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Microcap & Penny Stocks : HITSGALORE.COM (HITT)
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To: Janice Shell who wrote (4288)10/3/1999 11:09:00 AM
From: TideGlider  Read Replies (1) of 7056
 
More...and interesting rules involved.

albany.edu

To raise money for its operating expenses, the Co-op sold promissory notes which were payable on demand. The notes were neither collateralized nor insured, however, they offered higher interest rates than the local financial institutions. By 1984, over 1,600 members purchased demand notes having a value of over $10 million. It was later questioned whether these notes qualified as securities under the Arkansas Blue Sky laws.

Liability Under the Federal and State Securities Acts:

District Court:
In the 1986 Arkansas District Court case of Robertson v. White (635 F Supp 85), the court ruled in favor of the plaintiffs contending that the demand notes were securities under the 1979 Arkansas Security Act. Under the Arkansas Security Act any common stock, preferred stock, promissory note, or debenture must be registered as a security unless an exemption is filed. The Co-op did not register the notes nor did it file for an exemption. The court also concluded that the magnitude of the demand note sale further illustrated its use as a security. More than 1,600 members bought demand notes worth over $10 million. Additionally, a profit element which is common for securities was involved. The noteholders were expecting to receive a profit from the demand notes as evidenced by the Co-op's label of the demand notes as "investment transactions

TG
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