Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1938-04-23

aren't you7 you're the man who knows" True.
/ I may have to advise you that II Il Is q close
question It Is safer 70 assume that control
| does not exist; but in the great majority Of
| cases so far as I have been able to tell, the
/ question isn't a close one-it Is perfectly
/ obvious one way or the other, to anyone who
really knows the facts.
% much for rule ZOO Rule 20l is a little
| different-in some ways broader and in some
| vpvs narrower II covers issues Of almost
! every kind. and all the way up 70 100000
| the TOP limit OF the commissions powers. Like
rule 200 it has no prospectus requirements
/ no escrow provisions, no restrictions on the
! way the securities may be sold But the COM
/ mission felt that Il 10 was 70 grant blanket
/ exemption Of this kind for issues larger than
1 the $50 900 allowed under rule 200, It should
do so only for securities OF what you might
cali Investment grade. OF course there Is no
/ way OF being sure just what VIII turn out 70
! be sound snon- speculative investment, but the
/ rule tries TO set up at least few sign posts.
/ For one thing the securities have TO nave
relatively high par values OF denominatons-
/ e1oo Tor stock $500 for bonds-no bargain
/ basement stuff. They have 70 be solo az not
less than par or face value except Tor oohos'
which to meet present-day market tenoSIci S-
can be sold at 9O). They have TO be sold tor
| cash and, to keep out too much water, DC
part OF a class which has not been SOLD e4-
ceU. for cash during the past year tIhls Is
subject to one exception which ISM very I'M
norfant) They have to be the kind OF secur-
tiles which can be sold without too much saies
effort-the rule doesn't cover them the
to more luan ~ PSANCA@ -
underwriting and distribution costs All TINS
because the commission felt that II shouIen
waive the entire scheme Of buyer pro.e eSnao
contemplated by the act TOT issues pes"t ~
Sso ma and 100000 unless it could insure the
sJ.sS1ce Of some sort Of safeguard as to the
Kind Of security involved
As in the case Of rule 200. you have to de-
d,,rt from the top limit allowable the AInouls
OF other securities oiiereo.n a.t ,-sar. nut
stil being offered-during the past year, .I pot
IN two respects this requirement Is less ssIS 800
than rule 200. In the nrst plece, yOu Me-,
have to worry about any contIol Pl soS.-
,,,,dor r1de DOL for that rule requires oeuuS-
ttoy1 NJ past issues only II they were secuIi.I
NJ the same issuer. And secondly you ooh
hsve IN deduct past issues which were lesLs-
tered under the act or were lSSEs1 offerns
e~srnption of section 4(D, or the mt ~
exemption Of section SCa) III. FAse is ssoro
have to be deducted only II eAenlp'eu 80
reoistratiou solely by reason OF sAAAe " - -
attor rule under section sob OF the sct
thus YOU would not have to oedueI seeull a 20
issned TO promoters for property. az leasS -
the promoters took for investment slnce Una. ma.
- he a transaction mot involving any
n,b1ic offering" and so exempt under sectloit ~
4CD-although you shouldn't iofses ehas - /
the promoters securities were o. ..ntSsr1Sse
than for cash." and that TACT "oulu ueA'N'
the exemption under rule 2Ol.
Eule POI. however, doesn't DO greao o sal /
NJ good for the average mining issue Ioi
mining stocks aren't Olten bolu III CIV s'4--N
or on mere 10 percent underwriting sp I'a,9
Rule 2O2 is the mining companys nome liet IL
let me 20 through its requirements one pS
one. i,
First-Rule 2O2 applies only to shares o.: OF
stock In a corporation or similar interests IN
a trust or unincorporated association. Ana py
similar we mean similar; we don't mean
beneficiary's interest in a testamentary gIuss,
or n bondhoider's interest in property suoJect
to a corporate mortgage. The only similarity
those things would have to snare OF stoch
is that they would probably al be securltles.
We mean interests which carry risn1s, an
aloeous to stockholders rights in business
Enterprises organized along the same general
lines as corporations. For instance; we mean
the type OF interest that shateholoeI mas
in a Massachusetts business trust-an enter
nrise which is a corporation in everything ex-
cert the technical form Of its organization
second-Rule 202 has no maximum par or
value requirement You sell one cent
bar value stocks under It, But whatever your
par or stated value is you can't put your
public offering price below It, whether IL Is
cent or a hundred dollars Not even by sucn
devices as selling to the promoters at par and
getting the stock donated back, or selling one
share at par and giving" another away can
you get around this requirement. The not
less than par requirement is waived only IN |
tbe case OF treasury stock reacquired for cash |
or its equivalent at the current bona Tide |
market or selling price
TThird-As under rules 200 and 2o1, you can't |
sell successive weekly editions Of stock. This
provision however, follows the lines OF rule
2Of rather than rule 200; you don't have TO
worry about issues OF other companies IN the
saune control" family, and you don't have to
worry about issues which were registered or
had some other ground for exemption than
the SOD rules. All you have to deduct Is
offerings Of the same company which were
made during the past year, and which were
exempt only under rule 202 or one OF the
other 500 rules.
equally applicable to rules 200 and 701. When
we talk about offerings Of securities made
during the past year, we mean primarily o.
ferings initialy made or commenced DURING
the past year ANY such offering which was
exempt solely under one Of the sob rules
land in the case Of rule zoo any such offering |
at alb must be deducted, except to the extent |
that Il remains unsold and has been with !
drawn Offerings begun more than q year
ago don't count, even though they may have
been carried over into the year However, |
Offering begun more than year ago unoeI
rule z02 is stin open at the time you are
starting your new offering under the rule !
the amount remaining unsold and still being
offered would have to be deducted, since you
can't offer more than 100000 under RUE zOz
at any one time
Fourth-Di Distribution expenses must not ex-
coed IS percent Of the public offering price. |
In other words, II the issue is to be free from
the registration requirements, the buyer is |
to be assured that at least three-quarters OF
his money goes into the enterprise. This pro- |
vision can't be evaded by giving the under |
writer some additional bonus stock, for calling !
thing a bonus doesn't prevent the So !
called gift from being one Of the company s
expenses of distribution.
F4fth-Promoters' securities issued for serV- |
ices rendered In excess OF the promoters actual
expenses or for property in excess OF its fair |
value must be tied up in such way that they |
can't be disposed Of or liquidsted until the
company shows a years operating profits. In
other words, the public stockholders, who as |
likely as not have put up all the working
capital, must be given a fair chance to see
whether it viii work. before the promoters
can be allowed to pun out and take their
profit with them.
Sixth-A prospectus, containing q bare
minimum OF factual information, must be
filed with the commission and used in every
sale what must 60 in the prospectus Is set
out In the rule in fulli It Is very simple and
and ] won't so over 1t. When you've got all
that In you can put In anything else you
ike so long as you keep It honest-for as
said before these exemptions aren't exemptions
iron, the fraud provisions Of the act. This
prospectus must be given to every prospective
customer at the time you first approach him;
No s,come-on" letters. telling q wide mailing
list to write for a prospectus II interested are
rsermftted. And furthermore, no advertising
a. fknSs rva1or q. t1a fOrrn