Attorney General's Opinion
Attorney General, Richard Blumenthal
May 30, 1995
John P. Burke
Department of Banking
260 Constitution Plaza
Hartford, CT 06103
Dear Commissioner Burke:
Your department has sought our opinion on two questions relating to the interplay, if any, between Conn. Gen. Stat. §§ 36a-380 and 42-202. The first question asks us:
(1) Is a broker-dealer which is a member of the National Association of Securities Dealers, Inc. or registered under CUSA [Connecticut Uniform Securities Act] a "registered broker-dealer", "authorized by law to act as an escrow agent", within the meaning of Section 42-202 of the Connecticut General Statutes?
The second question was posed as follows:
(2) Does Section 36-314 apply to a corporation that is appointed to act as escrow agent with regard to the money or securities received from the sale of funeral services contracts? If the answer to this question is in the affirmative: (a) Must such corporation obtain a special act of the Connecticut General Assembly in order to act as an escrow agent under Section 42-202, or is such corporation, by virtue of Section 42-202 or otherwise, "specifically empowered so to act by a general statute of this state" within the meaning of Section 36-314; and (b) Does such corporation come within the jurisdiction of both the Department of Banking and the Department of Public Health and Addiction Services?
These questions are drawn against the following factual background. On March 31, 1994, the Department of Banking ("Department") advised Access Financial Group, Inc. ("AFG") that § 36-314, now recodified as § 36a-380, requires AFG to be licensed with the Department as a corporation exercising fiduciary powers before handling escrow accounts. AFG is a corporation licensed by the National Association of Securities Dealers, Inc. and is registered with the Department under Conn. Gen. Stat. § 36b-7 as a broker-dealer. AFG has a division called Interment Trust Services ("ITS") which provides master trust administrative services for funeral/interment pre-need programs. AFG manages and purchases government bonds for the master trusts administered by ITS. AFG responded to the Department, through its counsel, claiming that the latter had no authority to require AFG to obtain a license under § 36a-380. Your Department's two questions then ensued.
Although your Department seeks general advice with regard to registered corporate broker-dealers under the two specified statutes, we will answer the questions within the context of the particular facts recited above. Therefore, based upon our legal analysis which is set forth below, it is our opinion that in answer to your first question we believe AFG is a registered broker-dealer authorized by law to act as an escrow agent within the meaning of Conn. Gen. Stat. § 42-202(b). As to the second question, we believe that § 36a-380 applies to AFG if it is appointed to act as an escrow agent with regard to an escrow account established under Conn. Gen. Stat. § 42-202(a). Lastly, should AFG serve as an escrow agent under Conn. Gen. Stat. § 42-202(b), it would come within the jurisdiction of the Banking Commissioner for licensing purposes under § 36a-380 as well as for broker-dealer supervision under CUSA, generally. AFG, however, does not fall under the jurisdiction of the Department of Public Health and Addiction Services.
Our analysis commences with a review of the two statutes in question. First, the funeral service legislation, Conn. Gen. Stat. § 42-202(b), provides:
(b) Each escrow account established pursuant to this section shall be administered and maintained by an escrow agent. The funeral service establishment which deposits money or securities in such escrow account shall appoint such agent who shall be one of the following: (1) A national banking association; (2) a state bank and trust company; (3) a federal or state chartered savings bank; (4) a federal or state chartered savings and loan association; (5) a licensed insurance company, or (6) a registered broker-dealer. No such institution shall be appointed as an agent unless such institution is authorized by law to act as an escrow agent. (Emphasis added.)
