Download Securities and Exchange Commission v. Ralston Purina Co

SECURITIES AND EXCHANGE COMMISSION V. RALSTON PURINA CO
Name and Citation
Securities and Exchange Commission v. Ralston Purina Co [346 U.S. 119]
Court
Supreme Court of the United States
Judicial History
United States Court of Appeals affirmed a decision of the District Court which dismissed
Petitioner’s action to enjoin respondent from issuing unregistered shares of stock to its
employees. Court’s holding was that the issuance was not a public offering, and therefore
exempt from the registration requirement under § 4 of the Securities Act of 1933. Petitioner
appealed.
Facts
Between 1947 and 1951, Purina sold nearly $2,000,000 of unregistered stock to employees,
and in doing so, used the mail. Securities Act of 1993 (the Act) §5 requires that stock shares be
registered if mail is used in their issuance. Section 4(2) of the Act exempts companies from the
requirements of §5 if the transaction is not a public offering.
Issue
Is an offering of treasury stock to corporate employees within the exemption of §4(2) of the
Securities Act of 1933?
Holding
No. Securities Act of 1933 §4(2) exempts only those offerings that are not a public offering.
Absent special circumstances, stock sale to employees is a public offering. The United States
Court of Appeals for the Eighth Circuit erred in their dismissal of the action to enjoin.
Reasoning
Absent special circumstances (such as access to the kind of information that registration of
stocks would disclose), employees are considered to be members of the public, and need the
protection of the Act. The exemption from §4(2) is based on the knowledge of the offerees,
rather than the issuer's motive. Purina employees were not shown to have access to the kind of
information registration would disclose. Therefore, the offering of unregistered stocks is not
exempt from the requirement to register the stocks.
Decision
Reversed and remanded.
Opinion
Justice CLARK
Dissenting Without Opinion
Chief Justice Vinson, Justice Burton
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