Court Opinion

ID: 4136891
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:18:42.030353+00
Date Added: 2024-06-11T14:22:36.294472
License: Public Domain

.‘.       ,_

      Hon. John Osorlo, Chairman.
      Board of Insurance    Commissioners
      International   ,Life Building
      Austin, Texas
                           Opini,on No. ww-90
                               Ret    Is a ,person, firm, or partnership
                                      which is for part or all the time
                                      directly   or tnrougn    an agent en-
                                      gaged In activities described        In
                                      Article, 580-2(c)      V.C.S.,  exempt
                                      from the dealer i icenslng      provi-
                                     ,,sions of such Ac.t when dealing       in
                                     ~insurance   securities    as described
                                      in Article   580-3(c).
      Dear Sir:
                  You have requested          our opinion concerning            whether
      a person,   firm, corporation,          or partnership        which is for all
      or a part of the time directly             or through      an a ent engaged
      in the activities       described     In Article      580-2(c f , Vernon’s
      Civil Statutes      of Texas, denominated          “the Insurance         Securi-
      ties Act,” exempt from the dealer licensing                   provisions       of
      such Act when dealing         In insurance      securities       as described
      in kticle     580-3(c).       You state in your opinion request                 that
      th-ee security      dealers    who do not have licenses             under the
      Insurance   Securities      Division      of the Board but do have li-
      censes as a dealer through the Securities                  6 ommissloner of
      the Secretary      of State’s     office,    have asserted        that they are
      nut required    to seaure an insurance           dealer’s      license      for such
      secondary sales as are set out In Article                  580-3(c).        They con-
      tend that they are acting only as agent for vendor or seller
      under Section 3(c) and therefore             no insurance        securities       deal-
      er’s license     is required      of them as such agent.
                    4rticle    5,9:2(c),    defines    a ttdealer18:
                     “The term ‘dealer I shall include     every person
               or company, other, than ,a salesman, who engages in
               this state,    either   for ,a11 or part of his or fts
               time, directly     or through an agent, in selling,
Hen. John Osorlo,        page 2    (W-90)

      offering    for sale or delivery          or soliciting
      subscriptfons       to or orders for, or undertak-
      ing to dispose of, or to invite             offers for, or
      rendering     services     as an investment       adviser,
      or dealing in any other manner in any security
      or securities      within this state.           Any issuer
      other than a registered         dealer,     of a security
      or securities,       who, directly      or through, any
      person or company, other than, a registered
      dealer,    offers     for sale, sells      or makes sales
      of its own security         or securities      shall be
      deemed a dealer and shall be required to com-
      ply with the provisions         hereof;     provided,      how-
      ever9 this Section or provision             shall not
      apply to such Issuer when such security                 or se-
      curities    are offered for sale or sold either
      to a registered        dealer or only by or through a
      registered     dealer acting as fiscal           agent for
      the issuer;      and provided further,         this Section
      or provision      shall not apply to such issuer             if
      the transaction        is within the exemptions con-
      tained in the provisions         of Section 3 of this
      Act 0”
            The initial      paragraph      of subsection     3 of Article
580 providesl
              “Except as hereinafter       in this Act speci-
      fically     provided     the provisions    of this Act
      shall not apply co the sale of any security
      when made in any of the following           transactions
      and ‘under any of the following         oonditions       and
      the company or person engaged therein             sha 1 1 not
      be deemed a dealer within the meaning of this
      Act; that is to say, the provisions            of this Act
      shall not apply to any sale, offer for sale? so-
      licitation,      subscription,    dealing in or delivery
      of any security       under any of the following         trans-
      aetfcns     or conditionsa
              ”s . . n
            Amongst the transactions  exempted by subsection                 3
is the transaction    set forth in sub-paragraph (c) thereof,
which states8
              "(~1   Sales of securities  made by or In be-
      ha&c’      a ,vendor, whather br na
                 in the ordinary   course of bona fide per-
      sonal’lnvestment      of j&e aeru               of suc&
Hon. John Osorio,        page 3     (~~-90);

