Securities & Exchange Commission v. Insurance Securities, Inc.

The sale of stock of a company which acts as investment advisor and principal underwriter of an investment company gave rise to this action. Attacking this transaction, the Securities and Exchange Commission (Commission) brought this action for injunctive relief and an accounting. Authority to bring the suit, and the jurisdiction of the district court to entertain it, were asserted under §§ 42(e) and 44 of the Investment Com *644 pany Act of 1940 (act), 15 U.S.C.A. §§ 80a-41(e) and 80a-43.

Named as defendants were Insurance Securities, Incorporated (service company), and “Trust Fund Sponsored by Insurance Securities, Incorporated,” (Trust Fund). Also named as defendants were Abe P. Leach, Ossian E. Carr, Arthur J. Lonergan, Roy A. Haight (stockholders and directors of the service company), and Leland M. Kaiser, “as Attorney and Proxy for Investors of Trust Fund.”

In a first cause of action, it is alleged, in effect, that defendant-directors of the service company sold a controlling interest therein to a small group of affiliated purchasers at a price greatly in excess of the net book value of the stock sold. This action, according to the amended complaint, constituted “gross…