Untitled Texas Attorney General Opinion ( 1957 )

.‘. ,_ 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