Can an out-of-state trust company get Texas customers by having a related brokerage firm's agents hand out its account forms?

Texas AG Opinion JM-1032: When Does an Out-of-State Trust Company "Solicit" in Texas?

Plain-English summary

An out-of-state trust company can serve as trustee for Texas residents, but Texas law puts a wall around how it can drum up that business. This opinion is about a plan that tried to route around the wall by using a related brokerage firm, and the Attorney General concluded the plan crossed the line.

Here is the setup. A Missouri trust company was affiliated with a brokerage firm that did business in Texas. The plan was that the brokers would keep information about the trust company on hand; when a client asked about trust services, the broker would mention the affiliated company and hand over new-account forms. The customer would mail the completed form to Missouri, where the trust would be administered. There would be no general advertising in Texas and no mailings to Texas residents beyond account statements. On paper, the company kept its distance: no Texas office, no direct pitch, everything funneled through the brokers and back to Missouri. The Banking Commissioner asked whether that was allowed.

The governing statute is section 105A of the Texas Probate Code, which is the gateway for foreign banks and trust companies to act as Texas fiduciaries. Subsection (a) lets them do it on a reciprocity basis (their home state has to extend the same courtesy to Texas trust companies). But subsection (c) draws a hard line: a foreign trust company may not open a Texas office and may not "in any way solicit, directly or indirectly," fiduciary business in Texas. The whole question was whether the broker arrangement counted as prohibited solicitation.

The Attorney General said it did. Supplying new-account forms to the brokers, and acting in concert with the brokerage firm expecting those forms to be filled out by Texas residents, is solicitation, even though the trust company never contacts the customer directly. The statute's "in any way" language does real work here: it reaches solicitation carried out through intermediaries, whether or not the intermediaries are technically the trust company's own agents. The opinion leaned on a 1908 U.S. Supreme Court decision, United States v. Thayer, where Justice Holmes read a ban on soliciting "in any manner whatsoever" to cover a person who writes a letter and "intentionally puts it in the way of delivery," no matter whether the letter is delivered by the writer's own agents, by the recipient's agents, or by independent middlemen.

The opinion did draw one careful distinction. There is a difference between soliciting business and merely taking orders from people who were not prompted to place them. A customer's own unprompted, general question about whether trust services exist is not itself a solicitation by the company. But a plan designed to prompt those inquiries, or to meet a general inquiry with a sales presentation of the foreign company's services, is a design to circumvent the statute. Because the plan here was built to feed customers into the trust company through the brokers, appointments obtained that way would violate Texas law. And this is not a trivial line to cross: a violation of section 105A is a misdemeanor.

Currency note

This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Texas has recodified much of its trust-company and banking law since 1989. The old Texas Banking Code articles (such as 342-1101 and 342-1110) and the Probate Code itself have been reorganized (Texas Probate Code provisions have largely moved into the Estates Code, and trust-company regulation now sits in the Finance Code). Anyone weighing whether an out-of-state trust company can market or act in Texas today should check the current Finance Code and Estates Code rather than rely on these 1989 article numbers.

Who this opinion affected (as of 1989)

Out-of-state (foreign) trust companies: The opinion warned them that the reciprocity gateway in section 105A does not open the door to marketing in Texas. They could not solicit fiduciary business here "in any way," and channeling the pitch through an affiliated broker did not make it lawful.

Brokerage firms affiliated with trust companies: The opinion signaled that a brokerage cannot serve as the marketing arm for an out-of-state trust affiliate by handing account forms to Texas customers, because that makes the brokers the intermediaries in a prohibited solicitation.

The Department of Banking and Texas trust companies: The opinion protected the statutory scheme that limits how foreign fiduciaries enter the Texas market and confirmed the regulator's reading that indirect, intermediary-based solicitation is still solicitation.

Common questions

Can an out-of-state trust company serve as trustee for a Texas resident at all?
Yes, in principle. Section 105A(a) of the Probate Code lets a bank or trust company from another state serve in a fiduciary capacity in Texas on a reciprocity basis, but subsection (c) bars it from soliciting fiduciary business in Texas.

