Friday, November 22, 2013

Superintendent of Insurance of New York v. Bankers Life & Casualty Co. case brief

Superintendent of Insurance of New York v. Bankers Life & Casualty Co. case brief summary
404 U.S. 6 (1971)

The United States Court of Appeals for the Second Circuit affirmed the district court's judgment dismissing a complaint alleging that respondents defrauded an insurance company in the sale of certain securities in violation of § 17(a) of the Securities Act of 1933, 15 U.S.C.S. § 77q(a) and § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.S. § 78j(b). Petitioner Superintendent of Insurance of New York obtained a writ of certiorari.

The insurance company sold its stock to one respondent who paid for the stock with the company's assets by means of a scheme involving checks, treasury bonds, certificate of deposits, and loans. The company's books indicated that treasury bonds were sold and a certificate of deposit in the same amount was purchased, but did not show that the certificate of deposit had been assigned to a third party, then pledged to a fourth party. The company, represented by the Superintendent, alleged violations of securities laws. The district court dismissed the complaint and the court of appeals affirmed.


  • On review, the Court held that: 
  • (1) the alleged fraud was cognizable under § 10(b) of the Securities Exchange Act,15 U.S.C.S. § 78j (b), and S.E.C. Rule 10b-5, 17 C.F.R. § 240.10b-5, in the bond sale as the company was injured as an investor through a deceptive device that deprived it of any compensation for the sale of its valuable block of securities; and 
  • (2) the facts that the fraud was perpetrated by an officer of the company and his outside collaborators and that the transaction was not conducted through a securities exchange or an organized over-the-counter market were irrelevant.

The Court reversed the judgment dismissing the complaint and remanded for trial.

Recommended Supplements for Corporations and Business Associations Law

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