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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

Parents of Registrant

Page 60.

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-Continued

MANAGEMENT

Remuneration of Directors

Amounts paid for legal services to a firm of attorneys of which a director is a 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.

SUMMARIZATION

MATERIAL CONTRACTS

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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.

WHAT CONSTITUTES

PROMOTERS

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

Effectiveness of Post-Effective Amendments

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.

PART II

SECURITIES EXCHANGE ACT OF 1934

ASSOCIATIONS OF BROKERS AND DEALERS

REGISTRATION

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.

BROKER-DEALER REGISTRATION

GROUNDS FOR REVOCATION, SUSPENSION AND DENIAL

Convictions for Crimes Involving Purchase or Sale of Securities

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 registration that it purchases securities for customers on margin through members cf 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, så amended. 5 S. E. C.

BROKER-DEALER REGISTRATION-Continued

the registrant had willfully failed to report his change of address to the Commission, held, pending final determination on revocation, it is necessary and appropriate in the public interest and for the protection of investors that the broker-dealer's right to use the mails and instruments of interstate commerce in securities transactions be suspended. . . Pages 570, 615, 617, 634, 636, 638.

"SERVICE CONTRACT"

DEFINITIONS

Where the issuer has joined with other subsidiaries of the parent company "in a cooperative effort to obtain services needed by all of them and to that end have created various departments for their common use," and where the expenses are, in the first instance defrayed by the parent company and periodically apportioned among the subsidiaries held such agreement constitutes a service contract and information relating thereto must be submitted in response to appropriate items of Form 10-K... Page 449.

PRACTICE AND PROCEDURE

DETERMINATION OF JURISDICTIONAL AND CONSTITUTIONAL QUESTIONS The Commission will assume the constitutionality of statutes administered by it, in considering a motion to quash and dismiss an order for hearing on constitutional grounds. . . Page 112.

MOTION FOR BILL OF PARTICULARS

A motion for a bill of particulars concerning the matters to be considered in a hearing ordered by the Commission, which seeks to have the Commission plead its evidence, will be denied... Page 109.

POWER TO INSTITUTE PROCEEDINGS

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The provision of Section 27 of the Securities Exchange Act of 1934 that "The district courts . . . shall have exclusive jurisdiction of violations of this title. and of all suits in equity and actions at law brought to enforce any liability or duty created by this title..." does not deprive the Commission of jurisdiction to conduct the proceedings provided for by Sections 15 (b) and 19 (a) (3) of the Act, or other administrative proceedings provided for by the Act . . . Page 112. SUFFICIENCY OF ORDER FOR HEARING

An order for hearing is sufficient if it gives to the persons concerned reasonable notice of the matters to be considered . . . Page 109.

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UNLISTED TRADING PRIVILEGES

ADEQUACY OF DISTRIBUTION AND TRADING ACTIVITY IN APPLICANT'S VICINITY

Applicant held to have established sufficient public distribution and public trading activity in its vicinity (as previously determined) with regard to securities for which unlisted trading privileges were sought to render the extension of such privileges thereto appropriate in the public interest and for protection of investors... Pages 32, 36, 42, 248, 266, 389, 943.

Application for extension of unlisted trading denied where it appeared that there was insufficient public distribution and trading activity Pages 32, 36, 42, 389, 943.

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UNLISTED TRADING PRIVILEGES-Continued

Where applicant has not introduced satisfactory proof of sufficiently widespread distribution of, and sufficient public trading activity in, 11 securities, held that applications for extension of unlisted trading privileges should be held in abeyance pending the submission of additional data... Page 943.

ADEQUACY OF DISTRIBUTION AND TRADING ACTIVITY WITHIN APPLICANT'S VICINITY

Applicant held to have established sufficient public distribution and public trading activity within its vicinity (as previously determined) in securities for which unlisted trading privileges in round lots were sought to render the extension of such privileges thereto appropriate in the public interest and for the protection of investors . . . Pages 389, 949.

Applications for extension of unlisted trading in round lots denied as to one security due to insufficient public distribution and trading activity. . . Pages 389, 949.

ADEQUACY OF OPERATING MECHANICS OF THE EXCHANGE

Increase in number of odd-lot dealers to compete with each other, closing applicant exchange 15 minutes later than New York Stock Exchange to equalize prices and requiring the members to check both primary and local markets and to place any order in the market appearing to afford the better execution of the order, held to accomplish objectives of the Commission . . . Page 32.

Upon adoption of designated rules, the operating mechanics of applicant exchange held to be such as to render it appropriate in the public interest to grant unlisted trading privileges thereto, provided the statutory requisites of public distribution and trading activity are satisfied. . . Page 266. ADEQUACY OF REPORTS FILED UNDER SECURITIES ACT OF 1933 TO SATISFY SECTION 12 (f) (3) OF THE SECURITIES EXCHANGE ACT OF 1934

The registration of bonds under the Securities Act of 1933 coupled with the "undertaking" required by Section 15 (d) of the Securities Exchange Act of 1934 would normally insure that information will be supplied which would be substantially equivalent to that available pursuant to rules and regulations of the Commission in respect of similar bonds duly listed and registered on a national securities exchange within the meaning of the requirement of clause (3) of Section 12 (f) of the latter Act . . . Page 248.

ADEQUACY OF ROUND-LOT TRADING PROCEDURE TO ESTABLISH EXCHANGE AS AN INDEPENDENT SECONDARY MARKET

Present operating mechanics of Boston Stock Exchange as to round-lot trading tend to establish it as an independent secondary market . . . Page 389. NECESSITY OR APPROPRIATENESS OF EXTENSION OF ODD-LOT AND

ROUND-LOT TRADING

Where unlisted trading privileges in certain securities were granted to an appl cant exchange only with respect to odd-lot trading and not to round-lot trading because of its exchange's practice of gearing round-lot trading to the trading on the primary exchange, and subsequently new rules have been adopted and mace effective by the applicant exchange which appear to supply facilities for an independent market for unlisted trading in round lots held that it is appropriate in the public interest and for the protection of investors to extend to such exchange the privileges of unlisted trading in both round lots and odd lots to securities which otherwise satisfy the requirements of the statute. . Page 949.

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