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DISTRIBUTION OF SECURITIES-Continued
SUBSCRIPTION BY DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS
Where directors of a corporation subscribe to the registered shares held failure to disclose this fact in the registration statement is a material omission .. Page 1009. UNDERWRITING OF ISSUE Assignment of Options
Where the optionee has assigned options prior to the registration of the securities held failure to disclose the assignments of the option is a material omission ... Page 1009. Intention to Distribute Publicly
Where purchasers of large blocks of the registered shares distributed such shares publicly, held that it may be inferred that the shares were purchased with an intent to distribute them publicly, and failure to disclose the names of such persons as underwriters is a material omission ... Page 1009. Offering "at the Market”
Where a substantial amount of stock was kept off the market shortly before the filing of the registration statement held misleading to omit to disclose this fact in a statement that the stock was to be offered "at the market."... Page 982.
Where offering is to be made “at the market” and the underwriter has agreed to purchase a certain number of shares at a fixed price held misleading not to disclose that the underwriter will be unable to fulfill his agreement unless the market price appreciates . . . Page 982. Offering Price of Securities
Where registrant stated that its securities would be offered at $5 per unit, but that if shares were listed on exchange, offering price would be determined by exchange closing price for previous day held incumbent on registrant to disclose fact that underwriter had reserved right to trade in units for its own account and whether right would be used to stabilize market ... Page 60. Price to Underwriters
A statement that the price per unit of the registered shares to the underwriters is $1 per share, where a bonus of 75,000 shares is to be delivered in consideration of underwriter's services in procuring capital, held to be materially misleading ... Page 1009. Underwriter
Where an optionee of the registered shares or a partial assignee thereof whose interests are known to the registrant, has formed the intention to distribute publicly the shares to be acquired under the option, held he is an underwriter of the issue within the meaning of Section 2 (11) of the Act, and must be named as such in the registration statement ... Page 1009. Underwriter-Underwriter's Commissions
Where issuer had entered into a so-called "service contract" with underwriter pursuant to which underwriter had received $1,250 for services in connectior with registration of issue held agreement is so closely connected with "sale" of securities that it should have been disclosed in response to item calling for state ment of commissions paid to underwriter ... Page 60.
Failure to disclose alternative measure of compensation to underwriter in erent issuer failed to perform its part of agreement held material omission ... Page 60
DISTRIBUTION OF SECURITIESContinued
Underwriting Contract—False Impression of Firm Commitment where None
Existed Statement that underwriter had agreed to “take down" entire offering when in fact underwriter had agreed merely to use his best efforts to sell issuer's securities held materially misleading ... Page 60.
CONTINGENT BASIS OF EMPLOYMENT
Where a mining engineer was to receive stock in payment for his report filed with the registration statement contingent upon the registrant's ability to dispose of 370,000 shares of registrant's stock, held that failure to disclose the contingent basis of employment was materially misleading ... Page 1009.
Where an attorney was to receive stock in payment for his legal opinion filed with the registration statement contingent upon the registrant's ability to dispose of 370,000 shares of registrant's stock, held that failure to disclose the contingent basis of employment was materially misleading . . . Page 1009.
CONSENT TO USE OF OPINION
In view of serious consequences which might result from improper use of the opinion of an expert, Section 7 of the Act held to require that an original or duplicate original of nsent be filed . . . Page 60. USE OF MISLEADING OR UNACCEPTABLE ENGINEERING TERMINOLOGY
Where map in engineer's report shows only nominal tonnage in scattered stopes, statement that engineer's report indicates that there are many places where ore is known to exist held to be materially misleading . . . Page 1009.
HISTORY AND BUSINESS
ACQUISITION OF PROPERTY
Failure of registrant to show that options sold by promoter to the corporation for 170,000 shares of stock cost the promoter nothing held a material deficiency ... Page 543. CHARACTER OF BUSINESS Inadequate Description of Character of Registrant's Business
Where registrant had ceased to operate its mine several years earlier and could not resume operations without substantial repairs and further development, held the unqualified statement that registrant is engaged in mining is materially misleading ... Page 1009. Misleading Statement of Ability to Resume Operations
A statement in mining engineer's report that operations could be resumed as early as thought advisable held materially misleading where there was no explanation that it was not intended to resume operations on known ore bodies . . . Page 1009.
