HISTORY AND BUSINESS—Continued

GENERAL CHARACTER OF BUSINESS

Inadequate Description of Purposes of Enterprise

Where loan corporation exploited by officers by means of taking heavy commissions and profits on continuous sale, resale, purchase and exchange of registrant's securities giving officers profits far in excess of those of registrant held general statement that corporation is in loan business may be materially misleading... Page 1062.

Marketing of Products

Statement that registrant proposed to sell chrome products to the steel market, held to be materially misleading for failure to disclose that some of the chrome ore would require concentration, a process of doubtful commercial feasibility, and that registrant did not know whether the relation between the iron and chrome in the ore would meet the specifications of the steel alloy market ... Page 882.

Method of Operations

Representations that registrant proposed to mine its ores by hydraulicking, held to be materially deficient for failure to disclose that much of its "proven" ore cannot be mined by that process . . Page 882.

MANAGEMENT

Failure to Disclose Salaries, Other Remuneration, or Special Interests of Officers Where answer to certain items of registration statement failed to disclose remuneration from affiliates of registrant held such answer deficient . . . Page 1062. Qualifications of President

Recital of qualifications in the prospectus of president of the registrant and a statement that he had been connected with the oil business for the "past 30 years" calculated to indicate that he was eminently qualified to head the enterprise, held misleading where in fact the president had been out of touch with the oil business for 10 years and the underwriters who installed him themselves regarded him as unequal to the task of managing the registrant . . . Page 1028. Remuneration

Where properties having an original cost of $191,839.49 and a book value of $145,593 were conveyed as security to persons connected with the management of the registrant for debts in the aggregate amount of $13,584.61 owed by the registrant for services and salaries, and these properties were charged off on the registrant's books within the fiscal year prior to the effective date of the registration statement, failure to disclose the extent of indebtedness, and the payments made out of the income or sale of these properties, held to render the statement deficient notwithstanding that the services were rendered prior to the past fiscal year ... Page 1028.

Reversion of Control in Event of Underwriter's Inability to Perform

Where an underwriter succeeded in having a new board of directors of the registrant installed but entered into an agreement to permit the reinstallation of the old board in the event he failed to perform his underwriting contract, held performance of the underwriting contract was not a certainty and appropriate disclosure of the names of the old board and of the possibility that they might be reinstated should be made... Page 1028.

HISTORY AND BUSINESS—Continued

NATURE OF ASSETS

Where prospectus states that the water of creek running through registrant's land and to be used in distilling is "second to none in the world" and "found in a very few places in the country" and evidence shows that it is not only of a common type but also polluted, held such representation is materially false PRICE

...

Page 926.

Where registration statement states that registered shares would be offered to the public "at the market price as it exists from day to day on the ... Exchange," failure to disclose contemplated and actual restraints on the free flow of securities in the market by inducing stockholders to withhold from selling, creation of an artificial price and artificial activity by purchases made by the underwriters on the exchange, and touting of the stock held materially misleading... Page 1028. TITLE TO PROPERTY

Statement that real property had been "deeded" to the registrant where evidence disclosed that the grantor's wife did not sign the deed, and that her dower rights remained unconveyed under state law, held misleading... Page 926.

MATERIAL CONTRACTS

FAILURE TO DISCLOSE

Registrant's failure to disclose contract with architect whereby latter was to receive 10 percent of cost of buildings and equipment in consideration of his services, held material deficiency ... Page 926.

UNDERWRITER'S CONTRACT AFFECTING PRICE

A contract between two underwriters by which they committed themselves not to sell registered shares at less than a given price, and which necessitated that underwriters fill commitments on their sales at less than that price by purchasing over the exchange, held required to be disclosed because of the tendency of the contract to add to the volume of market activity, and further if no sales at less than given price were contemplated, disclosure of the contract held necessary in order to obviate the false impression created by a statement in the registration statement that shares were to be sold at the market price as it existed over a securities exchange "from day to day". . . Page 1028.

PRACTICE AND PROCEDURE

ADOPTION OF TRIAL EXAMINER'S REPORT

Where registrant has stipulated to facts and consented to entry of order, and trial examiner's report is supported by evidence, Commission may adopt such report as its findings and issue stop order . . . Page 86.

Where trial examiner's report is supported by the evidence, Commission may adopt such report as its findings and issue stop order... Page 597.

FINDER'S FEE

PROCEEDS OF ISSUE

Although failure to disclose an obligation to pay a finder's fee of 10 percent of all proceeds of the underwriting paid to the registrant by the underwriter does not render the financial statements defective-since the fee is an expense of underwriting, held the registrant's liability under the contract should be disclosed in answer to an item of the registration statement calling for information as to the use of net proceeds of the sale of the registered issue. . . Page 1028. SCOPE OF REporting requIREMENT

Held Items 40 to 45 of an A-1 registration form calling for information relative to the purchase of property with proceeds of offering does not call for information relative to a general program of exchanging new securities for registrant's outstanding securities. . . Page 1062.

