Fratt

It is alleged in the complaint which was filed in the United States District Court, that the defendants-appellees acquired corporate stock from the plaintiff-appellant through fraudulent representations by the use of the United States mails, the telephone, and other means and instrumental-ities of interstate commerce; thus violating Securities Exchange Commission’s Rule X-10B-5 which implements § 10 of the Securities Exchange Act of 1934, 48 Stat. 881 , 891, 15 U.S.C.A. § 78j. Of specific application here is § 10(b), subdivision (b) of § 78j, 15 U.S.C.A. Hereinafter we shall refer to the implemented section of the Act as § 10. The stock was not handled on or through any securities exchange, or any stock-dealing organization, nor by any person connected with any business sometimes referred to as “over-the-counter markets” or businesses. The stock was not listed with or upon or put for sale with any stock or security-exchange or sales business.

The defendants made motions to dismiss the action upon several grounds, and the court granted the motion. to dismiss specifically upon the one ground only, to-wit, that § 10 of the Act does not embrace transactions in stock- which have no…