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HISTORY AND BUSINESS. Continued
Misrepresentation and Nondisclosure of Past Activities
A description of nature of enterprise and an outline of the general development of registrant's business which failed to disclose (1) registrant's intention to become an underwriter of securities and of corporate reorganizations, (2) changes in character of investment from securities listed on national securities exchanges to loans to corporations in promotional stage in which registrant's management was interested, and (3) the inaccuracy of registrant's assertion that it "purchases, retains for investment and sells domestic and foreign securities," held to be materially deficient ... Page 287. Name of Product
Failure to disclose that name under which registrant proposed to market its product has for some time been the registered trade-mark of another concern held important omission ... Page 60. CONTROL Disclaimer That Registrant Has a Parent
Answer to item calling for list of parents of issuer held deficient for failure to name one who controlled issuer and thus came within definition of "parent" as defined in general rules and regulations Page 60. Parents of Registrant
Where voting trustees ceased to control registrant by reason of expiration of voting trust agreement and control vested in two holders of majority of voting trust certificates, who had acted jointly to cause fundamental changes in policies of the registrant, failure to disclose such holders to be the "parents” of registrant held an omission to state a material fact . .. Page 287. DIRECTORS, OFFICERS, AND PRINCIPAL SHAREHOLDERS Cost of Property Sold by Same to Corporation
Where the promoter and principal shareholder's interest in property sold to corporation is result of discovery or invention, the cost of development—the only measure of his financial interest in such property-should be disclosed ... Page 60. ESTIMATE OF FUTURE PROFITS
Use of definite figures in estimating future profits held to lend appearance of predictability improper for corporation not yet in business . . . Page 60. ESTIMATES OF PRODUCTION
An estimate of the year's production of sugar in the prospectus held misleading where facts show that the estimate could not have represented the best judgment of the management of the registrant . . . Page 982. FAILURE TO MENTION POSSIBLE EXPROPRIATION OF PROPERTIES
Where registrant describes "character of business done" as owning and operating sugar properties held misleading to omit facts showing that attempts by governmental authorities to expropriate the sugar lands had been made and were likely to continue and that the ability of registrant to resist such attempts was doubtful ... Page 982.
HISTORY AND BUSINESS
Remuneration of Directors
Amounts paid for legal services to a firm of attorneys of which a director is & member should be disclosed ... Page 982. PENDING LITIGATION
In a "statement of all litigation, if any, that may affect the value of the security" held misleading to omit a description of a decree affecting the properties of the registrant which remains unsatisfied and in full force and effect ... Page 982.
MATERIAL CONTRACTS SUMMARIZATION
Required summary of material contracts not made in ordinary course of issuer's business held deficient for failure to disclose provision in underwriting agreement for alternative compensation to underwriter in event of breach of agreement by which underwriter agreed to have securities registered . . . Page 60.
PROCEEDS OF ISSUE
STATEMENT OF PURPOSES FOR WHICH USED
Statement that a portion of the proceeds will go "to the registrant as additional working capital and reimbursement of organization and registration expenses." held materially deficient for failure to set forth in detail the amount of organization and registration expenses
. . Page 543.
PROMOTERS WHAT CONSTITUTES
Persons who were not engaged by principal promoter to perform any particular task, but who joined with him in planning and financing enterprise, and who were recompensed by payments in stock and became members of registrant's original board of directors held promoters whose names should have been disclosed under item calling for names of promoters . . . Page 60.
STOP ORDER PROCEEDINGS
AMENDMENT TO REGISTRATION STATEMENT
Where proposed post-effective amendment appeared incomplete and inaccurate on its face, statute held to require denial of registrant's motion to declare such amendment effective and to dismiss stop order proceeding ... Pages 60, 287.
Where (1) post-effective amendments to a challenged registration statement appeared not to be incomplete or inaccurate in any material respect and disclosed information pertinent to the alleged deficiencies in such statement, (2) it did not appear that registrant had intentionally omitted the required information, and (3) registrant had by letter apprised the security purchasers of all facts which might have been brought to their attention by stop order held to permit declaration of effectiveness of such amendments and dismissal of stop order proceedings ... Page 400.
SECURITIES EXCHANGE ACT* OF 1934
ASSOCIATIONS OF BROKERS AND DEALERS
An association of brokers or dealers having applied for registration as a national securities association and having filed a registration statement, pursuant to Rule X-15AA-1, and the Commission having found that the data and the rules of the association contained in such registration statement comply with the requirements of Section 15A (b), ordered that the application for registration as a national securities association be granted ... Page 627.
GROUNDS FOR REVOCATION, SUSPENSION AND DENIAL
Where principal officer of registrant was convicted of felony involving the sale of securities, held revocation of registration is in the public interest ... Page 271 Untrue or Misleading Statements or omissions in Applications
Where registrant willfully made false statements in its application for registration that none of its officers or directors was permanently enjoined by any court from engaging in any conduct or practice in connection with the purchase or sale of a security and that registrant's predecessor had sold securities for specified issuers, held, revocation of registration is in the public interest ... Page 574 Violation of Securities Act or Securities Exchange Act
Where registrant and its president willfully violated the fraud provisions of the Securities Act of 1933, held revocation of registration is in the public interest ... Page 271.
Where a registered broker-dealer has, in the ordinary course of business as a broker, incurred an excessive aggregate indebtedness in violation of Section 8 (b) of the Act, and where registrant's statement in its application for registrstion that it purchases securities for customers on margin through members of national securities exchanges "in exceptional and isolated cases" was willfully false and misleading, revocation of registration held to be in the public interest . .. Page 572. PROCEEDINGS Lack of Personal Service
Where notice of a hearing to be held in a broker-dealer revocation proceeding was sent by registered mail and returned unopened, and where further notice was then given by publication in the Federal Register, and where it appeared that
•The term "Act” as used in Part II of this Digest refers to the Securities Exchange Act of 1934, se amonded.
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