Your first question has two components. It first asks us to determine whether a broker-dealer which is registered with the Banking Department under CUSA1 is a "registered broker-dealer" within the meaning of Conn. Gen. Stat. § 42-202. Your staff has confirmed that AFG is a broker-dealer registered with the Department pursuant to Conn. Gen. Stat. § 36b-7.2
The term "registered broker-dealer" used in Conn. Gen. Stat. § 42-202(b) is clear and unambiguous and therefore there is no room for construction. Cilley v. Lamphere, 206 Conn. 6, 9, 535 A.2d 1305 (1988). This statutory provision must be interpreted as written. Zachs v. Groppo, 207 Conn. 683, 690, 542 A.2d 1145 (1988). We may not torture the words to import ambiguity where the ordinary meaning leaves no room for it. Kelemen v. Rimrock Corporation, 207 Conn. 599, 606, 542 A.2d 720 (1988). Nor can we speculate as to any supposed intention where the wording is plain. Nicotra Wieler Investment Management, Inc. v. Grower, 207 Conn. 441, 455, 541 A.2d 1226 (1988). We are guided further by the legal doctrine of "in pari materia" whereby the meaning of a word or phrase in one statute may be ascertained by its application in another statute dealing with the same subject or concept. State v. Roque, 190 Conn. 143, 152, 460 A.2d 26 (1983). Conn. Gen. Stat. § 42-202(b) and CUSA, Conn. Gen. Stat. §§ 36b-2, et seq, may be considered statutes in pari materia since they both concern the same subject matter, i.e., registered broker-dealers. Our position finds further support from the recognized rule that the legislature is presumed to act in view of the existing relevant statutes and with the intention to create one consistent body of law. Zachs v. Groppo, 207 Conn. at 696. Based upon the foregoing rules of statutory interpretation, we conclude that the legislature intended that the phrase "registered broker-dealer" in Conn. Gen. Stat. § 42-202(b) means a broker-dealer, as defined in Conn. Gen. Stat. § 36b-3(3), which must be registered with the Banking Department under Conn. Gen. Stat. § 36b-6 in order to transact business in this state.
The second part of the first question asks us whether a registered broker-dealer must meet the requirements of the last sentence of Conn. Gen. Stat. § 42-202(b), which provides that "[n]o such institution shall be appointed as an agent unless such institution is authorized by law to act as an escrow agent." We have already had the occasion to interpret the phrase "authorized by law to act as an escrow agent" as it is used in Conn. Gen. Stat. § 42-202(b). See 87 Conn. Op. Atty. Gen. 340, 350-51 (9/11/87). We have opined that "one is authorized by law to act as an escrow agent either directly by the constitution, statute, regulation, charter, certificate of incorporation or indirectly by implication therefrom." Id.
We, therefore, turn to Conn. Gen. Stat. § 36a-380. This statute sets forth two requirements. First, it mandates that a corporation must be specifically authorized by a general statute or special act to act as an escrow agent. Second, it requires that such a corporation be licensed by the Banking Commissioner before it can transact business as an escrow agent. This statute provides:
(a) Except as provided in this section, no corporation, other than a bank, shall have or exercise in this state the power to receive, by grant, assignment, transfer, devise, bequest or otherwise, any money, securities or other personal property, or any interest in real estate from any person or corporation in trust, to hold, manage or dispose of the same for the benefit of any third person or corporation, or to accept or execute any such trust, unless such corporation is specifically empowered so to act by a general statute of this state or by a special act of the general assembly. Any corporation so empowered to act as trustee, other than such bank, shall, before so acting, obtain a license from the commissioner as provided in subsection (b). (Emphasis added.)
With regard to AFG, a registered broker dealer, this statute directs us to any Connecticut general statute which "specifically empowers" such a corporation to act as an escrow agent. Conn. Gen. Stat. § 42-202(b)(6) specifically empowers registered broker dealers to act as escrow agents for funeral service contracts. We, therefore, conclude that AFG, as a registered broker dealer, is authorized by law to act as an escrow agent within the meaning of Conn. Gen. Stat. § 42-202(b).
Your Department's second question also contains several subparts. The first inquiry we are asked to make is whether Conn. Gen. Stat. § 36a-380 applies to corporations like AFG when they act as escrow agents under funeral services contracts. We believe it does. When the plain language of a statute is unambiguous, we do not look further to determine its meaning. Butch v. Thangamuthu, 37 Conn. App. 547, --- A.2d --- (1995). The plain language of § 36a-380 makes no distinction among corporations, save banks, which are exempt from the statute's licensing requirements. AFG is a corporation and a registered broker dealer and such entities are specifically authorized by Conn. Gen. Stat. § 42-202(b)(6) to act as an escrow agent. Therefore, before it may act as an escrow agent, AFG must obtain a license from the Banking Commissioner under Conn. Gen. Stat. § 36a-380.3
You have also asked whether, for the purposes of Conn. Gen. Stat. § 36a-380, AFG must obtain a special act in order to act as an escrow agent or whether it is so empowered by virtue of Conn. Gen. Stat. § 42-202. Our analysis and response to your first question suffices here. AFG, as a registered broker dealer, is specifically empowered to act as an escrow agent by virtue of Conn. Gen. Stat. § 42-202(b)(6).