SHARES EXCHANGED WITH EXISTING SECURITY HOLDERS

Where part of offering was to be made to existing security holders on exchange basis held misleading to state a figure for the proceeds to be raised, calculated by multiplying number of shares in total offering by price per share . . . Page 1062. STATEMENT of intended USES

Statement that minimum capital necessary to commence operations is $350,000 and that if such is not realized but $150,000 is obtained within 90 days of public offering date, operations will be commenced on "reduced cost on buildings and equipment," held materially deficient for failing to show use of funds should only $150,000 be obtained and failing to show registrant's plans, should $150,000 be not raised . . . Page 926.

OMISSION TO REFLECT ITEMS

PROSPECTUS

Prospectus held to be materially defective in that it fails to reflect the information contained in various items of the registration statement . . . Page 926.

REGISTRATION STATEMENT

CUMULATIVE EFFECT OF DEFICIENCIES

Net effect of numerous interrelated distortions held materially misleading as constituting the registration statement and prospectus as a whole not a true picture of registrant's activities ... Page 1062.

INFORMATION VOLUNTEERED BUT NOT REQUIRED

Although information as to the financial background of registrant's operations may not be required to be disclosed in a description of the character of the registrant's business, where it volunteers the explanation that its dormant condition is due to the liening of its property to creditors and full disclosure necessitates stating to which creditors it refers, held it must make the volunteered information truthful and adequate. . . Page 1028.

6 S. E. C.

REGISTRATION STATEMENT-Continued

REMUNERATION FOR SERVICES

Where the registration statement calls for information concerning the remuneration from all sources for services paid or to be paid by the issuer, directly or indirectly during the issuer's past official year, held disclosure of payments actually made within the past fiscal year as well as any liability for services accruing during that year must be made, regardless of when the services were rendered. . . Page 1028.

STOP ORDER PROCEEDINGS

AMENDMENT OF REGISTRATION STATEMENT

Incomplete Amendment

Where amended registration statement cured only part of alleged deficiencies and did not cure certain other deficiencies held motion to dismiss stop order proceedings cannot be considered . . . Page 1062.

DISCRETION OF COMMISSION TO CONSIDER AMENDMENTS FIled during STOP ORDER PROCEEDINGS

Where the record is persuasive that only a stop order will bring adequate notice of a defective registration statement to purchasers of registrant's stock, held to be Commission's policy to refuse to consider amendments filed during stop order proceedings until after issuance of the stop order ... Page 882. DISCRETION OF COMMISSION TO CONSIDER AMENDMENTS FILED SUBSEQUENT TO ORDER FOR HEARING

Where deficiencies in a registration statement were such as to require disclosure in the public interest held stop order proceeding will not be dismissed in the face of a motion therefor rested on assurances of amendment . . . Page 1062. PRACTICE AND PROCEDURE

Withdrawal of Registration Statement by Registrant

Where registrant, when apprised of the manner in which its affairs had been handled, retained an accounting firm to make a complete investigation of its affairs, made results of investigation public, and purchased all of the bonds outstanding in the hands of the public at their principal amount and accrued interest, withdrawal of registration statement held consistent with public interest and protection of investors. . . Page 850.

Registrant does not have an absolute right to withdraw its registration statement after it has become effective and, where present statement compounds deficiencies found in earlier withdrawn statement held refusal of withdrawal and issuance of stop order is in the public interest and for the protection of investors Page 926.

6 S. E. C.

PART II

SECURITIES EXCHANGE ACT OF 1934

CONTROL

BROKER-DEALER REGISTRATION

Where power exists to direct management and policies of corporation, heid "control" within meaning of Section 2 (11) of the Act exists even though persons who possess that power do not own majority of company's voting stock .. Page 1111.

grounds for revocatioN, SUSPENSION, AND DENIAL

Convictions for Crimes Involving Purchase or Sale of Securities

Where president of registrant was convicted of larceny as a result of conduct arising out of the business of broker and dealer in securities, and where registrant failed to inform the Commission of the conviction, held grounds for revocation of registration... Page 13.

Failure to Report Prosecution by State Court for Misdemeanor Arising out of Purchase or Sale of Securities

Where a dealer was prosecuted on charge of selling securities in state without a license and pleaded guilty to the charge held failure to report prosecution constituted grounds for revocation of registration . . . Page 336.

Failure to Report Revocation of License by State Securities Commission

Where a broker-dealer has failed to inform the Commission of the cancelation of his license to sell securities by a state body, held that his registration should be revoked... Page 384.

Failure to Report Suspension from Membership on an Exchange

Where dealer failed to report suspension from membership on an exchange for nonpayment of dues, held grounds for revocation of registration... Page 325. Violation of Securities Act or Securities Exchange Act

Where broker-dealer represented that corporation would deposit specified amount of proceeds from each sale in special account to be used "exclusively" for drilling and equipping wells, when he knew that this money was being dissipated for other purposes, held a willful misrepresentation... Page 97.

Willful violation of Section 5 (a) of the Securities Act of 1933 in the sale of fractional undivided interests in oil, gas and other mineral rights held grounds for refusal of broker-dealer registration . . . Page 97.

...

Where dealer charges his customers a price which bears no relation to the prevailing market price, held the inherent misrepresentation as to the value of the security is a fraud on the purchaser, and revocation of such dealer's registration is in the public interest . . . Page 386.

The term "Act" as used in Part II of this Digest refers to the Securities Exchange Act of 1934, a amended.

6 S. E. C.