*1 Division affirmed. Appellate judgment Justices For. Justice Weintraub, affirmance —Chief Mountain, Judge Jacobs, Proctor, Con- Hall BORD-6.
For reversal—-None. SYSTEMS, INC., A CORPORA- NEW JERSEY DATA ACCESS PLAINTIFF-APPELLANT, TION, JER- v. STATE OF NEW KUGLER, SECURITIES, SEY, GEORGE F. OF BUREAU JR., THE STATE OF NEW GENERAL OF ATTORNEY KRUPSKY, CHIEF, JERSEY, F. AND JOSEPH BUREAU SECURITIES, DEFENDANTS-RESPONDENTS. OF Argued 5, 1972 Decided June 1973. December *2 for appellant B. M. cause Frohling argued Mr. John Donald P. Mr. B. M. Frohling, attorney; John (Mr. Brandi, brief). Mr. H. on Charles Sharkey Annich, General, Attorney Deputy Ms. Virginia Long F. Kugler, George for (Mr. the cause argued respondents An- Ms. Jr., Jersey, attorney; New General of Attorney Parker, R. nich, brief; Mr. Charles of counsel on the General, brief). on the Attorney Deputy Jr., Hazlehurst, the cause argued Mr. Robert P. Amer Curiae, Association Amicus Bankers Investment Mr. attorneys; and Kipp, Hardin Pitney, ica (Messrs. Hazlehurst, counsel). and Mr. Donald B. Kipp *3 was delivered The of the Court opinion whether here presented The issue J. Mountain, of virtue authority by has Affairs1 Division of Consumer 49:3-47, A. N. J. Law S. (1967), Uniform Securities securi- a federally registered of to review the merits et seq., are con- in this State where sales of securities ties offering templated. directed 23, 1971 the Division order entered June
By and Inc. to cease Access Systems, (Data) Data plaintiff, a for in New Jersey pro sale from selling desist had been with registered issue which common stock posed under the and Commission Exchange (SEC) Securities A. 77a, 15 C. et On 1933, ap Act of U. S. seq. Securities § affirmed Di Appellate was ruling the agency’s peal 95 there- Immediately 117 N. J. vision, Super. (1971). (L. 1971, 1By Act of 1971 c. of Affairs terms the Consumer powers functions, 134) and duties of the former Bureau of all Department Safety trans Law and Public were in the of Securities department. Affairs in the same Division Consumer ferred to the May 6, and is N. A. 1971 now J. S. 52:17B The took effect statute 125.
161 Association Industry known as (then after the Bankers America)2 the Investment Association sought Division as leave to before the amicus Appellate appear of an curiae and a brief in for support application to file a but the petition Leave to was rehearing. appear granted denied. We then the Association granted for was rehearing curiae as amicus and leave to before this Court proceed presented jointly by for certification granted petition J. 283 and 60 N. Data Association. (1972). 1969 a in June organized
Data is New corporation communications and in the of electronic engaged assembly its office to computers; principal equipment relating Dover, New to issue sell Wishing located Jersey. on 1971 Pebruary additional as a public offering, shares a a filed statement covering Data with the SEC registration 200,000 common stock to shares its proposed offering 1971 Data underwriters. On Pebruary be sold through of in- Bureau of Securities notification filed the then State, sell within this accompanied by tent which had been included in the of the copy prospectus regis- filed was statement with the SEC. This tration done :13-52,3 Regulation with the Bureau’s which compliance consist about investment association 2The members of throughout 2,100 registered having banking- branch offices some firms underwrite, member firms deal Canada. States the United types all of securities. act as brokers 13:13-10.1, regulation, N. reads as follows: J. A. G. now 3This *4 offerings interstate securities of Notification Offerings (a) filed with of which have been the Se- provisions pursuant Exchange to of Commission the curities thereunder, regulations rules and Act of 1933 and the the Securities require- exempt from not to or the or which are regulations Act 1933 and the rules of ments the Securities thereunder, 3(a) of such Act and than reason Section other may qualified 3(a), regulations Section rules and under said filing a from New offer and sale within or for setting to the Bureau Chief forth: notice written issuer; The name of 1. purported require such notification and as a filing pre requisite qualification for offer and sale within this state. 25, On May the agency issued an order enjoining sale of the in New shares Jersey, and a following hearing, entered the cease and desist 23, order of 1971, June men tioned above. This action was predicated principally upon a that offering involved finding unreasonable amounts of promoters’ contrary N. J. participation S. A. 49:3-64 (vi). (a)
The decision rested a determination upon it had a authority to make substantive review of the terms of the The proposed offering. here con- appellants tend, below, as did they that the New Jersey statute makes provision such a review where the proposed offering, as case, is here has been with registered the SEC under 1933. Securities Act of The question one of statutory interpretation. Uniform Law N. J. A. 8. (1967), 4 was a
49:3-47, et intended to with seq., supersede, single all with legislation earlier exception,5 the same sub dealing N. J. A. 49:3-48. ject Although matter. S. it modeled was Act upon the Uniform Securities which had been approved by the National Conference of on Uniform Commissioners Laws, 7 Laws Annotated-Business and Fi State Uniform nancial Laws from (Master ed.) the latter departs a of important significant number respects. Especially to the those present comparison of sections inquiry Exchange Commission; 2. The the Securities and 3. The name and address of the or broker-dealer underwriter who effect is to offers sales on behalf issuer within of the or Jersey. from New (b) accompanied by copy prospectus notice is to be Such of the circular.
