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Definition of Control in Secondary Distributions
Law Faculty Scholarly Articles
  • Rutheford B Campbell, Jr., University of Kentucky College of Law
Abstract
Section 2(11) of the Securities Act of 1933 (Act) generally subjects the sale of securities by a person "controlling an issuer" to the same rules that govern the sale of securities by an issuer. Accordingly, before a "control" person may sell the securities he holds in the controlled corporation he must either register them with the Securities and Exchange Commission (Commission) or qualify for an exemption from the registration requirement. While the Act clearly requires that a "control" person either register or qualify for an exemption, it fails to define "control." Thus, the task of defining has fallen to the Commission and to the courts. To date, as evidenced by the apparent development of two definitions of control rather than one, their definitional attempts have largely failed to provide a selling shareholder with clear guidelines as to when he will be considered a control person. This article will initially discuss the two existing general definitions of control and suggest that only one of these definitions provides both an understandable and workable norm. Factors which the courts and the Commission have utilized in reaching a decision that a selling shareholder is a control person will then be isolated and examined in terms of their utility as general indices of control under each of the two definitions. Finally, two techniques to remedy the present lack of certainty will be suggested.
Document Type
Article
Publication Date
11-1-1976
Notes/Citation Information

Boston College Industrial and Commercial Law Review, Vol. 18, No. 1 (November 1976), pp. 37-64

Citation Information
Rutherford B Campbell, Jr., Definition of Control in Secondary Distributions, 18 B.C. Indus. & Comm. L. Rev. 37 (1976).