Friday, November 22, 2013

Securities and Exchange Commission v. Amster & Co. case brief

Securities and Exchange Commission v. Amster & Co. case brief summary
762 F. Supp 604 (1991)

Plaintiff, the Securities and Exchange Commission (SEC) sued defendants, an investment company and its allies, for alleged violation of § 13(d) of the Securities Exchange Act of 1934, 15 U.S.C.S. § 78m(d), and for alleged violation of § 10(b) of the Act, 15 U.S.C.S. § 78j. Defendants moved to dismiss the complaint for failure to state a claim or in the alternative for summary judgment, and the motion was treated as a motion for summary judgment.

Defendants were alleged to have violated § 13(d) because they failed to disclose that they were considering waging a proxy contest, an omission which the SEC alleged rendered their filing false and misleading.


  • The court concluded that defendants were undo no duty to report preliminary considerations of a proxy contest, any more than they were required to report other options under consideration. 
  • The duty to report arose only when a stockholder formed the purpose, which was to say the intention, of acquiring control of the company. 
  • Amendments to Schedule 13D could fairly be construed only in relation to the original filing they were drafted to amend, just as variations on a musical theme might be understood only in relation to the theme itself. 
  • There was no evidence to support the proposition that defendants had formed an intent or purpose to obtain control by means of a proxy contest. 
  • A preliminary decision to consider waging a proxy contest was quite different from a preliminary decision actually to wager it. 
  • There was no evidence to support any of the SEC's criticisms of defendants' 13D amendments. 
  • The court concluded that the SEC's § 10(b) claim fell with the § 13(d) claim.

The court directed the clerk to dismiss the complaint with prejudice.

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