Securities Regulation – Controlling Stockholders as “Issuers” Under the Securities Act of 1933

The Securities and Exchange Commission sought an injunction to restrain the corporate defendant, a brokerage company, and the individual defendant, its president and controlling stockholder, from selling stock in an oil company. At the time the stock was issued and sold, the individual defendant was also president and controlling stockholder of the oil company. No registration statement was in effect with reference to the stock,. which was sold through the mails in interstate commerce in violation of section 5 of the Securities Act of 1933. Section 5 of the act applies only to transactions by an “issuer, underwriter, or dealer.” Held, for the plaintiff. The corporate defendant and the individual defendant, as persons directly or indirectly in control of the oil company, were “issuers” of the stock of that company; therefore, their transactions were not exempt from the registration provisions of section 5. Securities & Exchange Commission v. Kaye, Real & Co., (D.C. N.Y. 1954) 122 F. Supp. 639.