Irving Loeb Goldberg

“ The role of insider status Once the alternative means of coming within the private placement exemption are clearly separated, we can appreciate the proper role to be accorded the requirement that the offerees occupy a privileged or "insider" status relative to the issuer. That is to say, when the issuer relies on "access" absent actual disclosure, he must show that the offerees occupied a privileged position relative to the issuer that afforded them an opportunity for effective access to the information registration would otherwise provide. ”

“ Despite the force of this argument when ordinary investors are concerned, with respect to sophisticated investors the additional protection may be unnecessary. Sophisticated investors will be more able to discern a fraud or misrepresentation and will presumably have the acumen successfully to invoke the securities laws even if evidence of the misrepresentation is not as easily preserved.↑ That all offerees are in certain respects "insiders" does not ensure that the issuer will gain the private placement exemption. ”

“ Hayden, Stone Inc., supra, the district court held that a transaction was not part of a public offering because " (1) the number of people involved in this capital venture was small, and all were sophisticated investors, (2) none of the defendants 'solicited for the sale of stock,' and (3) the amount of money invested by [plaintiff] was small vis-a-vis his total investment portfolio." We reversed because the defendants had failed to prove either the number of offerees or the offerees' relationship to the issuer. ”

“ While we appreciate full well that the test we have fashioned remains too fluid to enable the would-be private offering issuer to feel entirely secure, we are confident that, at long last, the safe harbor of Rule 146 will provide that security and that few private placement claimants will stray far from that harbor. ”

“ The court below found that the offer and sale of the "special participant" interest was a private offering because Doran was a sophisticated investor who did not need the [p899] protection of the Securities Acts. The court also found that there was no evidence that PMC, its officers, or Kendrick made any misrepresentation or omissions of material facts to Doran. Finally, the court found that the overproduction of the wells was not a breach of the partnership agreement, but in any event there was no evidence that Doran suffered any losses as a result of the overproduction. ”

“ Similarly, in Woolf we found that because it was not clear "what information was disclosed to whom at what time," we were obliged to remand the case. Because the defendants in Woolf did not argue that [p906] the offerees' access to information qualified the offering for private status even without actual disclosure, we did not and could not hold that disclosure was the only means of coming within the exemption. ”

“ I. Facts Prior to July 1970, Petroleum Management Corporation (PMC) organized a California limited partnership for the purpose of drilling and operating four wells in Wyoming. The limited partnership agreement provided for both "participants," whose capital contributions were to be used first to pay all intangible expenses incurred by the partnership, and "special participants," whose capital contributions were to be applied first to pay tangible drilling expenses. ”

“ It shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed as to such security * * *. ”

“ Since exempt transactions are those as to which "there is no practical need for . . . [the bill's] application," the applicability of [§ 4 (2) ] should turn on whether the particular class of persons affected need the protection of the Act. ”

“ American International Franchises, Inc., supra, 448 F.2d at 691. A private placement [p901] claimant's failure to adduce any evidence regarding the number of offerees will be fatal to the claim. SEC v. Continental Tobacco Co., supra, 463 F.2d at 161; Henderson v. Hayden, Stone Inc., supra, 461 F.2d at 1071-72 ”