Timetrust, Inc. v. Securities & Exchange Commission

This action was brought by the Securities and Exchange Commission, a federal agency, to obtain an injunction prohibiting the appellants from continuing operating a plan denounced by the complaint as a “device, scheme or artifice to defraud”, for the purpose of selling the capital stock of the appellant bank. Briefly stated, the plan permitted the purchase of such stock by pooling the monthly payments of the various purchasers, and the purchase on the market of such stock at market price, the payments to be made by a trustee, the Title Guarantee and Trust Company, the stock to be allotted pro rata to the various purchasers, title to be taken in the name of the trustee. The appellant Timetrust, Inc., was organized to promote the purchase of such bank stock. It employed a large number of salesmen to sell the plan to the prospective purchasers, issuing a certificate to the purchaser when the transaction was completed. Such certificate and passbook, or receipt book, showing monthly payments constituted the sole evidence of title in the hands of the purchasers.

The commission does not claim that the plan is inherently wrong or illegal, but that the literature issued by Timetrust, Inc.,…