Securities and Exchange Commission v. Resch-Cassin & Company

In mid-1970, Africa, U.S.A., Inc. (Africa) hired Resch-Cassin & Co. (defendant) to underwrite a public offering of Africa stock at $10 per share. Resch-Cassin was required to sell all the shares in the offering or else return the money it received from prospective buyers. Resch-Cassin’s strategy was to hype the stock’s post-offering price. Once trading in Africa shares began on the over-the-counter market, Resch-Cassin bought 3,000 shares at $20 per share to stimulate interest and inflate Africa’s post-offering price. Despite some initial success, the price dropped to $11 per share. Resch-Cassin then recruited Nagler-Weissman & Co., Inc. and Robert Nagler, Adolph Weissman, and Maxwell Forster (collectively, Nagler-Weissman) (defendants) to help with its scheme. Resch-Cassin ordered 1,000 shares from Nagler-Weissman, which began buying Africa shares. Again, the price rose initially, reaching $16 per share, but eventually dropped again; once the underwriting ended in November and by December, the stock price was $4 per share. Until December, Africa’s stock never traded below the $10 offering price. The Securities and Exchange Commission (SEC) sued Nagler-Weissman and Resch-Cassin, pursuant to § 10(b) of the Securities Exchange Act of 1934 (exchange act), SEC Rule 10b-5, and § 17(a) of the Securities Act of 1933, alleging it manipulated Africa’s stock price and sought a permanent injunction against Nagler-Weissman, prohibiting further violations of the securities laws.