Is handing out account forms through affiliated brokers considered "solicitation"?
Yes. The Attorney General concluded that supplying new-account forms to brokers at an affiliated brokerage firm, expecting them to reach Texas customers, is prohibited solicitation under article 105A(c), even though it is indirect.

Does it matter that the brokers, not the trust company, contacted the customers?
No. The Attorney General relied on United States v. Thayer to conclude that the "in any way" prohibition reaches solicitation carried out through intermediaries, whether or not they are technically the trust company's agents.

What if a customer asks about trust services on their own?
An unprompted, general inquiry from a customer is not itself a solicitation by the company. But a plan designed to prompt such inquiries, or to answer them with a presentation of the foreign company's services, is a design to circumvent the statute.

What is the penalty for violating section 105A?
A violation is a misdemeanor under section 105A(f) of the Probate Code.

Background and statutory framework

The Commissioner of the Texas Department of Banking asked, on an inquiry submitted on behalf of a Missouri trust company, whether a foreign trust company operating under a described plan could accept appointments by Texas residents to serve as trustee under living and testamentary trusts. Under the plan, the trust company was an affiliate of a brokerage firm doing business in Texas; the brokerage would supply its brokers with information about the trust company to distribute to customers who inquired about trust services, and brokers would discuss the company's services only in response to a client's inquiry about providers. New-account forms would be made available to inquiring customers and forwarded by the customer directly to the company's Missouri offices, where the trusts would be administered and records kept. There would be no general advertising in Texas and no mailings to Texas residents other than statements and account correspondence, no Texas branch or place of business, and the company had made the filings required by section 105A(b) of the Probate Code.

Article 342-1110 of the Texas Banking Code prohibits a foreign trust company from doing business as a trust company in Texas, or exercising the trust powers referred to in article 342-1101, except as provided by section 105A of the Probate Code. Section 105A(a) allows a bank or trust company organized under the laws of and having its principal office in another state, with the corporate power to act, to be appointed and serve in Texas as trustee, executor, administrator, guardian of the estate, or in any other fiduciary capacity, when and to the extent that the other state grants Texas banks and trust companies like fiduciary authority (a reciprocity condition). Subsection (c) prohibits a foreign trust company from establishing a Texas office and prohibits it from soliciting, directly or indirectly, in any way, fiduciary business in Texas of the types described in subsection (a). Subsection (e) provides that section 105A is in addition to, and not a limitation on, Tex. Rev. Civ. Stat. art. 1513a, § 1 (codified in 1987 as article 342-1101 of the Banking Code). (In a footnote, the Attorney General questioned whether Missouri actually extends reciprocity to Texas, because the Missouri statute (section 362.600) defines "foreign corporation" as a bank organized under the laws of a state that "adjoins or next adjoins" Missouri; Texas does not adjoin Missouri but adjoins states that do, and the phrase "next adjoins" is undefined, with the only Missouri case using it in the same sense as "adjoins," citing Wann v. Gruner and Epperly v. Mercantile Trust & Savings Bank of Quincy.)

Because "solicitation" is defined in the Texas statutes in only one place (article 4582b, on funeral directing, subsection 1M) and appears in scattered other statutes, the Attorney General turned to the ordinary meaning and to case law construing "solicit." He quoted subsection (c) in full, which bars a foreign bank or trust company from establishing a Texas office or "in any way" soliciting, directly or indirectly, fiduciary business in Texas of the types embraced by subsection (a), and from acting in a fiduciary capacity in Texas except as authorized by state law. A violation is a misdemeanor. Prob. Code § 105A(f); see Page v. State, 492 S.W.2d 573 (Tex. Crim. App. 1972).

The Attorney General concluded that both the language and the intent of subsection (c) are plain. The foreign corporation solicits fiduciary business in violation of the statute by furnishing "new account forms" to the brokers of an affiliated brokerage agency and by otherwise acting in concert with the brokerage firm with the expectation and intent that the forms will be completed on behalf of Texas residents, especially Texas residents prompted to inquire of the brokers about available providers. The statute prohibits not only direct or indirect solicitation from consumers but also solicitation through the use of, or from, intermediaries, whether or not the intermediaries are technically agents of the soliciting trust company. The phrase "in any way" means in any way. See United States v. Thayer, 209 U.S. 39 (1908). In Thayer, a case originating in Texas, the U.S. Supreme Court considered a federal statute forbidding any person to "solicit in any manner whatsoever" political contributions on government property; Justice Holmes, writing for the Court, held that letters sent to federal employees violated the statute, reasoning that a person who writes a letter and intentionally puts it in the way of delivery solicits, whether delivery is accomplished by the writer's agents, the recipient's agents, or independent middlemen.

The Attorney General acknowledged a difference between "soliciting business" and, without design, merely "taking orders" from persons not prompted to place them (citing Sanderfur-Julian Co. v. State), but explained that a general inquiry about the availability of trust services is not a request about services furnished by a particular company, and that a design to prompt inquiries, or to respond to general inquiries with a presentation of the benefits of the foreign trust company's services, is a design to circumvent the statute. Accordingly, appointments of the foreign trust company as trustee obtained under a plan of business such as the one described would violate the Texas statute.

Citations

Cases:

• United States v. Thayer, 209 U.S. 39 (1908) (a ban on soliciting "in any manner whatsoever" reaches solicitation by letter delivered through the writer's agents, the recipient's agents, or independent middlemen)
• Coutlakis v. State, 268 S.W.2d 192 (Tex. Crim. App. 1954) (meaning of "solicit")
• Page v. State, 492 S.W.2d 573 (Tex. Crim. App. 1972) (solicitation)
• Sanderfur-Julian Co. v. State, 77 S.W. 596 (Ark. 1903) (distinguishing soliciting business from merely taking orders)
• Barton v. Walker, 21 S.W. 687 (Tex. Civ. App. 1893) (activities in other states)
• Wann v. Gruner, 251 S.W.2d 57 (Mo. 1952) (Missouri use of "next adjoins")
• Epperly v. Mercantile Trust & Savings Bank of Quincy, 457 S.W.2d 1 (Mo. 1967)

Statutory authority:

• Texas Probate Code § 105A(a) (reciprocity gateway for a foreign bank or trust company to serve as a Texas fiduciary)
• Texas Probate Code § 105A(c) (no Texas office; no direct or indirect solicitation of fiduciary business "in any way")
• Texas Probate Code § 105A(e) (section 105A is in addition to, not a limitation on, art. 1513a, § 1)
• Texas Probate Code § 105A(f) (violation is a misdemeanor)
• Texas Banking Code art. 342-1110 (bars foreign trust company from Texas trust business except as allowed by section 105A)
• Texas Banking Code art. 342-1101 (trust powers)
• Tex. Rev. Civ. Stat. art. 1513a, § 1 (codified in 1987 as art. 342-1101)
• V.T.C.S. art. 4582b, subsec. 1M (only statutory definition of "solicitation")

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1032
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1032.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

THE ATTORNEY GENERAL OF TEXAS

March 27, 1989

Mr. Kenneth W. Littlefield
Commissioner
Texas Department of Banking
2601 North Lamar Blvd.
Austin, Texas 78705-4294

Opinion No. JM-1032

Re: Appointments of foreign trust company as trustee for Texas residents (RQ-1488)

Dear Mr. Littlefield:

On behalf of the Department of Banking you have asked about a foreign trust company accepting appointments to serve as trustee. Your letter reads:

The Department of Banking has received an inquiry as to the interpretation of § 105A of the Texas Probate Code. The inquiry was submitted on behalf of a Missouri trust company (referred to herein as the "Trust Company"). The Department therefore requests your opinion as to whether a foreign trust company, operating as described in this letter, can accept appointments by Texas residents to serve as trustee under living and testamentary trusts.

Plan of Business

The Trust Company is an affiliate of a brokerage firm which does business in Texas. The brokerage firm proposes to supply its brokers with information about the Trust Company which would be distributed to customers who inquire about the availability of trust services.

Brokers may from time to time discuss with existing clients of the brokerage firm the advantages of professional trust services. The brokers would discuss the ability of the Trust Company to provide these services only in response to the client's inquiries as to the providers of such services. The brokers would have new account forms which would be made available to inquiring customers. The completed forms would be forwarded by the customer directly to the Trust Company's offices in Missouri. There would be no general advertising of any kind in Texas and no mailings to Texas residents other than statements and other correspondence regarding specific accounts.

