567 F.Supp. 724 (1983)
- World-Wide Coin Investments, Ltd. (the defendant) is a publicly traded corporation and engaged in the business of selling rare coins and precious metals.
- An independent audit of the company revealed it did not have sufficient safeguards in place that would protect its inventory.
- Most particularly, the audit complained that World-Wide had allowed any of its employees to gain access to its metals.
- Defendant also did not require employees to record whether or not they had removed inventory from World-Wide’s vault.
- Moreover, the audit complained that World-Wide’s accounting records were in disarray, which resulted in inaccurate or incomplete financial data.
- The lack of safeguards for its inventory as well as its poor accounting system led the Securities and Exchange Commission (The Plaintiff) to bring suit against World-Wide for violating §13(b) of the Foreign Corrupt Practices Act.
The court held that the company and/or individual defendants: (1) violated all provisions contained in § 13(b)(2)(A), (B) of the Foreign Corrupt Practices Act, 15 U.S.C.S. § 78m(b)(2) and the SEC's rules promulgated thereunder; (2) knowingly, recklessly, and materially violated § 10(b) of the 1934 Securities Exchange Act (Act) and Rule 10b-5, 15 U.S.C.S. § 78j(b), 17 C.F.R. § 240.10b-5; (3) violated §§ 13(d), 14(d)(1), 14(e), and 14(f) of the Act, 15 U.S.C.S. §§ 78m(d), 78n(d)(1), 78n(e), and 78n(f)and related rules; (4) violated § 14(a) of the Act, 15 U.S.C.S. § 78n(a) and related rules; (5) violated § 16(a) of the Act, 15 U.S.C.S. § 78p(a), and Rule 16a-1, 17 C.F.R. § 240.16a-1; (5) violated § 13(a) of the Act, 15 U.S.C.S. § 78m, and rules 12b-20, 13a-1, 13a-11 and 13a-13.
The court ordered an individual defendant to return to the company the shares of stock he received in exchange for overvalued merchandise. The court ordered the rest of the individual defendants' stock to be placed in escrow pending completion of a full fraud accounting by an independent auditor. After the completion of the audit, the court would make a determination regarding disposition of the stock and other equitable relief.
Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials