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4 Bull. Sec. Corp. Banking & Bus. L. 1 (1965-1966)

handle is hein.journals/txjbus4 and id is 1 raw text is: BULLETIN OF THE SECTION ON CORPORATION, BANKING & BUSINESS LAW VOLUME 4 OCTOBER, 1965 NO. 1 ACKNOWLEDGMENTS On behalf of the entire Section on Corporation, Banking and Business Law, the Bulletin wishes to express appreciation to Mr. Marvin Sloman for his years of excellent work in its behalf. Because of the increasing burden of other work, Mr. Sloman asked not to be reappointed as Chairman of the Committee on Information for the year 1965-1966. Appreciation is also expressed to Mr. Sloman for the materials contained in this issue, most of which were supplied from his files. The change in the editorship has required a change in printers, and in this connection two expres- sions of gratitude are in order. Thanks must first be given to Warlick Printing Company of Dallas for the many years of excellent service which they have contributed to this publication, without compensation, and without which the publication would not have been possible. Equal thanks must now be given to Thos. De La Rue, Inc. of Houston who have printed this issue and have agreed to continue the publication on the same fine basis as it has been done in the past. RECENT DEVELOPMENTS Texas Securities Act - Small Offering Exemptions - Public Solicitation and Advertisements. In the first reported Texas case dealing with the question, the Beaumont Court of Civil Appeals construed the terms public solicitation and advertisements used in Sec. 5.I of the Texas Securities Act as in effect prior to the 1963 amendments to the Act. Plaintiff sued the defendant corporation for his commission for selling its common stock. Although less than 35 persons actually purchased stock, the corporation defended on the grounds that plaintiff was not a licensed securities dealer or salesman and that he used public solicitation or advertising in selling the stock. Plaintiff was not a registered dealer or a licensed salesman and in offering the stock had solicited some 250 persons to whom he exhibited a brochure containing the usual data as to the proposed capital stock, nature of the project, estimated income and otherwise amounting to a detailed prospectus. The trial court entered judgment for the plaintiff on jury issues in his favor, including the finding that the sale was accomplished without the use of advertisements or public solicitation. The Beaumont Court reversed and rendered. Tumbleweed Bowling Corporation v. Matise, 388 S.W. 2d 479 (Tex. Civ. App., 1965). Sec. 5.1 of the Act was amended in 1963 and now provides for the so-called 35 man, the employee option, and the 15-a-year exemptions, all conditioned upon the absence of any public solicitation or advertisement.' No reasons appear why the holding of the Beaumont Court would not be applicable to this section of the Act as now in effect. In defining public solicitation, the Court stated that a sale of securities is offered to the public when several people are asked if they will not buy and are urged to buy such stock. Obviously, the number of permissible offerees under the Act must be at least equal to the respective numerical limits (35 and 15) on purchasers or holders, and, logically, must be somewhat greater than these numbers.2 In addition, there is no numerical limit imposed by Sec. 5.1 on the number of employees to whom stock options may be granted. Thus, it would seem that stock issued pursuant to options offered to 250 employees, for example, would not constitute a public solicitation under the Texas Act and destroy the exemption for this reason. Accordingly, it should require more than an offer to several people in order to constitute public solicitation under Sec. 5.1. However, the holding of the Court on this particular point does not seem subject to question, where, as was the fact, the offer was made to some 250 persons. 1 Bromberg, Texas Small Offerings Exemptions, 18 SW. L.J., 537 (1965). 2 Ibid at page 552, footnote 65.

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