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PART I

SECURITIES ACT OF 1933

EXEMPTION FROM REGISTRATION

Grounds For Suspension of Exemption

False and misleading statements Where offering circular, filed pursuant to Regulation A for purpose of obtaining exemption from registration under Securities Act of 1933, contained false and misleading statements concerning the use of underwriters and their remuneration, and omitted to state, among other things, the name of the underwriters and the existence of outstanding options at prices less than the public offering price, and issuer's report of sales was false and misleading with respect to the number of shares sold and the per unit and aggregate sales price, held, exemption permanently suspended * * * Page 34

Where notification and offering circular, filed pursuant to Regulation A for purpose of obtaining exemption from registration under Securities Act of 1933, contain false and misleading statements and omit required information concerning officers' and directors' interests in issuer and in material contracts involving issuer and its affiliates, identity of affiliates, sales of unregistered securities by affiliates, and cash receipts and disbursements, and where registration statement of affiliate of issuer is subject of examination under Section 8, held, exemption permanently suspended * * * Page 38

Where offering circular, filed pursuant to Regulation A for purpose of obtaining exemption from registration under Securities Act of 1933, falsely represented that no underwriting commissions or discounts would be paid and omitted to state that certain purchasers would be given bonus stock in consideration of their purchases, and issuer failed to file timely reports of sales, held, exemption permanently suspended * * * Page 66

Where notification, filed pursuant to Regulation A, failed to disclose affiliate and affiliate's sales of unregistered securities, where amount of such sales within prior year when combined with amount of proposed offering exceeded $300,000 limitation under Regulation A, and where underwriter accepted orders and received payment for securities prior to effective date of amended offering circular and without giving purchasers any offering circular, held, terms and conditions of Regulation A not complied with * * * Page 92

Where substantial part of issue of securities offered under Regulation A are sold by named underwriter to relatively small number of broker-dealers and persons associated with them who effect resales of part at prices in excess of stated offering price so that amount paid by public purchasers exceeds $300,000, where offering circular contains misleading statements regarding public offering price and method of offering, and where terms and conditions of Regulation A are not complied with in that, among other things, false and misleading statements are disseminated during the period of the public offering and copies thereof are not filed with the Commission, held, exemption permanently suspended * * * Page 226

937

Where substantial part of issue of securities offered under Regulation A
were sold by named underwriter to relatively small number of broker-dealers
and other persons who purchased for resale and resold to the general investing
public, held, such resales constituted part of the public distribution, and the
period of the public offering included the period when such resales were
made * * * Page 226

Where offering circular filed pursuant to Regulation A for purpose of
obtaining exemption from registration under Securities Act of 1933 stated
that issuer of securities owned 3 groups of mining claims, and record shows
that 2 groups had lapsed and although issuer asserted that claims had been
re-staked it produced evidence of re-staking with reference to 1 group only, held,
exemption will be permanently suspended unless issuer permits similar evidence
of re-staking of second group * * * Page 529

Where, in connection with sale of stock covered by a notification and offer.
ing circular filed under Regulation A for the purpose of obtaining an exemption
from registration under Securities Act of 1933, issuer made offers by a sales
letter which was not filed prior to use and which was not accompanied or
preceded by an offering circular, and where the letter and the offering circular
contained misleading statements concerning the nature of the investment, pros-
pects of the company, status of the property, control of the issuer, and the
education and experience of its president, held, exemption permanently sus-
pended * * * Page 533

Where notification filed pursuant to Regulation A for purpose of obtaining
exemption from registration under Securities Act of 1933, failed to disclose
all jurisdictions in which securities were to be offered ; false and misleading
statements were made in the offering circular and in connection with the sale
of the stock concerning, among other things, reimbursement of underwriter's
expenses, a proposed merger, the listing of such stock on an exchange, the
value of the stock, the business prospects of the company, and dividends; and
sales literature which was used was not filed with Commission, held, exemption
permanently suspended * * * Page 610

Where offering circular filed pursuant to Regulation A for purpose of obtain-
ing exemption from registration under Securities Act of 1933 stated that issuer
of securities owned 3 groups of mining claims and where record shows 1 group
of claims had lapsed and issuer admits such claims were not re-staked, held,
offering circular is materially false and misleading and exemption will be
permanently suspended * * * Page 655

