Imágenes de páginas
PDF
EPUB

an exemption from the registration requirements of the Act of a proposed public offering by Searchlight of 500,000 shares of common stock at 10¢ per share.?

Our order of August 8, 1955, alleges that Mills and Searchlight Consolidated Mining and Milling Co., an affiliate of Searchlight, are permanently enjoined by a decree entered by the United States District Court for the District of Nevada on June 30, 1953, from further violations of the registration requirements of the Act in connection with the sale of securities of the affiliate, and that Mills was found guilty by that Court on October 7, 1954, of criminal contempt for having violated the terms of the injunction.”

We gave notice of the entry of our order and opportunity to request a hearing to determine whether the temporary denial order should be vacated or made permanent. Applicants did not request a hearing but instead filed the instant application and a supporting brief, the Division of Corporation Finance filed a brief in opposition, and applicants filed a reply brief.

Applicants contend that Section 3 (b) of the Act requires that we make a finding adding the stock proposed to be issued by Searchlight to the classes of securities exempted by that section because, they assert, enforcement of the Act with respect to that stock is not necessary in the public interest and for the protection of investors. They further contend that Rule 223 (a) (6) of Regulation A, upon which they allege the temporary denial is based, should be rescinded on the ground that that rule is not authorized by Sections 3 (b) or 19 (a) of the Act, is arbitrary, and represents an exercise of legislative power in contravention of Section 1 and Section 8, Clause 18, of Article I of the Constitution of the United States.* They also point out that Searchlight was not organized until August 9, 1954, after the injunction was entered against Mills and the affiliate.

Rule 223 (a) of Regulation A provides in pertinent part:

The Commission may, at any time after the filing of a notification enter an order temporarlly denying the exemption, ... if It has reason to believe that

(1) No exemption is available under the regulation for the securities purported to be offered hereunder ..." - The proposed offering was the subject of a notification filled with us on July 20, 1955 for the purpose of obtaining an exemption under Regulation A.

*Role 216 (b) of Regulation A, which is made applicable by Rule 223 (a) (1), upon which our temporary order under Rule 223 (a) was based, provides in pertinent part:

“No exemption under this regulation shall be available for any of the following securities :

"(5) Securltles of any Issuer if such issuer or any of its directors, officers, affiliates or predecessors, (or) any of its promoters presently connected with it in any capacity if the issuer was organized within the past 3 years . .

"(1) has been convicted within 5 years prior to the filing of the notification required by Rule 218 of any crime or offense involving the purchase or sale of any security ...;[or)

"(11) is subject to any order, judgment or decree of any court entered within 5 years prior to such fling, enjoining or restraining such person from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security ..."

[graphic]

There is no substance to applicants' contentions. Section 3 (b) of the Act provides that this Commission may promulgate rules and regulations, subject to such terms and conditions as may be prescribed therein, to “add any class of securities to the securities exempted" under Section 3 (a) of the Act, if it finds that enforcement of the Act with respect to such securities is "not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering.” Section 3 (b) does not in our opinion give this Commission authority to grant a special exemption to a particular security issue of an individual issuer. This is indicated not only by the language of Section 3 (b) and the general nature of the exemptions expressly granted by Section 3 (a), which relate to various categories of securities, but also by the fact that our authority under Section 3 (b) to add new classes of securities may be exercised only through the adoption of rules and regulations, which normally deal with matters of general applicability, and not by orders, which normally treat individual situations.

The inclusion in Regulation A of rules providing for the denial of an exemption with respect to securities of any issuer if such issuer or designated associates or related companies have been convicted or enjoined within 5 years prior to the filing of notification in connection with the purchase or sale of securities, irrespective of the fact that the public offering may be limited or the amount involved may be small, is not in our opinion arbitrary. We think it clear that provisions such as these implement the objective of the Acts designed by the Congress for the protection of investors. They are comparable for example to Section 15 (b) of the Securities Exchange Act of 1934 and Section 203 (d) of the Investment Advisers Act of 1940 which require this Commission, if we find it to be in the public interest, to deny or revoke reg. istrations as a broker-dealer and as an investment adviser, respectively, because of a conviction within the past 10 years of a felony or misdemeanor or an injunction in connection with the purchase or sale of a security.

• Rule 223 (a) (6) is similar to Rule 216 (b) (5), except that it covers the situation where the Commission has reason to believe that the persons named "shall be" indicted, convicted or enjoined.

Article I, Section 1 vests all legislative powers granted by the Constitution in Congress. Article I, Section 8, Clause 18, gives Congress the power to make all laws necessary and proper for carrying out its powers.