The final question posed is whether a corporation appointed to act as an escrow agent with regard to funeral services contracts comes within the jurisdiction of both the Department of Banking and the Department of Public Health and Addiction Services. We have already opined herein that the Department of Banking has jurisdiction to regulate such corporation as a registered-broker dealer under CUSA, generally, and to license it under § 36a-380 as a corporation "specifically empowered ... to act [as an escrow agent] by a general statute of this state." We find no authority, however, to place AFG within the purview of the Department of Public Health and Addiction Services. That department has regulatory authority over funeral directors; see Conn. Gen. Stat. §§ 20-220 and 42-201; but not with respect to an escrow agent appointed by a funeral director.
We do note, however, that the Commissioner of Consumer Protection is responsible for adopting regulations directed at the business practices of persons licensed or regulated under Chapter 385 of the General Statutes (Embalmers and Funeral Directors) and for adjudicating all complaints concerning such business practices. A violation of section 42-202 shall be deemed an unfair or deceptive trade practice in accordance with the provisions of Chapter 735a (Unfair Trade Practices Act), which provisions come within the jurisdiction of the Commissioner of Consumer Protection. See Conn. Gen. Stat. § 42-206.
We trust this answers your questions.
Very truly yours,
William J. Prensky
Assistant Attorney General
1 Because AFG is a registered broker-dealer with your Department, we do not reach the question of whether a broker-dealer which is a licensed member of the National Association of Securities Dealers, Inc. but not registered with your Department is a "registered broker-dealer" for purposes of Conn. Gen. Stat. § 42-202(b)(6).
2 Conn. Gen. Stat. § 36b-7 provides: "A broker-dealer, agent or investment adviser or investment adviser agent may obtain an initial or renewal registration by filing with the commissioner or other depository as the commissioner may by regulation or order designate an application together with a consent to service of process pursuant to subsection (g) of section 36b-33. The application shall contain such information as the commissioner may require.
Conn. Gen. Stat. § 36b-6(a) provides: "(a) No person shall transact business in this state as a broker-dealer unless he is registered under sections 36b-2 to 36b-33, inclusive...."
Conn. Gen. Stat. § 36b-3(3) defines the term "broker-dealer" as "any person engaged in the business of effecting transactions in securities for the account of others or for his own account. 'Broker-dealer' shall not include (A) an agent, (B) an issuer, (C) a state bank and trust company, a national banking association, a savings bank, a savings and loan association, a federal savings and loan association, a credit union, a federal credit union, or trust company, (D) a person who has no place of business in this state if he effects transactions in this state exclusively with or through (i) the issuers of the securities involved in the transactions, (ii) other broker-dealers, or (iii) a state bank and trust company, a national banking association, a savings bank, a savings and loan association, a federal savings and loan association, a credit union, a federal credit union, a trust company, an insurance company, an investment company as defined in the Investment Company Act of 1940, a pension or profit-sharing trust, or other financial institution or institutional buyer, whether acting for itself or as trustee, or (E) such other persons not within the intent of this subsection as the commissioner may be regulation or order determine."
Conn. Gen. Stat. § 36b-3(10) defines the term "person" as "an individual, a corporation, a partnership, an association, a joint-stock company, a trust where the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government or a political subdivision of a government."
3 We are cognizant that AFG claims the Banking Department has no role in AFG's serving as an escrow agent for funeral service contracts. For this position it relies on the very sparse legislative history of Conn. Gen. Stat. § 42-202(b) which we find totally unpersuasive. See 28 H. R. Proc., pt. 19, 1985 Sess., at 6919.