  Spectrum of Seyfert 1 Galaxies (S1G hereafter) is very similar to that of
several Galactic Black Hole Candidates (GBHCs) in their hard state, suggestive
that both classes of objects have similar physical processes. However, recent
work has shown that reprocessing features make the patchy corona-disk model
(PCD model: the best current explanation of S1G spectrum) problematic for
GBHCs. To address the similarities and differences in spectrum of Seyferts and
GBHCs, we consider the structure of the ionized X-ray skin near an active
magnetic flare. We show that the X-ray skin is subject to a thermal
instability, similar in nature to the well known ionization instability of
quasar emission line regions. Due to the much higher ionizing X-ray flux in
GBHCs, the only stable solution for the upper layer of the accretion disk is
that in which it is highly ionized and is at the Compton temperature ($\sim $
few keV). We show that this accounts for the difference in spectrum of GBHCs
and S1G. In addition, same instability, applied to S1G, leads to the X-ray skin
temperature $T\sim 1-3\times 10^5$ Kelvin, which then may explain the observed
spectral shape of BBB.
