Sullivan, Leonard and Carton. The opinion of the court was delivered by Sullivan, P.J.A.D.
This appeal, in the main, involves the issue of whether the State of New Jersey, acting through its Bureau of Securities, has jurisdiction over an offering of capital stock by a New Jersey corporation when such offering is covered by a registration statement filed with the Securities and Exchange Commission under the Federal Securities Act of 1933.
Data Access Systems, Inc., a New Jersey corporation (Data), was organized in June 1969. Its principal office is in Dover, New Jersey, and it is engaged in the assembly of electronics communication equipment relating to computers. After its original organization Data issued additional shares of its stock on a "private placement" basis. As
of February 28, 1971 it had 452,400 shares issued and outstanding. Its total assets as of that date, as shown by its balance sheet, were $320,383.
In the early part of 1971 Data proposed to issue an additional 200,000 shares of its capital stock for $3.50 per share. A registration statement was filed with the Securities and Exchange Commission. On February 16, 1971 copies of the registration statement and prospectus were filed with the New Jersey Bureau of Securities (Bureau). (Regulation 13:13-52 of the Bureau provides for written notice of the federal filing as a condition of qualifying the security for offer and sale in New Jersey.)
Rejecting the contention of Data's counsel that the Bureau had no jurisdiction over a security offering registered under the federal act, the Chief of the Bureau ruled that the proposed issue, so far as it involved an offer from or within the State of New Jersey, was subject to the New Jersey Uniform Securities Law (1967), N.J.S.A. 49:3-47 et seq. Ultimately the Bureau issued a final order of cease and desist against the issuance or sale of the proposed stock from or within the State of New Jersey. The order was bottomed on the Bureau's findings that the offering involved unreasonable amounts of promoters' participation, contrary to N.J.S.A. 49:3-64(a)(vi). The Bureau gave as an added reason that Data, from July 1, 1969 to July 1970, engaged in the sale of securities in this State without complying with New Jersey securities laws, evidencing a disrespect and disregard therefor.
Data appeals on the following grounds: (1) the Bureau had no jurisdiction to pass on the substance of a federally registered offering; (2) even assuming the Bureau had jurisdiction in the instant matter, it improperly applied principles of administrative law in reviewing the matter of unreasonable promoters' participation; (3) Data's alleged sales of unregistered securities in 1969-1970 is not a proper legal basis for the Bureau's order.
Preliminarily we conclude that the 1969-1970 sale of securities should not operate to permanently bar Data from future sale of securities in this State. The record indicates that during the period in question some 125,000 shares were sold to approximately 23 persons in New Jersey. On its face it would appear that these securities should have been registered under the New Jersey Securities Law. However, there are mitigating circumstances and there does not appear to have been a deliberate attempt to circumvent the law. We think the public interest will be protected and justice satisfied by alternatives such as requiring Data to offer to buy back such stock from original subscribers at cost price, the offer to remain open for a limited period of time.
The basic issue, as heretofore noted, is the jurisdiction of the Bureau to make a substantive review of a federally registered offering of securities. Data does not contend that Congress has preempted this field by its enactment of the Securities Act of 1933. Rather, Data argues that the limited Uniform Securities Law adopted in New Jersey indicates a legislative intent to exempt federally registered offerings from state control. We do not agree.
Regulation of the issuance of securities under the Federal Securities Act of 1933 is basically in the area of requiring full and fair disclosure via registration statement and prospectus. The federal act specifically permits the exercise of concurrent jurisdiction by state securities regulatory agencies. 15 U.S.C.A. § 77v.
The Uniform Securities Act, adopted in New Jersey with certain modifications hereinafter referred to, provides more extensive investor protection than the federal act. It not only requires full and fair disclosure but empowers the Chief of the Bureau of Securities to issue a stop order suspending the effectiveness of a registration statement covering a security if he finds that ...