Trading In Unregistered Stock.

The Securities and Exchange Commission disciplined a financial corporation for violating sections 59 and 5(c) of the Securities Act of 1933 [15 U.S.C. §§ 77e(a) and 77e(c)] which prohibit the sale or offer of sale of a security without filing a registration statement. Petitioners argued to the Ninth Circuit that the brokers’ exemption applied to their transactions in unregistered stock, and that the SEC carried the burden to show the exemption was vitiated. Not so, the appellate court found, stating: “Because registration is so important to the protection of the investing public, exemptions to registration requirements are construed narrowly against the parties claiming the benefits.” The court added that once it was shown the stocks were unregistered, “the burden shifted to Petitioners to show the applicability of . . . the brokers’ exemption.” (World Trade Financial Corporation v. U.S. Securities & Exchange Commission (Ninth Cir.; January 16, 2014) 739 F.3d 1243.)