The governing fact in determining whether a stock issue is a public offering is whether the persons to whom the offering is made are in such a position with respect to the issuer that they either actually have such information as a registration would have disclosed, or have access to such information.
Gilligan, Will & Co. et al., dealers who were suspended after they resold unregistered stock, argued that they were not underwriters within the meaning of § 2(11) of the Securities Act of 1933, 15 U.S.C.S. § 77b(11), because they were not involved in the original issue, and that their resales were not public offerings under § 5 of the Securities Act of 1933, 15 U.S.C.S. § 77e. Gilligan, Will & Co. et al. sought review of their suspension.
Did the Securities and Exchange Commission err when it ordered the suspension of Gilligan, Will & Co. from membership in a securities dealers' association?
The court found that Gilligan, Will & Co. et al's intention to keep the stock only if the issuer continued to do well was equivalent to purchasing "with a view to distribution," and thus made them underwriters. The court then found the stipulation that those who purchased from petitioners were not supplied with, or in a position to have access to, material information about the stock and its issuer was conclusive evidence that the resales were public offerings. Finally, the court found that petitioners waived objection to respondent's prejudgment of the case.