Securities and Exchange Commission v. Sargent, 589 F.Supp.3d 173

In 2014 Henry B. Sargent formed BMP Holdings, served as CEO/CFO/sole director and caused issuance of large blocks of stock to himself and 32 nominal "S-1" shareholders (initial shares sold to S-1 holders at $0.01).
BMP filed an S-1 that became effective in August 2015 and obtained OTC quotation clearance; Sargent later obtained stock powers signed by S-1 shareholders.
In Aug–Oct 2016 Sargent (and two associates) acquired most S-1 shares at nominal prices using those stock powers; BMP declared a split and merged with Pixar, whose stock began trading publicly on Oct 31, 2016.
Pixar stock price rapidly rose (to ~$30 within days); Sargent sold some shares and realized large gains relative to the prices paid to S-1 shareholders.
The SEC sued for violations including Section 5 of the Securities Act; it moved for partial summary judgment on the Section 5 claim against Sargent, and the court granted the motion.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Section 5's registration requirement attaches to transactions or to securities	Section 5 applies to each offer/sale (transactions); registration of an earlier transaction does not immunize subsequent offers/sales	The securities were registered by the S-1, so subsequent sales were not unregistered	Court holds Section 5 applies to transactions (registration does not "travel" with the security)
Whether Sargent was an "underwriter" (i.e., did he control the S-1 shareholders)	Sargent gained control of S-1 shares at a disproportionally low price and via signed stock powers, sold soon after — creating (per Kern/Sierra) a presumption of control and thus underwriter status	Sargent disputes affiliation/control: BMP had business purpose, some shareholders knew about the S-1, factual differences from Kern/Sierra — argues issue is for a jury	Court adopts a limited presumption: extreme price disparity + short resale window gives prima facie inference of control; Sargent failed to produce probative rebuttal, so court found he was an underwriter as a matter of law for summary judgment

SEC v. Kern, 425 F.3d 143 (2d Cir. 2005) (price-disparity and ability to garner large proportions of stock supports finding of control and defeats safe-harbor)
SEC v. Sierra Brokerage Servs., Inc., 712 F.3d 321 (6th Cir. 2013) (adopting Kern-style analysis: stock powers and low-price accumulation show control over nominal shareholders)
Ralston Purina Co. v. SEC, 346 U.S. 119 (1953) (Statutory purpose governs scope of exemptions to registration requirement)
SEC v. Cavanaugh, 155 F.3d 129 (2d Cir. 1998) (Section 5 applies to transactions; control inquiry depends on totality of circumstances)
Basic Inc. v. Levinson, 485 U.S. 224 (1988) (approving rebuttable market-presumption in securities law as an analogue for creating limited presumptions)
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133 (2000) (summary-judgment standards when the nonmoving party bears the burden at trial)