On the basis of the foregoing we find that no Regulation A exemption is or should be available for Searchlight's securities. Mills was convicted of criminal contempt and he and the affiliate company were enjoined within 5 years prior to the filing of the notification, and it is immaterial that Searchlight was not in existence when the injunction was entered. In any event Mills' conviction occurred after Searchlight was organized. We conclude that the application should be denied.

Accordingly It Is ORDERED that the application of Searchlight Uranium Corporation and Homer C. Mills for an order modifying and rescinding the Commission's order of August 8, 1955 temporarily denying an exemption under Regulation A of a proposed public offering of common stock of Searchlight Uranium Corporation be, and it ereby is, denied.

By the Commission (Chairman Armstrong and Commissioners Adams, Orrick, and Patterson).

37 S. E.C.

IN THE MATTER OF

A. M. KIDDER & CO.

Promulgated March 21, 1956

(Securities Exchange Act of 1934—Sections 15(b) and 15A)

BROKER-DEALER REGISTRATION

Revocation of Registration
Suspension or Expulsion From National Securities Association

Violation of Securities Act of 1933
Sale of Unregistered Securities

Publio Interest Where registered broker-dealer firm which has sold unregistered securities in willful violation of the Securities Act of 1933, makes offer of rescission to all purchasers and takes steps to prevent future violations, and partner principally responsible for violation resigns from firm, held under the circumstances it is not in public interest to revoke firm's registration or suspend or expel it from membership in national securities association.

APPEARANCES:

David Hartfield, Jr., of White & Case, for Gordon R. Kay.
Hubert C. Mandeville of Beekman & Bogue, for A. M. Kidder & Co.

William D. Moran and Warren E. Blair, for Division of Trading and Exchanges.

FINDINGS AND OPINION OF THE COMMISSION

This is a private proceeding under Section 15 (b) · and 15A (1) (2) 2 of the Securities Exchange Act of 1934 (“Exchange Act”) to determine whether A. M. Kidder & Co. (“registrant”) and Gordon R.

.

1 Section 15 (b) of the Exchange Act provides in pertinent part:

"The Commission shall, after appropriate notice and opportunity for hearing, by order revoke the registration of any broker or dealer if it finds that such revocation is in the public interest and that (1) such broker or dealer has willfully

violated any provision of the Securities Act of 1933 ..." * Section 15A (1) (2) of the Exchange Act, as it applies to this case, in substance authorizes the Commission, if it is necessary or appropriate in the public interest, to suspend for a period not exceeding 12 months or to expel a broker or dealer from membership in a registered securities association if it finds, after appropriate notice and opportunity for hearing, that the member has willfully violated any provision of the Securities Act. 37 S. E. C.-34 -5289

Kay willfully violated Section 5 (a) (1) and 5 (a) (2) of the Securities Act of 1933 ("Securities Act”): and, if so, whether it is in the public interest to revoke registrant's registration as a broker and dealer, or to suspend or expel registrant from membership in the National Association of Securities Dealers, Inc. (“NASD").

The order for proceedings alleges that registrant and Kay, a partner in registrant who was in charge of its branch offices, willfully violated the above provisions of the Securities Act in that they used the mails and facilities of interstate commerce to sell and deliver shares of the common stock of Brunston Mining Company, Ltd., (“Brunston") a Canadian corporation, when no registration statement was in effect as to such securities. A stipulation of facts was entered into by the parties and Kay which requests that we dispose of the issues on the basis of the facts stipulated and reach the conclusion that it is not in the public interest under the circumstances presented to revoke registrant's registration or to suspend or expel it from the NASD. On the basis of our review of the record we make the following findings.

In the spring of 1953 Brunston, which had previously issued 2,500,000 shares of capital stock, which was outstanding in the hands of the public, took steps to issue an additional 1,000,000 shares. It entered into a contract with Delma Agency Limited (“Delma”) a Canadian corporation engaged in the securities business in Toronto, Canada, whose president and controlling stockholder is vice-president and general manager of Brunston, under which Delma subscribed for 400,000 shares at 25€ per share and took an option on 600,000 shares at prices ranging from 30¢ a share to 40¢ a share. Delma took down all 1,000,000 shares. It sold 300,000 shares on the Toronto Stock Exchange, where the Brunston stock was listed, 100,000 shares through Kay to an investor, and it still holds the remaining 600,000 shares.

Kay, who had in conversations with Delma's president and the manager of registrant's Toronto office been given favorable information respecting the Brunston stock, told his partners and registrant's

* During the period involved in these proceedings, Section 5 (a) of the Securities Act provided :

"Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly~

"(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the malls to sell or offer to buy such security through the use or medium of any prospectus or otherwise.

*(2) to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale ar for delivery after sale."

• Brunston had previously been named Quesabe Mines Limited, and at the time of the change of name in 1963 it reduced its outstanding stock by one share in exchange for cach two shares outstanding.

« AnteriorContinuar »