Federal Jurisdiction – Securities and Exchange Commission – Application of Rule X – 10B-5 to Transactions Involving Non-Securities
Plaintiff brought an action for damages and the cancellation of certain instruments under section 10 (b) of the Securities Exchange Act of 1934 and rule X-10B-5 promulgated thereunder by the Securities and Exchange Commission. She proved a series of interrelated acts which took place over a period of months by which the defendants fraudulently deprived her of both securities and other property. The defendants objected to the jurisdiction of the district court on the ground that rule X-10B-5 was not applicable to transactions involving non-securities. The district court retained jurisdiction on the theory that all of the acts complained of were part of a single transaction which was within the scope of the rule. On appeal, held, affirmed. Rule X-10B-5 is applicable to the securities in a single transaction or scheme involving a combination of securities and non-securities. Errion v. Connell , (9th Cir. 1956) 236 F. (2d) 447.