      vendor, or change in such investment,          if
      such vendor Is not otherwise         ,engaged either
      permanently      or temporarily    in selling   securi-
      ties;    provided,    that in no’ event shall such
      sales or offering        be exempt from the provi-
      sions of this Act when made or intended bP
      mdor      or his m,         for the benefit,    either
      directly     or indirectly,     of any aompany or cor-
      poration     except the individual      vendor (other
      than a usual commission to said agent) ;
             ‘1. . . ”
           The issue,     then,, is whether a dealer who makes a
sale for a vendor, which sale would be exempt under the pro-
visions  of subsection      3 of Article    580, would himself be
exempt from obtaining       a license   under the Insurance   Securi-
ties Act of such dealer engages only in transactions           exempt
under Article   580-3(c).
            The Insurance    Securities  Act Is su stantially     iden-
tical   to the language of the Securities       Act. !i The language
of both acts was derived from &ticle          6OOa, V.C.S., popularly
known as the “Blue Sky Law,” as amended.          Accordingly,   cases
construing    the provisions   of old, Article   600a will be control-
ling where applicable.
             In construing     Article     600a, Subsection   3(c) $ which
is substantially     identical     tp Article    580-3(c),  the courts
have repeatedly    held that a dealer engaged in such a transas-
tion must obtain a dealer’s          license.    In tier    v . Hancock,
the court stated:
             ‘IWe think involved in that language is the
      construction     that Section 3(c) applies to the

  A,/ Article    579-l    through    Article   579-42.
   &’ 14gES.W.2d 239 (Tex.Civ.App.          1941, error dism.)       This
was a suit for a’brokerts        commission for the sale of an oil
payment by the plaintiff.         Defendant defended on the basis
that plaintiff      had no dealer’s     license   while plaintiff     claimed
to be exempt from the provisions           of the Securities      Act requi.r-
ing a dealer Is license       by virtue    of Section 3(c) g and was
therefore    entitled   to recover,     notwithstanding      the fact that
he had no dealer’s      license.
                                                                       . .     ’

Hon. John Osorio,       page 4    (WV-90)

      owner of the seaur,ity;      that he is not a dealer
      if he sells for the purposes named, either            in
      person’or  through another a personally          owned
      seaurity-,    provided,    of course, he is not in
      that general     business.     The ,sale or, contract
      of sale made under such circumstances,           whether
      by the owner or another,         is In all respects
      legal and enforceable.         It is not held, ‘however,
      we think,  that if the one effecting          the sale for
      such a vendor is an unlicensed          dealer under the
      Securities    hct that he would be entitled         to com-
      pensation   :‘or his services.11
              This   ruling   has been adhered   to in a nwnber of
,~‘ases..‘3
            Adollttedly there have been several     amendments to
hrcicle  600a, Section 3(c) since the time of 3hese decisions.
(The additional     language added by ‘amendment is underlined    in
ihe excerpt 02’ si.zbsection 3(a) set, out’ above.)

            It ~:an readily   be seen that the amendments are not
substantial    and do not materially     change the lan uage of the
act with respect     to the issue raised.      Section 3 t c) of Arti-
s.;le 600a certainly   contemplated   sales by agents,     for how else
;o,old a sale Abemade on behalf of a vendor except by another
person?
             The Insuranae      Seourlties    Pot hae no proVislC% ex-
sllipt ing 18dea.Lers” licensed     by the Securities     Commissioner of
cae Secretary     of State’s     office    from obtaining    a license  pur-
s’.iant: to the l’Insurance    Securitiee     Attn.    Therefore   the deal-
dtx in, question     are not exempted !Yom ,the Act.

  ,A’ &)&Jr  v. c
rrr.‘r.r
      re%. n.r.e.
Civ.App. l.9+5 err0
3~77 (Tex.Sup.&.  1953) i
g;W.2d 197 (Tex.
-.      _

     Hon. John Osorio,     page 5’ m-90)
            .

                                       SUMMURY
                   A person, firm, or corporation       or partnership
            which is for part or all of the time directly            or
            tnrougn an a ent engaged In activities          described.
            in Article    5 %0-2(c),   V.C.S., is not exempt from
            the dealer’s     licensing   provisions   of such Act when
            dealing    in insurance    securities   as described    in
            Article    580-3(c).
                                           Very truly   yoursr

                                           WILL WILSON
                                           Attorney Gen.eral

                                             Wallace P. Finfrock
                                             Assistant
     WPF:wb
     APPROVED:
     OPINION COMMITTEE
     H. Grady Chandler
              Chairman