Securities and Exchange Commission v. Ralston Purina Co. Case Brief Summary | Law Case Explained

Securities and Exchange Commission v. Ralston Purina Co. | 346 U.S. 119 (1953)

It’s common for companies to offer their stock to their employees. But do these offerings have to comply with securities regulations meant to protect the general public? A company wants to give its key employees a treat in Securities and Exchange Commission versus Ralston Purina Company.

Ralston Purina Company, an animal feed and cereal manufacturer, had a policy of encouraging stock ownership among its employees. Between 1947 and 1951, Ralston Purina sold nearly $2 million worth of stock to employees without registering the securities, as required for public offerings under the Securities Act of 1933. Ralston Purina didn’t solicit employees to buy stock. Instead, it sold stock to employees who took the initiative themselves and asked Ralston Purina how to buy it. All types of employees inquired about the stock, including artists, foremen, veterinarians, and stock clerks. These employees lived in over fifty communities spread across three states. In selling the stock, Ralston Purina classified all of these employees as key employees exempt from registration requirements. According to Ralston Purina, key employees were employees who were eligible for promotions, especially influential to other employees, ambitious, carried some special responsibility, or were sympathetic to management.

The Securities and Exchange Commission, or SEC, sued Ralston Purina, arguing that the company had to register the sale of its stock to employees. Ralston Purina conceded that a stock offering to all of its employees would be a public sale requiring registration. But it argued that these stock sales were private sales only for key employees. The district court ruled in Ralston Purina’s favor, and the Eighth Circuit affirmed. The SEC appealed to the United States Supreme Court, which granted cert.




#casebriefs #lawcases #casesummaries