INSURANCE ‑- SECURITIES ‑- SALE OF ‑- LICENSE TO SELL
(1) An individual soliciting the sale of securities to members of the public under a solicitation permit pursuant to RCW chapter 48.06 must comply with the terms of RCW 21.04.090.
(2) Companies for whom individuals under RCW 48.06.090 sell securities are required to be licensed pursuant to RCW 21.04.030.
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October 26, 1956
Honorable Della Urquhart
Director of Licenses
General Administration Building
Olympia, Washington Cite as: AGO 55-57 No. 334
Dear Mrs. Urquhart:
You have requested the opinion of this office on the following questions:
(1) Must an individual soliciting the sale of securities to members of the public under a solicitation permit pursuant to chapter 48.06 RCW comply with the terms of RCW 21.04.090?
(2) Are companies, for whom individuals under RCW 48.06.090 sell securities, required to be licensed pursuant to RCW 21.04.030?
We answer both of your questions in the affirmative.
The statutes necessary for a clear determination of the questions set out herein are in pertinent part as follows:
[[Orig. Op. Page 2]]
"Terms used in this chapter, unless otherwise apparent from the context, shall have the meaning given in this section:
"(1) The word 'companies' includes all domestic and foreign private corporations, associations, syndicates, joint stock companies, and copartnerships, and also trustees (but not including executors, administrators, receivers, or other trustees acting under the authority of a court); also individuals selling, offering for sale, negotiating for the sale of or taking subscriptions for any security of their own issue;
"(b) All insurance companies authorized to transact business within this state and all corporations transacting a banking or trust companies business within this state;
"(4) The word 'agent' includes every person or company employed or appointed by a broker or company who sells, negotiates for the sale of, solicits, or takes subscriptions for any security.
"(5) The word 'broker' includes every person or company, other than an agent, engaging in the business of selling, offering for sale, negotiating for the sale of, soliciting subscriptions for, or otherwise dealing in securities issued by others; . . ."
"No company, or underwriter thereof, shall sell, or offer for sale, negotiate for the sale of, or take subscriptions for any security of its own issue, until the company or an underwriter thereof shall have first applied for and secured from the director a permit authorizing the sale of such security; . . ."
"No company or person shall act as an agent or broker without a certificate so to do. The certificate shall be issued for a term of one year, but may be revoked for cause."
[[Orig. Op. Page 3]]
"(1) No person shall act as an insurer and no insurer shall transact insurance in this state other than as authorized by a certificate of authority issued to it by the commissioner and then in force; . . ."
"Solicitation for sale of securities to members of the public under a solicitation permit shall be made only by individuals licensed therefor pursuant to the provisions of the securities act."
Properly to answer the questions presented necessarily requires a preliminary determination of the meaning of the phrase "All insurance companies authorized to transact business within this state", found in RCW 21.04.010 (1) (b). Said statute specifically exempts insurance companies authorized to do business within this state from compliance with chapter 21.04 RCW entitled "Sale of Securities." It necessarily follows that when the term "agent or broker" is used with reference to company in chapter 21.04 RCW, it means as agent or broker only of a company recognized under chapter 21.04 RCW.
The terms of RCW 48.05.030 specifically provide that possession of a "certificate of authority" is necessary in order for an insurance company to be authorized to transact business within this state. Therefore, it is the opinion of this office that the phrase "All insurance companies authorized to transact business within this state," set out in RCW 21.04.010, refers only to those insurance companies that hold a "certificate of authority" under the insurance code. That is, any insurance company or organization not holding said certificate falls within the scope of chapter 21.04 RCW, while insurance companies holding such certificates are excluded from the provisions of said chapter.
We will now answer the questions in light of the foregoing interpretation of RCW 21.04.010 (1) (b).
RCW 48.06.090 permits solicitation for sale of securities to the public only by individuals licensed pursuant to the provisions of the securities act. RCW 21.04.010 (4) and (5) provide that "The word 'agent' includes every person or company employed or appointed by a broker or company who sells, negotiates for the sale of, solicits, or takes subscriptions for any security," and that "The word 'broker' includes every person or [[Orig. Op. Page 4]] company, other than an agent, . . . soliciting subscriptions for . . . securities issued by others." RCW 21.04.090 provides in part that "No company or person shall act as an agent or broker without a certificate so to do."
From the provisions of the aforementioned statutes it is evident that anyone soliciting for sale of securities as mentioned in RCW 48.06.090 falls within the meaning of "agent" or "broker" under chapter 21.04 RCW of the securities act. The provisions of RCW 21.04.090 unequivocally provide that an agent or broker must obtain a certificate.
Therefore, it is the opinion of this office that RCW 48.06.090 requires compliance with RCW 21.04.090 by all individuals soliciting the sale of insurance securities offered by companies not holding "certificates of authority."
We reiterate that, in answering the second question, the word "company," used in RCW 21.04.030 in pertaining to insurance organizations, is subject to the distinguishing interpretation given insurance organizations at the outset of this opinion.
The word "company" as used in RCW 21.04.030 must necessarily be analogous to the term "principal" as used in the law of agency in order to distinguish RCW 21.04.030 from RCW 21.04.090, since an individual or company may either be an "agent" or "company" under their respective definitions set out in RCW 21.04.010.
The preamble to the original securities and investment laws, chapter 69, Laws of 1923, stated the purpose of the act to be:
"An Act providing for the regulation and supervision of the issuance and sale of certain securities, as the same are herein defined, to prevent fraud in the sale thereof, and providing penalties, and making an appropriation."
There would be little purpose in regulating those channels which offered securities directly to the public if there were no provision for regulation of the company or organization whose securities were being offered. Fraud may possibly be perpetrated upon the public by the organizers of a company whose securities are offered, as well as by agents or brokers who engage in the business of presenting others' securities for sale to the public.
The provisions of RCW 21.04.090 regulate the latter class while RCW [[Orig. Op. Page 5]] 21.04.030 regulates the former class, by requiring the respective applicants to obtain a certificate as a prerequisite for the sale of securities to the public.
The word "company," used in RCW 21.04.030, is defined in RCW 21.04.010 (1). Since it was determined at the outset of this opinion that "companies" included all insurance organizations not holding "certificates of authority," it follows that those organizations must comply with RCW 21.04.030.
We hope this opinion will be of assistance to you.
Very truly yours,
Assistant Attorney General