Case Information
*1 THEATJTORNEY GENERAL OFTEXAS AUSTXN~~.-~'EXA~
Gerald C. Mann
ATTOxcNF,Y ‘:rENr!2HAr.
Hon. Jno. Q0 McAdams Opinion No. O-5724 Coulml .ssioner, Depart- Rer Construction of Articles 1524a and 696, of the Revised Civil Stat- ment of Banking Austin, Texas utes, with respect to depositing by loan and brokerage com- Dear Mr. McAdams: panles.
You request an opinion from this Department in the following letter:
“Two companies hold charters under Article 1303b of the Revised Civil Statutes of Texas for 1925. Both companies up to now have engaged only in the business of accumulating and lending money. The companies now propose to issue face amount as authorized by 1303b and 1524a, Revised Civil Statutes for 1925. The issue and sale of these however, are to be only in connection with loans made by the No certificates will be respective companies. sold to any person other than a borrower from the company. No certificate will be sold in an amount in excess of the amount loaned to the purchaser.
No general offering to the public of these ficates will be made. No part of the capital either company is to be raised by the issuance sale of these certificates. The sole purpose to be accomplished by the issue and sale of such cer- tificates is to afford the borrower a convenient plan for savings to repay his loan obligation at its maturity.
“We would like to Imow whether loan and brok- erage companies issuing debentures and certificates upon which they are to receive payments 1524a Revised Civil Statutes of 1925 in the manner set out above are also re uired make the deposit provided by Article 69 % Title 21 of the same statute.‘* Section 7, of Article 1524a, Vernon’s Revised Civil as amended in 1937, 45th Legislature,
Statutes, p. 405, Chap. 204, Sec. 2, contains the following:
Hon. Jno. Q. McAdams, page 2 drben-
“All bonds, notes, tures, or other obligations in !.‘exas by any corporation affected by a provision of this Act shall be secured by securities of the reasonable market value, equaling at least at all times the face value of such bonds, notes, certificates, debentures or other obligations.
If such corporation sells in Texas bonds, notes, certificates, debentures or other obligations upon which it receives installment payments, such bonds, notes, certificates, debentures other obligations shall be secured at all times by securities having the reasonable market value equal to the withdrawal or cancellation value Said securi- of such obligations outstanding.
ties shall be placed in the hands of a corpora- tion having trust powers approved by the Bank- ing Commissioner of Texas as Trustee under a trust agreement, the terms of which shall be approved in writing by the Banking Commissioner o,f Texas, or at the option of any such corpora- tion which sells in Texas bonds, notes,
ficates, debentures or other obligations upon which it receives payments, such corporation may upon application to, and approv- al by, the Banking Commissioner of Texas deposit having a reasonable market value equal to the withdrawal or cancellation value of such outstanding with the State Treasurer of Texas in lieu of such deposits with a Trustee as set forth hereinabove, ***.
“Any such corporation which sells in Texas bonds, notes, debentures or other upon which it receives payments, which upon the effective date of this Act has securities deposited with a Trustee here- under, may, with the written consent of the Bank- ing Commissioner continue under said trust agree- ment , and/or agreements as to bonds, notes, cer- tificates, debentures or other obligations
already in Texas upon which it receives in- stallment payments, and avail itself the option to deposit such securities as to future sales of said obligations with the State Treas- urer of Texas by complying with this Act in the same manner that a corporation hereafter organ- ized would be required to comply with this Act.
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Hon. Jno. Q. McAdams, page 3
“All cash or securities left with the State 696, Revised Treasurer in compliance with Article Civil Statutes of 1925, shall be considered as part of the collateral required under this section.” It has been held by this Department that the securi- 696, of the Revised Civil Statutes, ties deposited under Article are for creditors of the depositing corporation generally, not specially for its Texas creditors. (See opinion of Mr. Richard Brooks, Assistant Attorney General, of date May ll,s1e9838’ addressed to Honorable Charley Lockhart, State Treasurer. , also, opinion by Assistant Attorney General Cureton, June 17, 1917, Opinions Attorney General, 1916-1918, p. 202). The opin- ion by Mr. Brooks likewise held that securities deposited un- of Section 7 of the Loan and Brokerage Corn: der the requirement panics’ Act are exclusively for the benefit of holders of ob- ligations in Texas.
It will be seen that the Loan and Brokerage Companies hct (Article 152&a) requires such company issuing and selling the public its bonds or other securities in Texas to keep its outstanding obligations secured “at all times”, to the extent 696 does not require therein stated, while Article such continu- ous collateral security. There can be no doubt of the Banking Commissioner’s authority to require companies operating under Article 1524a to keep its outstanding collateral- ized at a 1 tw but such power does not exist under Article 696, as above sta;ed.
We are of the opinion the provision above quoted, that securities deposited with the State Treasurer under Arti- cle 696, may be considered as part of the collateral security required by Article 1524a, is a privilege extended to the cor- poration, but there is nothing to be found in either Act that would justify the construction that an issuing company would be required to do more than to collateralize its outstanding obli- gations in Texas with securities deposited 1524a, either with the State Treasurer, in the exercise of its option, or with a trustee, as provided for in Article 152&a.
To keep such outstanding collateralized in a manner here indicated would be a full compliance with every requirement, and meet every purpose of the Loan and Brok- erage Companies Act.
-- ,_ Hon. Jno. Q* McAdams, page 4
Trusting that what we have said is sufficient an- swer to your inquiry, we are
Very truly yours ATTORNEY GEiNERAL OF TEXAS By /s/ Ocie Speer Ocle Speer, Assistant APPROVED DEC 3, 1943
/s/ Grover Sellers
FIRST ASSISTANT ATTORNEY GENERAL
APPROVED: OPINION COMMITTEE BWB, CHAIRMAN
BY:
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