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PART I

SECURITIES ACT* OF 1933

REVOCATION

BROKER-DEALER REGISTRATION

Sale of Unregistered Securities

Where registered broker-dealer sold and delivered after sale securities without the registration required by the Securities Act of 1933, held, willful violation of Section 5 (a) of that Act . . . Page 372

DENIAL

Where applicant for registration as broker and dealer sold and delivered after sale securities, without the registration required under the Securities Act, held willful violation of Section 5 (a) of the Securities Act of 1933 ... Page 208

DEFINITIONS

Security

Assignments of oil and gas leases sold with an undertaking by the seller to drill a well constitute "investment contracts" and are therefore "securities" under Section 2 (1) of the Securities Act of 1933 ... Page 372

STOP ORDER PROCEEDINGS

MISSTATEMENTS AND OMISSIONS

Where numerous omissions, inaccuracies and inconsistencies were found in various items in the registration statement as well as in the prospectus and other material required to be filed, concerning, among other things, the control of registrant, the business and property of registrant and subsidiaries, its capital stock, the underwriting and distribution of the securities registered, the acquisitions of various properties, remuneration of officers, principal holdings of securities, interest of affiliates in property acquired, and recent sales of securities, held the registration statement, as a whole, is materially misleading by reason of omissions of material fact and material misstatements and a stop order must issue... Page 334

Where registered broker-dealer misrepresented the results and prospects of a test oil well, held, willful violation of Section 17 (a) of the Securities Act of 1933 and Sections 10 (b) and 15 (c) (1) of the Securities Exchange Act of 1934 and rules under latter statute . . . Page 372

CONSIDERATION OF AMENDMENTS FILED IN COURSE OF PROCEEDING

Where numerous material deficiencies are found to exist in financial statements included in a registration statement which has been on file for a considerable

*The term "Act" as used in Part I of this Digest refers to the Securities Act of 1933. 25 8. E. C.

791

period of time and where revised financial statements were filed during the
course of stop order proceedings, held that it is appropriate under the circum-
stances, prior to acceptance of the revised financial statements as amendments,
to call to public attention the material deficiencies in the original financial
statements and these deficiencies provide an additional basis for entry of a stop
order... Page 334

EFFECT OF INSTITUTION OF STOP ORDER PROCEEDINGS

The institution of a stop order proceeding under Section 8 (d) has the effect
of suspending effectiveness of the registration statement until final determination
of the issues raised therein... Page 1

SUSPENSION OF TRADING ON NATIONAL SECURITIES EXCHANGE

Where, after correction by amendment of deficiencies in financial statements
in registration statement filed under Securities Act respecting stock issue, de-
ficiencies which remained in financial statements in annual reports filed under
Securities Exchange Act, were not of such materiality as to require suspension
of trading in the stock until correction of the deficiencies, and where a national
securities exchange had of its own motion continued existing suspension of trad-
ing and it appeared that such trading would not be resumed until investors had
sufficient time to assimilate the information supplies in the revised financial
statements, held, no action by Commission was needed to prevent trading in the
stock on the exchange . . . Page 1

25 S. E. C.

PART II

SECURITIES EXCHANGE ACT* OF 1934

BROKER-DEALER REGISTRATION

FAILURE TO REGISTER AS BROKER-DEALER

Where broker-dealer engaged in interstate transactions in securities without registering with this Commission, held, willful violation of Section 15 (a) of the Securities Exchange Act of 1934 ... Page 208

GROUNDS FOR REVOCATION

Proceeding to revoke registration of broker-dealer dismissed where evidence fails to establish that broker-dealer participated in or caused a soliciting group to omit from proxy solicitation material filed with this Commission material facts required to be disclosed by Regulation X-14 . . . Page 492

Where registered broker-dealer willfully violated provisions of Securities Exchange Act of 1934 and Rule promulgated thereunder by failing to file required reports of financial condition, held that it is in the public interest to revoke such registration as broker-dealer. . . Page 35

WILLFUL VIOLATION OF RULE

Where registered broker-dealer, despite communications from Commission referring to requirement of Rule calling for filing of financial reports and requesting that he file such reports, failed to file, held his failure under the circumstances constituted "willful" violation of Rule within the meaning of Section 15 (b) of the Securities Exchange Act of 1934, notwithstanding asserted belief that the existence of a temporary injunction against him precluded his filing such reports. . . Page 32

FAILURE TO DISCLOSE MARKET CONTROL

Where applicant for registration as a broker and dealer sold securities to customers of the firm employing him without disclosing his control of the market in such securities, held, willful violation of Section 17 (a) of the Securities Act of 1933, Sections 10 (b) and 15 (c) (1) of the Securities Exchange Act of 1934 and rules thereunder... Page 208

PRACTICE AND PROCEDURE

Certification of Record on Petition for Review

In certifying corrected transcript of record pursuant to remand of reviewing court, held index to transcript, prepared by record officer of the Commission after Commission's decision and after the filing of a petition for review, erroneously listing certain exhibits as having been received "for identification only" but in fact received in evidence, was not a part of the record upon which Commission's order was based.

