Securities Law–Prospectus Must Reflect Developments Subsequent to Effective Date of Registration Statement To Meet Requirements of Section 10(a) of Securities Act of 1933–SEC v. Manor Nursing Centers, Inc.*
Manor Nursing Centers, Inc., made a public offering of 450,000 shares of its common stock at a price of ten dollars per share. Under the provisions of the Securities Act of 1933, a registration statement containing a prospectus was filed with the Securities and Exchange Commission. These documents represented that the offering would be on a best efforts, “all-or-nothing” basis-that is, if all the 450,000 shares were not sold by a specified selling deadline, the proceeds of any sales would be returned to subscribers. The prospectus stated that subscribers’ funds would be segregated in an escrow account and that arrangements to establish such an account had already been made. Finally, the registration statement represented that the shares would be sold only for cash. Contrary to these representations, no escrow account was ever established, Manor’s principals disposed of shares for other than cash consideration, and the offering was closed before complete dispersal of the shares. In addition to these misrepresentations, the registration statement and prospectus failed to reveal that certain individuals and brokers would receive special compensation for their participation in the offering.