Where notification and offering circular, filed pursuant to Regulation A for
purpose of obtaining exemption from registration under Securities Act of 1933,
stated that issuer had acquired option to purchase oil and gas lease from
certain person named as owner of lease and did not name such person as
predecessor of issuer within definition in Regulation A or state that he had been
convicted of offense involving sale of securities, and contained misleading state
ments concerning recoverable oil reserves and cost of developing lease; and
where issuer requested that temporary suspension of exemption be vacated
upon satisfactory amendment of notification and offering circular, held, under
all the circumstances—including facts that issuer did not learn of conviction
of named owner or fact that he was not real owner until subsequent to filing
notification, thereupon acquired option from real owner, and did not file cor-
recting amendment because of advice of counsel to await receipt of deficiency
letter from staff; that promoters evidenced good faith in causing issuer to
propose public offering of controlling stock interest; and that issuer refrained
from offering securities, relied in good faith upon advice of counsel and geo-
logical reports obtained from owner of lease, and indicated willingness to make full disclosure of facts developed at hearings—temporary suspension order will be vacated if proposed revised filing contains no material deficiencies, otherwise suspension will be made permanent * * Page 720

Where in offering circular, filed pursuant to Regulation A for purpose of obtaining an exemption from registration under Securities Act of 1933, and in connection with the sale of the securities, false and misleading statements were made concerning, among other things, the stock ownership and options of officers and directors, the failure to comply with State law regarding the qualifying of securities for sale and the registration of securities brokers and salesmen, the legality of sales in that state, the contingent liability resulting from such sales, the safety of the investment, the number of shares sold, and the identity and qualifications of officers and directors; and where sales were made without delivery of the offering circular, and sales literature was used which was not filed with Commission; held, exemption permanently suspended

Page 782 Where notification filed pursuant to Regulation A for purpose of obtaining exemption from registration under Securities Act of 1933 failed to list controlling person as affiliate and incorrectly stated his stock holdings, and offering circular incorrectly stated amount paid for stock and listed as secretary and a director one who had resigned, and where issuer failed to cooperate with the Commission by not adequately providing for receipt of mail or response to Commission's letter of comments regarding proposed offering, held, exemption permanently suspended and request for withdrawal denied * * * Page 812

Where size of proposed offering exceeds $300,000 maximum permitted for exemption from registration under Regulation A, offering circular contains false, misleading or inadequate statements with respect to estimates of oil reserves, portion of oil production accruing to issuer, and use of proceeds, and sales material sent to prospective purchasers was not filed with Commission, held, exemption permanently suspended and issuer's request for withdrawal of notification denied * * * Page 833

Where offering circular, filed pursuant to Regulation A for purpose of obtaining exemption from registration under Securities Act of 1933, contained false and misleading statements concerning the identity of the underwriter, the underwriter's lack of experience in offering securities, the purchase of certain mining claims for issuer's stock, and the existence and terms of outstanding options, and issuer's reports of sales were misleading in failing to disclose options, held, under all the circumstances including continued sale of securities subsequent to entry of temporary suspension order exemption permanently suspended * * * Page 891 Vacation of Temporary Suspension Order

Under all circumstances, including facts that underwriter's acceptance of premature orders was contrary to issuer's instructions, no securities were actually issued thereon, underwriter's engagement has been discontinued, and issuer has agreed to amend notification and offering circular to make appropriate disclosures and reduce amount of offering to comply with $300,000 limitation under Regulation A, held, public interest does not require permanent suspension, and temporary suspension order will be vacated upon filing of appropriate amendment * * * Page 92

Where offering circular, filled pursuant to Regulation A for purpose of obtaining exemption from registration under Securities Act of 1933, incorrectly stated number of shares issued to two promoters in exchange for oil and gas

claims but disclosed transfers of part of such shares to third promoter for
nominal consideration so that end result of promoters' shares transactions was
adequately shown, held, under all circumstances, misstatement did not require
permanent suspension, and temporary suspension order will be vacated
Page 639

PRACTICE AND PROCEDURE
Re-opening of Record

Where Commission, in Findings and Opinion issued subsequent to close of
hearings, afforded respondent opportunity to submit documentary evidence on
specific factual question, and respondent submits factual allegations on matters
other than that specified by the Commission, and where such new allegations
are diametrically opposed to position taken by respondent at hearings and no
showing has been made of any basis for respondent's failure to present such
allegations or adduce evidence thereon at hearings, held, such factual allega-
tions not appropriately advanced for the first time at such stage of the pro
ceedings * * * Page 655
Denial and Suspension of Privilege to Practice Before Commission

Where partner of accountant certifying financial statement in registration
statement filed with Commission pursuant to Securities Act of 1933 is the
principal officer and controlling stockholder of the registrant, held, certifying
accountant is not independent with respect to registrant.