4L. c. 93. Offerings Law, Syndication 49:3-27, 5The Real Estate N. J. A. S. seq., expressly unchanged by legislation. et was left new
163 as to what securities with the the two laws dealing question a state. be sold within may lawfully given (cid:127) — n — law to our opposed provides, Act as Uniform unlawful for offer or sell any person that it is § it has first been regis- within the state unless any security act. with the state or is under exempt tered statute, reads, which Jersey pertinent the New Compare follows: as part secnrity any sold in this State unlawful to be offered or It is
unless: (a) security exempted under section 3 is or transaction act; A. [N. 49:3-50] J. S. of this exempted (b) security or is is not or transaction requirements from, registration of 1933 of the Securities Act thereunder; regulations reason of section other than the rules and regulations 3(a) said section under of such act and rules ; 3(a) security (c) registered 1988; is under the Act security (d) registered Syndication is under the Beal Estate Law; Offerings security (e) registered 49:3-60; is [N. under this act. J. S. A. Emphasis supplied] — — Under Uniform Act absent statutory exemption or sale is without state In legal con registration. the New a trast statute sets specific forth list exceptions, including registered under the fed statute, to which eral as there need be no state registration. N. J. A. That S. an 49:3-60(c) intended as exemption from J. state N. registration unequivocally manifested S. A. 49:3—63 which calls for the of certain data “un is not to be security less the section required registered by A. J. S. act.” Thus we have [N. 49:3-60] of the blanket rejection for state legislative requirement in the Uniform appearing Act favor of narrower which, much will be requirement practice, essentially limited intrastate offerings. think we
Appellants argue, that our convincingly, mean statute should be taken to im- exactly clearly what *6 been, have registered where securities under the that plies, more, may, Act of 1933 without be offered they Securities this State and that there need be no separate or sold within in We can find the entire statute nothing here. registration in the there is state any power regulatory to that suggest or sale upon or inhibit such based prevent absent, of review, substantive following an adverse finding of fraud. course, element any un review, as was here for substantive such Authority N. J. A. found S. only can be by dertaken the agency, instances limited those clearly 49:3-64. This provision filed in New Jer statement has been a registration where case, found to be the if, have here as we sey. Accordingly it be local registration, that there there is requirement sub invoking basis for statutory follows that there is no stantive review. further confirmed our belief
We are that was not state registration of fed- legislative purpose require fact statute, securities that our erally registered Law has been (1967), interpreted Securities Uniform all of the commentators and students of the way this themselves expressed upon point. who have Thus says, Professor Loss6 provision registration generally Jersey on The New securities syndications) only (as in- from real estate attaches to those distinct registered neither under or other issues that are Se-
trastate exempted nor offered in a transaction under Act of 1933 that curities Regulation (Supp. 1969) Loss, 2262] [4 act. require Jersey law was amended in 1967 so as to The New offerings. Registration will of intrastate securities not be security qualifies exemptions required if a or transaction for certain Act of the se- law or the Securities under the New if authority regulation, Pro in the field of securities 6A known well principal draftsman the Uniform Securities Loss was fessor Annotated-Business and Financial Laws Laws 7 Act. Uniform ed.) (Master 691
165 Developments- [Adams, ourity registered under the Act. 1967 1933 Lawyer 785, Regulation, The Business 23 797 State Securities (1968) Emphasis supplied] ; Blue Restrictions on Shy Mofshy, the same see To effect Bloomenthal, 133; Blue Promotions New Business (1971) Overkill, L. Wayne 15 Theory and the Shy Regulation Hueni, Re Merit Application Rev. 1447, 1452 (1969); L. Rev. Wayne Regulation, State Securities quirements (1969). by the have been submitted various materials Einalty, the persons amicus curiae that very clearly which indicate who drafted it to the presented Legisla- the statute who (cid:127)— — as an measure intended ture administration *7 re- not should of substantive power state have the federally a had been already view where proposed offering an materials are most of these important registered. firm of law Ivey, of William J. a in the partner affidavit Investment