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

25 S. E. C.

Summaries and explanations attached to certain exhibits after they were offered in evidence with a view to assisting the trial examiner's disposition of the matter, held, properly included in transcript of the proceedings as argumentative material, the Commission being fully apprised of the nature of the material and having ruled that such data did not constitute evidence.

In certifying transcript of record to reviewing court, held, the mechanical tasks of compilation and copying may be delegated to Commission employees, but certification is the act of the Commission and should be evidenced, like other Commission actions, by the signature of Commission's Secretary, as well as by affixing by Secretary of Commission's seal.

Pursuant to direction of the reviewing court, held certificate should be made in the statutory language that transcript is of the record "upon which" rather than "included" orders complained of were entered... Page 395

MANIPULATION OF TRADING ON NATIONAL SECURITIES EXCHANGE

Where president and controlling person of registered broker-dealer admittedly caused broker-dealer to purchase certain stock through national securities exchange at prices in excess of last prior quotation, when president planned to sell substantial quantities of such stock owned or controlled by him for which registration statement was then pending before Commission, held, willful violation of Section 9 (a) (2) of Securities Exchange Act of 1934 by broker-dealer, requiring, in the public interest, revocation of broker-dealer's registration ... Page 227

REVOCATION OF REGISTRATION

Where a registered broker-dealer has engaged in manipulative practices in willful violation of Section 9 (a) (2) of the Securities Exchange Act of 1934 and was permanently enjoined from engaging in certain practices in connection with the purchase and sale of securities, held, that it is in the public interest to revoke its registration pursuant to Section 15 (b) of the Act... Page 227 MANIPULATIVE ACTIVITIES

Where it is shown that a person having a substantial direct interest in the success of a proposed offering takes active steps to effect a rise in the market price of outstanding securities of the issue, held, such showing establishes prima facie manipulative purpose constituting element of violation of Section 9 (a) (2) of the Securities Exchange Act of 1934, even though there was no immediate resale of the shares which were purchased in the process of raising the market and prices paid were within the market range of the stock for some time, both before and after the purchases, and at other times independent persons effected transactions at levels as high as the level to which the market was raised... Page 227

SALE OF UNREGISTERED SECURITIES

Where registered broker-dealer sold substantial amounts of securities not registered as required under Section 5 (a) of the Securities Act; failed to file reports of his financial condition as required under Section 17 (a) of the Securities Exchange Act, and failed to disclose in his application for registration as a broker-dealer the revocation in Ontario of his license to sell securities and that he was permanently enjoined from engaging in certain practices in the sale and purchase of securities, held, willful violations of Securities Act and Securities Exchange Act, requiring, in the public interest, denial of requested permission to withdraw from registration, and revocation of broker-dealer's registration... Page 294

WITHDRAWAL OF REGISTRATION

Where registered broker-dealer, during hearing in revocation proceedings establishing a willful violation of Commission's Rule requiring filing of financial reports, seeks to withdraw his registration, and it appears that for several years said broker-dealer has not engaged in business as a broker-dealer, held that under circumstances presented the public interest and the protection of investors is adequately served by withdrawal rather than revocation, and withdrawal will be permitted ... Page 32

STRIKING OF SECURITY FROM LISTING AND REGISTRATION

Application by exchange to strike security from listing granted without terms where corporation in impaired financial condition is engaged in no current operations and its future prospects of profitable operation are very doubtful and trading in security has been suspended for some time by exchange for those reasons... Page 287

SECRET PROFITS

Where applicant for registration as a broker and dealer sold his own securities at a profit to customers of the firm employing him in transactions confirmed on an agency basis, held, willful violation of Section 17 (a) of the Securities Act of 1933, Sections 10 (b) and 15 (c) (1) of the Securities Exchange Act of 1934 and rules thereunder

PRIOR INJUNCTION

...

Page 208

Where registered broker-dealer consented to the entry of a permanent injunction restraining him from engaging in and continuing certain practices in connection with the sale of securities, held, injunction is not subject to collateral attack in broker-dealer revocation proceeding... Page 372

NATIONAL SECURITIES ASSOCIATIONS

DENIAL OF MEMBERSHIP

Where national securities association disapproves application for membership solely because of disability arising from applicant's previous expulsion, where such expulsion and previous revocation of registration were based on similar misconduct, where Commission has found it consistent with public interest to grant reapplication for registration, and where national securities association has offered no additional information or basis for denying application for membership, held, appropriate in the public interest to direct broker-dealer's admission to membership in said association... Page 28

CONTINUANCE IN MEMBERSHIP

Application of national securities association pursuant to Section 15A (b) (4) of the Securities Exchange Act of 1934 for approval of continuance in membership of broker-dealer employing individual under disqualification from employment by members, approved, upon showing that such employment was appropriate in the public interest . . . Pages 450 and 648

REVIEW OF DISCIPLINARY PROCEEDINGS

Setting Aside Action of Association

Where national association disciplined a member for violation of its rules on the basis of evidence insufficient to support its findings of violation and an erroneous application of its rules to that evidence, action of association set aside and record remanded to association for such reconsideration and further proceedings not inconsistent with Commission's opinion as it should deem appropriate... Page 437

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