Upon opening an account, the Trust Company would serve as trustee under living and testamentary trusts created by Texas residents. The trusts would be administered in Missouri. All property other than real property would be held in Missouri and all trust records would be kept in Missouri. The Trust Company would not establish any branch office, agency or other place of business in Texas. The Trust Company has made the filings required by § 105A(b) of the Probate Code.

Applicable Law

Article 342-1110 of the Texas Banking Code prohibits a foreign trust company from doing business as a trust company in Texas or exercising in Texas those powers referred to in Article 342-1101 of the Banking Code, except as provided by § 105A of the Probate Code. Section 105A(a) of the Probate Code provides in part:

Any bank or trust company organized under the laws of and having its principal office in, . . . any . . . state of the United States of America, other than the State of Texas, . . . having the corporate power to so act, may be appointed and may serve in the State of Texas as trustee (whether of a personal or a corporate trust), executor, administrator, guardian of the estate, or in any other fiduciary capacity, whether the appointment be by will, deed, agreement, declaration, indenture, court order or decree, or otherwise, when and to the extent that . . . [the] other state in which such foreign bank or trust company is organized and has its principal office grants authority to serve in like fiduciary capacity to a bank or trust company organized under the laws of, and having its principal office in, the State of Texas . . . .

Missouri permits Texas trust companies to act in a fiduciary capacity in Missouri upon compliance with requirements similar to those set forth in § 105A(b) of the Texas Probate Code. See § 362.600 Mo. Rev. Stat.[1]

Subsection (c) of § 105A prohibits a foreign trust company from establishing a branch office, agency or other place of business within Texas and prohibits in any way the solicitation, directly or indirectly, of any fiduciary business in Texas of the types described in Subsection (a) of § 105A. Subsection (e) of § 105A states that the provisions of § 105A are in addition to and not a limitation on the provisions of Tex. Rev. Civ. Stat. Art. 1513a, § 1, which in 1987 was codified as Article 342-1101 of the Texas Banking Code.

[1] The conclusion that Missouri permits Texas trust companies to act in a fiduciary capacity pursuant to section 362.600 of the Missouri statutes is questionable. The Missouri statute defines "foreign corporation" to mean a bank or other corporation organized under the laws of "any state of the United States, which state adjoins or next adjoins the state of Missouri." (Emphasis added.) Texas does not adjoin Missouri, but does adjoin states that do. However, the phrase "next adjoins" is not defined or elsewhere used by Missouri statutes, and the only Missouri case using the phrase that we have found uses it in the same sense as "adjoins." See Wann v. Gruner, 251 S.W.2d 57, 58 (Mo. 1952). See also Irons v. American Ry. Express Co., 300 S.W. 283 (Mo. 1927) ("next adjoining circuit"). Cf. Mo. Rev. Stat. § 362.925-1(1) ("adjoining-state bank holding company" defined); Epperly v. Mercantile Trust and Savings Bank of Quincy, Ill., 457 S.W.2d 1 (Mo. 1967) (Illinois corporation).

The term "solicitation" is defined by the Texas statutes in only one place, although it and its relatives appear in other statutes. In article 4582b, dealing with funeral directing and embalming, subsection 1M states:

'solicitation' means a direct or indirect contact with [certain persons] for the purpose of securing the right to provide funeral services or merchandise . . . .

See V.T.C.S. art. 2372p-3 ("soliciting"); V.T.C.S. art. 4495b, § 3.07(c); V.T.C.S. art. 9023a ("solicitations"); Educ. Code § 4.21 ("solicit"); Hum. Res. Code § 12.001(b); Ins. Code art. 21.49-1, § 5 ("solicitation"). Coutlakis v. State, 268 S.W.2d 192 (Tex. Crim. App. 1954) ("solicit").

