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Securities and Exchange Commission v. Guild Films Co.

United States Court of Appeals for the Second Circuit
279 F.2d 485 (1960)


In 1958, Hal Roach, Jr. obtained a loan from the Santa Monica Bank and The Southwest Bank for $120,000, which was secured by stock in F.L. Jacobs Co. Roach was the controlling shareholder in F.L. Jacobs. F.L. Jacobs later obtained Guild Films Co. (defendant), through the transfer of newly issued, but unregistered, Guild stock. After this transaction, F.L. Jacobs’ stock lost significant value. As such, Santa Monica Bank and Southwest Bank demanded further collateral from Roach, which was provided in the form of 50,000 shares of Guild that Roach held through his dealings with F.L. Jacobs. When Roach fell behind on his loan payments, the banks attempted to sell the Guild stock. The Securities and Exchange Commission (plaintiff) then brought an action to stop the transfer of the unregistered Guild shares. The district court ruled in favor of the SEC. Guild Films then appealed to the Second Circuit Court of Appeals, arguing that the banks in question did not “purchase” the stock, as required to be considered an underwriter. The SEC argued the banks in question were bound by federal securities registration requirements.

Rule of Law


Holding and Reasoning (Moore, J.)

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