Brief Fact Summary. The Securities and Excahnge Commission, (Petitioner), brought this complaint seeking to enjoin unregistered offerings of treasury stock by Ralston Purina Co., (Respondent).
Synopsis of Rule of Law. Whether a transaction by an issuer involves a public offering depends on the need of the offerees for the protections afforded by registration.
That is to say, we begin, in the light of the declaration, with the presumption that the legislature intended the act to be divisible; and this presumption must be overcome by considerations which make evident the inseparability of its provisions or the clear probability that the invalid part being eliminated the legislature would not have been satisfied with what remains.View Full Point of Law
Issue. Whether Respondent’s offerings of treasury stock to its “key employees” are exempt as transactions by an issuer not involving any public offering.
Held. No. Respondent’s purpose in singling out key employees for stock offerings does not make the transaction exempt as not involving any public offering.
Discussion. The remedial purposes of federal securities legislation impose the burden of proof on an issuer to prove its transaction is exempt. The question of exemption turns on the knowledge of the offerees, not the motivations of the issuer. Here, the employees were not shown to have access to the kind of information which registration would disclose. The opportunities for pressure and imposition make it advisable that the transaction not be entitled to exemption.