The precise language of subsection (c) of section 105A of the Probate Code reads:

(c) No foreign bank or trust company shall establish or maintain any branch office, agency or other place of business within this state, or shall in any way solicit, directly or indirectly, any fiduciary business in this state of the types embraced by subdivision (a) hereof. Except as authorized by the laws of this state, no foreign bank or trust company shall act in a fiduciary capacity in this state. Nothing in this Section shall be construed to authorize foreign banks and trust companies to issue or to sell or otherwise market or distribute in this state any investment certificates, trust certificates, or other types of securities (including without limiting the generality of the foregoing any securities of the types authorized by Chapter 7 of the Insurance Code of 1951 prior to the repeal thereof), or to conduct any activities or exercise any powers of the type embraced and regulated by the Texas Banking Code of 1943 other than those conducted and exercised in a fiduciary capacity under the terms and conditions hereof. (Emphasis added.)

A violation is a misdemeanor. Prob. Code § 105A(f). Page v. State, 492 S.W.2d 573 (Tex. Crim. App. 1972) (solicitation of drinks).

We think both the language and the intent of subsection (c) of article 105A are plain. The foreign corporation solicits fiduciary business in violation of the statute, in our opinion, by furnishing "new account forms" to the brokers employed by an affiliated brokerage agency and by otherwise acting in concert with the brokerage firm with the expectation and intent that the forms will be completed on behalf of Texas residents -- especially, Texas residents prompted to inquire of the brokers about available providers of trust services. The statute prohibits not only a direct or indirect solicitation of such business from consumers; it also prohibits solicitations in this state of such business by the use of, or from, intermediaries, whether the intermediaries are technically agents of the soliciting trust company or not. The phrase, "in any way" means in any way. See United States v. Thayer, 209 U.S. 39 (1908). Cf. Murphy v. Campbell Soup Co., 40 F.2d 671 (D. Mass. 1930) (activities on behalf of foreign corporation); Frazer v. McGowen, 502 A.2d 905, 909 (Conn. 1986) ("organizational network likely to prompt [business]"); see also Barton v. Walker, 21 S.W. 687 (Tex. Civ. App. 1893) (activities in other states).

In United States v. Thayer, supra, a case originating in Texas, the United States Supreme Court considered a federal statute forbidding any person to "solicit in any manner whatsoever" political contributions on government property. Mr. Justice Holmes, writing for the Court, held that letters sent to federal employees violated the statute. He wrote:

Of course it is possible to solicit by letter as well as in person. It is equally clear that the person who writes the letter and intentionally puts it in the way of delivery solicits, whether the delivery is accomplished by agents of the writer, by agents of the person addressed, or by independent middlemen, if it takes place in the intended way. It appears to us no more open to doubt that the statute prohibits solicitation by writing as well as by spoken words. It forbids all persons to solicit 'in any manner whatever.'

209 U.S. at 42.

There is a difference between "soliciting business" and -- without design -- merely "taking orders" for business from persons not prompted, asked or importuned directly or indirectly to place orders. See Sanderfur-Julian Co. v. State, 77 S.W. 596 (Ark. 1903). However, a general inquiry about the availability of trust services is not a request about the availability of trust services furnished by a particular company, and such an inquiry is not the attempted placement of an order with any company.

A design to prompt inquiries, or to respond to general inquiries with a presentation of the benefits offered by the foreign trust company and its services, is a design to circumvent the statute, we believe. Accordingly, appointments of the foreign trust company as trustee obtained pursuant to a plan of business such as you describe would be violative of the Texas statute. See Bittiker v. State Bd. of Registration for Healing Arts, 404 S.W.2d 402 (Mo. App. 1966). Cf. Smallwood v. Pearl Brewing Co., 489 F.2d 579, 599 (5th Cir.), cert. denied, 419 U.S. 873 (1974) (solicitation of proxies); B.C. Turf & Country Club, Ltd. v. Daugherty, 210 P.2d 760 (Cal. App. 1949) (corporate shares).

SUMMARY

The action of a foreign trust company in supplying information and forms to brokers employed by an affiliated Texas brokerage firm with the intention that they be distributed to customers of the brokerage firm who make general inquiries about the availability of trust services violates article 105A(c) of the Texas Probate Code. Appointments as trustee obtained by the foreign trust company pursuant to such a plan of business would be violative of the Texas statute.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Bruce Youngblood
Assistant Attorney General