the court held that the plaintiff (a seller of option contracts like the plaintiff here), "was a seller" (not a purchaser) Gutter v. Merrill Lynch, 644 F.2d at 1196. The Gutter court added that "although the anti-fraud provisions of the 1934 Act protect both purchasers and sellers, the anti-fraud provisions of the 1933 Act protect only purchasers. " ( Id. at 1197). Since the plaintiff was not a purchaser, the Court of Appeals for the Sixth Circuit affirmed a directed verdict for the defendant on the 1933 Act claims. (Id.)
Similarly, in Prudential-Bache Securities, Inc. v. Cullather, 678 F. Supp. 601 (E.D. Va. 1987), the court ruled that section 12(2) "does not apply to options contracts because an option writer is a seller, not a purchaser. Furthermore, purchasing securities in order to close an outstanding option position [as the plaintiff in that case did, and as Panek did in the present matter], does not convert an options seller into a 'purchaser.'" ( Id. at 606-07). The court added that the core of the transactions was the selling aspect because the profit expectation held by the plaintiff was based on "the selling premium's margin over the cost of satisfying the obligation that the opening position established." ( Id. at 607).
(Paragraphs 4-9 of Bogucz' affidavit describes the process by which all the transactions of which plaintiff complains were accomplished and describes briefly the writing or selling of options. This description is not controverted by plaintiff.)
3. Definition of a Seller Under the Securities Act of 1933
Plaintiff is unable to withstand defendants' motion for summary judgment for another reason. Under the Securities Act of 1933, a seller of securities has a narrowly tailored definition which plaintiff cannot meet. This Court will follow the reasoning of two cases: Ralph v. Prudential-Bache Securities, Inc., 692 F. Supp. 1322, Fed. Sec. L. Rep. (CCH) P93, 964 (S.D. Fl. August 1, 1988), and SSH Co. Ltd. v. Shearson Lehman Brothers, Inc., 678 F. Supp. 1055, Fed. Sec. L. Rep. (CCH) P93,647 (S.D.N.Y. 1987). In Ralph, the plaintiff based his section 12(2) claims on purchases of shares of common stock in certain corporations. In that sense, the facts diverge from the matter at hand. However, the Ralph court's definition of a "seller" under the 1933 statute is also valid under the circumstances here.
The Ralph court stated that section 12(2) of the Securities Act of 1933 "imposes liability on a person who offers or sells a security by means of a 'prospectus or oral communication.' The congressional purpose and intent underlying the Securities Act of 1933, 15 U.S.C. § 77a et seq., is the regulation of the distribution of securities. In contrast, the primary concern of the Securities Exchange Act of 1934 is post-distribution trading of securities." (Id. at 1323).
The Ralph court granted the defendants' motion for summary judgment as to the count of the complaint that alleged a violation of section 12(2) because none of the occurrences of which the plaintiff complained in that case "transpired in the course of an initial distribution of securities." (Id.)
Similarly, in SSH Co. Ltd., a section 12(2) claim was dismissed because that section of the Act imposes liability only on a person who offers or sells a security by means of a prospectus or oral communication. That court held that "the phrase 'prospectus or oral communication' refers to a prospectus, registration statement, or other communication related to a batch offering of securities, not to subsequent trading." ( SSH Co. Ltd., 678 F. Supp. at 1059.).
In other words, the thrust of the 1933 Act is to protect the investor against misstatements and omissions made in the course of placing or issuing securities in the market place. It is not aimed at trades of listed securities in the market place after distributions have been completed. See also Klein v. Computer Devices, Inc., 591 F. Supp. 270, 277-78 (S.D.N.Y. 1984).
Therefore, even if plaintiff Panek here could establish that the Securities Act of 1933 governs his transactions by making him a purchaser of options, he cannot successfully allege that the defendants here come within the statute's definition of seller. Therefore, as a matter of law, this Court rules that section 12(2) of the Securities Act of 1933, 15 U.S.C. § 77l, does not govern the securities transactions in question and that Panek is not a proper plaintiff under that section. Panek is not a purchaser of securities and the defendants Bogucz and Paine Webber are not sellers of securities within the definition of the Act.
For the foregoing reasons, the motion of defendants for summary judgment as to Count II of the complaint is granted. Therefore, the Court need not reach plaintiff's cross-motion for a determination that his claim under section 12(2) of the Securities Act of 1933 is not arbitrable.
DATED: May 10, 1989
For the reasons set forth forth in the Court's opinion filed herewith,
It is on this 10th day of May, 1989,
ORDERED that defendants' motion for summary judgment as to Count II of the complaint be and it hereby is granted.
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