Cromwell, & the which represented Sullivan Sills, then an of Arthur J. Association, Bankers and affidavit ifew The latter Jersey. the of General of State Attorney former. Mr. of the affidavit corroborative essentially various memo- statement, with Ivey’s considered together the the randa which he and his associates at time prepared 1967 a major 1964 until drafted, reveals that from law was regulation securities concerning revision of the legislation A bill, actively was considered. within this State being a full re- on and providing modelled the Uniform Aet whether federally registered all offerings, view of office of in the the not, was first apparently prepared of the When came to the attention General. this Attorney interest in Association, expressed its Investment Bankers and legislation of the sought the matter proposed with draftsmen and to allowed to discuss the bill be to a them. a this meet- request its views to As result submit Sills, by Mr. Deputy held which was attended was ing Bureau, the Securities assigned General to Attorney of the Bureau of all Securities, then Chief as representing and Mr. and other State, Ivey representatives that, The latter the belief group expressed Association. to a while closer over securities control legislation looking cer- seemed Jersey light desirable offerings New abuses, tain abuses stemmed if not en- existing these largely than intrastate rather from interstate tirely offerings, from and confined stringent regulation to more legislation intrastate be the mis- offerings adequate remedy would out full It was further that pointed requirement chief. and review the state level would substantive at be, at least of the federal would part, duplicative processs, New place and inconvenient and would expensive in a position inferior to other competitively respect states from nearby in benefits derived sharing metropolitan securities markets. these Apparently arguments prevailed. The bill was redrafted to as embody suggestions these and so revised was passed by introduced Legislature.
The State has moved these ma- suppress extraneous alia, inter terials that urging, they part are in hearsay, it is not known shown were to the and that they Legislature some of them at least are tainted with bias of their source. We now motion deny suppress.
Our conclusion as to the meaning true intent of the statute is reached without reference to any extrinsic materials. There is no really ambiguity the enactment hence need'to compelling resort to aids. interpretative *8 The value of these materials in this case lies the con firmation which they Not bring. only may extrinsic aids used to resolve legislative ambiguities, N. J. Pharmaceutical Furman, Ass’n v. 33 N. J. 121, 130 (1960); Westinghouse Electric Corp. Review, v. Board 25 N. J. 221, 226 of Fisher-Stevens, (1957); Director, Inc. v. Division Taxa of tion, 121 N. J. Super. 513, 517-518 Div. (App. 1972), certif. den. 62 N. J. 575 they (1973), may also appropriately sup ply reassuring confirmation of literally apparent meaning, Co., as is case. v. Linen Thread Deaney here the 19 N. J. 578, 585 Nor do we think it (1955). to con improper sider materials which never may eye. have met the legislative While a may enactment first see the proposed light day chambers, legislative its and have fre conception, preparation taken elsewhere. This is true of place normally quently administration Of such materials must be proposals. course scrutinized their carefully weight authenticity evaluated, no merit in a but we see rule their demanding from judicial total exclusion consideration. :13-10.1, N. J. A. C. 13 State,
As interpreted above, for the reasons we have exceeds expressed clearly to the statutory which the has power Legislature delegated however, Divi We do not mean to agency. imply, sion not suitable rules and may adopt regulations designed condemning the several implement statutory provisions any fraudulent or activities on the misleading part per In in connection with the or sale of securities. son N. J. A. C. 13 :13—10.1 could rather be revised easily deed restated, fulfill As so as its de purpose. having such above rather than sign implementation suggested pur sale, for offer it would to condition qualification porting In we call attention to be valid. this connection presumably :3-63, N. J. S. A. 49 mentioned above another connec tion. This authorizes the provision any pamphlet, require filing prospectus, [to] or order rule advertisement, circular, letter, or ad form or other sales literature vertising for distribution communication addressed or intended prospective including prospective investors, clients clients advisor, security an not re investment unless quired registered by [N. 49:3-60] to be J. S. A. section 13 this act.