Where one partner in firm of certified public accountants who was the
principal officer and controlling stockholder of company which filed a registra-
tion statement with the Commission caused the other partner to certify regis-
trant's financial statement as an independent public accountant, held, firm and
both partners engaged in improper and unethical professional conduct, and
privilege of practicing before the Commission should be denied to the firm and
the partner controlling registrant until they obtain the approval of the Com-
mission, and the privilege to practice before the Commission of the certifying
accountant should be suspended for 30 days * * * Page 815
Permanent Disqualification to Practice Before Commission

Where attorney for issuer, which had filed notification pursuant to Regula-
tion A under Securities Act of 1933 for purpose of obtaining exemption from
registration for proposed offering of its stock, prepared and filed knowingly
false financial statements on behalf of issuer; obtained from the issuer a sum
of money for stated purpose of distributing it to Commission employees and
falsely represented to issuer that money had been so distributed; and advised
issuer to sell shares of stock prior to time prescribed in Regulation A for com-
mencing offering, held, attorney engaged in unethical and improper profes-
sional conduct within meaning of Rule II (e) of Commission's Rules of Practice,
and should be permanently disqualified from appearing or practicing before
Commission * * * Page 879

STOP ORDER PROCEEDINGS
False and Misleading Statements

Where registration statement states that registrant's outstanding stock was
issued in transactions not involving a public offering and therefore exempt
from the registration requirements of the Securities Act under Section 4(1),
held, that under all the circumstances including purchasers' lack of means of
informing themselves about registrant, exemption was not available and repre
sentation as to the existence thereof was untrue * * * Page 19

Where registration statement represents that promoters of registrant include 51 named persons who have rendered no service to registrant and whose only relationship with registrant is that of purchasers of its stock, held, representation false and misleading * * * Page 19

Where registration statement contains materially misleading statements and omissions with respect to, among other things, the possible market for regis trant's product, the cost of construction of a plant, the amount and quality of available raw materials, and transactions with promoters, held, stop order will issue suspending effectiveness of registration statement * * * Page 19

Where registration statement of proposed cement company states that registrant has available very large amounts of raw materials, held, representations false and misleading in the absence of adequate tests to determine the extent and quality of such materials * Page 19

Where registration statement of newly formed company proposing to build and operate cement plant fails to disclose that no survey or analysis of potential market for products has been made and that consumption of products in proposed marketing area has been less than proposed production capacity of registrant and its competitors, held, omissions materially misleading * * * Page 19

Where registration statements contain materially false and misleading statements concerning, among other things, an assertedly new type airplane to be manufactured by registrant and the ownership and coverage of a patent thereon, the liabilities arising from prior sales of unregistered stock and the use of the proceeds of such sales, the offering price of the stock being offered, the selling cost, and the use of the proceeds, and do not include, among other things, required financial statements and opinion of counsel, held, stop order will issue suspending effectiveness of registration statements * * * Page 97

Where registration statement contains materially misleading statements and omits facts with respect to, among other things, previous sales of securities of registrant, market transactions by persons interested in the distribution of registrant's securities and statement disseminated prior to filing of registration statements which might have a tendency to affect market price of securities, transactions with promoters, registrant's exploration program, and the proposed method of distributing the shares to be offered, held, stop order should issue suspending effectiveness of registration statement * * * Page 226

Inclusion among assets at reproduction cost, under designation as development work, of tunnels in long-unworked mines of company proposing to explore claims on which tunnels are located, held, materially misleading * * * Page 423

Representations that registrant's business is to be that of public utility and operation of mining properties and that proceeds of offering will be used to construct mill, and representations as to existence of ore bodies, held, materially misleading where business is to be exploratory mining venture, there is no commercial demand for power from long-idle electric plant owned by registrant, and there are no known ore bodies on any of registrant's properties * * * Page 423

Use of replacement cost appraisal of hydroelectric plant located on mining properties, held, materially misleading, where appraisal was not prepared in accordance with accepted standards and failed to consider registrant's situation, including lack of commercial demand for power from plant and of any proven or probable ore, or question whether use by registrant of power plant would be economical, and where appraisal exceeds last purchase price of plant * • • Page 423

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