Opinion ID: 757739
Heading Depth: 3
Heading Rank: 1

Heading: Registration of Securities

Text: 8 Before the acquisition, four controlling persons, including Chachas, held nearly all of Curbstone's outstanding 3.5 million shares, which had been issued to them in 1996 pursuant to a Form S-8 employee benefit plan registration. Levy argues that the SEC did not present a prima facie case that the sale in December 1997 violated Section 5 because the Curbstone shares had been registered on the S-8 form in 1996. Levy contends that once a registration statement is filed for any sale of a security, subsequent sales of that security do not need to be registered. 9 Levy does not cite any legal authority to support his argument, which contradicts the long-standing reading of Section 5. A registration statement permits an issuer, or other persons, to make only the offers and sales described in the registration statement. 12 As two commentators stated: 10 [I]t is really the offering or sale of the particular security that is registered and not the security itself--that is, once a security has been sold pursuant to a registration statement, subsequent sales are not themselves sales for which a registration statement is in effect. Each sale of a security, then, must either be made pursuant to a registration statement or fall under a registration exemption. 13 11 Although the language of Section 5 standing alone does not clearly indicate whether a registration statement must be filed for each offering of a security, other portions of the Act, regulations and the SEC's interpretive statements overwhelmingly support the SEC's position in this case. For example, Section 4 provides exceptions to the registration requirement of Section 5 for specific transactions, 14 indicating that registration of a security is transaction-specific. 12 Moreover, the regulations for registering securities specifically provide that a registration statement and any post-effective amendments will become effective upon filing with the Commission if: (1) The registration statement is for registering additional securities of the same class(es) as were included in an earlier registration statement for the same offering. 15 This language indicates that registration statements are filed for offerings and not for securities. Similarly, the regulations allow for delayed or continuous offering and sale of securities if certain requirements are met. 16 The logical conclusion is that registration is normally for a single, defined offering of securities. The instructions to the Form S-8 registration statement advise all potential registrants that the registration statement does not apply to resales of the securities previously sold pursuant to the registration statement. 17 This understanding is reflected in multiple cases which focus on whether the defendant was a control person, while taking for granted that the securities would have to be re-registered if that were the case. 18 Thus, the Curbstone shares were not registered for all purposes under Section 5. 13