinionw8e affirmedIn Stewartv. Utility IIwesting Corporation(C.C.A. 3rd) 78 Fed.2d 279. Thin case Is apparentlythe only one interpretingthe meaningof the term "reorganization"in the contextof the State SecuritiesAct. The PennSylvaniaSecuritiesAct providedthat: "The issue of securitiesto the Securityholderaor other creditorsof 8 corporation,in the processof 8 bon8 fide reorganization of such corporation,made In good faith . . . In exchangefor the securities. . . of such creditors. . . [Shouldnot constitutethe perSon or com- pany engagedtherein8 dealerwithin itS meaning]." Hon. WilliamM. King, page 9 (WW-504)
Under the facts involvedin the case, the corporationin ques- tion was offeringto debentureholdersof that companycertainnew or differentsecuritiesin exchangefor their debentures. It was the pur- pose of the companyto relieveitselfof the burden of having to meet fixed interestchargesat definiteperiodsby invitingthe holdersof fixed interestdebenturesto exchangethem for new obligationsat a high rate of interest,cumulative,but payableonly as earnedand coupled with a sinkingfund provision. The holderswere also offeredtwo options, the exerciseof either of which was describedby the court as havingthe effectof naturallylighteningthe fixed interestburden upon the equi- ties of the holdingcompany. The court stated:
"I entertainno doubt that this rearrangementof its capitalstructureis a reorganization of the companywith- in the meaning of the act. While corporatereorganizations are frequently,in fact usually,effectivethroughthe me- dium of receivershipand judicialsale, the ordinarymean- ing of the word is quite broad enoughto includevoluntary capitalreadjustments.Nor is it necessarythat there be a new corporationor changeof managementor ownershipof physicalassets. Nor need the equitiesbe affected(though in this case they are). That the act contemplates,among others,reorganizations entirelyconfinedto the credit structureappearsfrom the fact that the provisionin ques- tion may be read as applicableto 'issueof securitiesto the . . . creditors. . . in exchangefor the . . . claims of such creditors.' 70 P.S. Pa. Sec. 2(c) and (11).
"The underlyingpurposeof this and similarstatutes is to protectthe investingpublic. The method by which the PennsylvaniaAct does it is the licensingof dealers. Exceptionsfrom the operationof the law are createdby ex- cludingfrom the class of dealerspersonsengagedin cer- tain specifiedtranssctions,one of which is the offer of securitiesin the course of corporatereorganizations.The only conditionis that the reorganizationbe bona fide and the offer of securitiesmade in good faith."
This decisionrecognizesthat whethera given transactionis a reorganization dependsupon the particularfacts involved. Though recognizingcertainsimilarities, we believethe fact situationinvolved in your requestdiffersfrom those in this decisionso that it would not controleven though it be the law in Texas.
In connectionwith this transactionthe CitizensStandardLife InsuranceCompanyhas made applicationto the Commissionerof Insurance for approvalto amend their charterto permit the increaseof their capl- tal in order to transferthe stockto their so-calledcertificateholders. We call attentionto certaintestimonytaken by the Commissionon February Hon. WilliamM. King, page 10 (WW-504)
25, 1958,in connectionwith said application. On page 13 of this trans- criptMr. PrestonDoughty,Presidentof the CitizensStandardLife In- suranceCompany,explainedthe purposeof the amendmentin the following language:
"In fact, the programof gettingthese ~ . . this charteramendmentwas motivatedby constantrequestsfrom the advisoryboard, of certificateholdersthat they be permittedto surrendertheir certificateand be issued stock. The stock of the company,on a local market,has