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Securities Regulation, Keyed to Choi
Gilligan, Will & Co. v. Securities and Exchange Commission
Citation:
267 F.2d 461 (1959)Facts
In July 1955, Elliott & Company agreed to privately sell $3,000,000 of Crowell-Collier Publishing Company five percent convertible debentures without registration. Edward Elliott offered James Gilligan the opportunity to purchase debentures for investment only, informing him that Crowell-Collier had “turned the corner” to profitability and that attorneys deemed the placement exempt. Gilligan agreed to purchase $100,000 of debentures for his own account. On August 10, 1955, Gilligan, Will & Co. received the debentures and sent an investment intent letter to Crowell-Collier. However, by that date, nearly half had already been resold to Louis Alter ($45,000) and Michael Mooney ($5,000), with $5,000 placed in the firm’s trading account. In May 1956, after observing that Crowell-Collier’s advertising was not increasing as anticipated, Gilligan decided to convert his debentures to common stock and sell. He, Alter, and the registrant converted their debentures and sold the resulting stock at a profit on the American Stock Exchange, where Gilligan served as specialist. Also in May 1956, the firm participated in selling an additional $200,000 of debentures, with immediate conversions to stock, and facilitated Value Line Special Fund’s purchase of $200,000 in debentures. Throughout these transactions, investment intent letters were provided to Crowell-Collier, but the stipulated facts revealed that purchasers were not supplied with material information of the scope contemplated by the Securities Act nor did they have access to such information.
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