We do not this section of the statute as in interpret any the broad of the Division to way limiting powers require — of such data and material in- relevant the items enumerated above provision quoted cluding *9 168
— may necessary as it deem or useful its re- fulfilling the sponsibility protect investing public fraud or against We take misrepresentation. it to refer the lack of only to for the of such any need materials as prerequisite local where, because of federal registration registration, local such is required.
In view of our decision as to the invalidity of the regula- attack, tion under it becomes to consider the unnecessary other issues raised and argued upon appeal.
The reversed, Division is judgment Appellate order entered the Division of Affairs on June Consumer 1971 N. is set aside and J. A. C. 13 :13-10.1 hereby de clared invalid. J.C. I concur in
Weintraub, (concurring). the result but not without difficulty. 1933;
The Act of 77a Securities 15 U. S. C. A. et seq., § deals with interstate and seeks to assure full “dis offerings closure” with to them. respect The federal statute does not deal with the “merits” or substance of proposed sale. The stock offered may worthless, may or promoters an seek inordinate gain at the but if expense purchasers, full, disclosure is the federal act is satisfied. This is so notwithstanding able average purchaser hardly the terms and comprehend to make them. judgment upon It remains for the several States to deal with the problem overreaching defrauding purchasers. Act, Uniform Ann. Laws p. Uniform provides “substantive” review of the merits of stock both offerings, interstate and intrastate. As opinion indicates, of the Court Act Uniform was seri- amended in our ously Legislature, before it was enacted. The is whether the question amendments eliminated “substan- tive” review an as to interstate which muster passed as to “disclosure” under the federal statute. The amend- ments, which did visible, not make that purpose plainly *10 as the could result nonetheless be found to lead to that opinion' of the Court concludes. relies
In the Court conclusion, the opinion its reaching amicus curiae re- the part by material submitted upon and interested association vealing conversations within the Gen- Attorney converations its with the by representatives eral. it asserted of the Court notes that was opinion that State level material that substantive review at the But would in the federal process. be part duplicative thus action would proposition was inaccurate. State if be to interstate the State “duplicative” offerings only as above, the federal stat- “disclosure,” for, dealt as noted with in- ute deals with “substantive” review of that facet. But action would not offerings “duplicate” terstate is for, said, federal have the federal agency, as we However, not concerned it true that with that is subject. amicus curiae material submitted reveals that thereafter the he was concerned Attorney only General said with intrastate and of the indus- offerings, representatives advised, try, upon so to fashion amendments being sought to that end. Some in the refers remaining statute language to interstate thus such would offerings, suggesting offerings to substantive review State Other agency. are advanced to us to account for that explanations residual but language, none is unequivocal. can
One understand to deal with “dis- purpose only cloure” with intrastate thus respect offerings, paralleling the limited federal action as to interstate But if offerings. worthwhile, “substantive” review as to intrastate offerings is not clear should why State decline thus to protect its residents respect we offerings. interstate Indeed told that intrastate offerings are are but handful.1 signed law, speak he bill 1When into the Governor seemed to expansively: more “Finally, Bill No. Senate 327 revises the State Uniform Securities requires Daw and for the first time state- I cannot with conviction that the Although say opinion Court reads the record and its incorrectly legislative I end-product, think it should be made clear that this area of important consumer the contribution protection, statute, made by the as us interpreted by today, quite puny.
Mr. Justice joins opinion. concurring Jacobs For reversal—Chief Justice Justices Weintraub, Jacobs, Lewis—6. Judges Mountain, Hale Coneorb For affirmance—None. *11 prior public. measure,
ments the sale to the This I certain, great protecting public, am will be of assistance particularly buyer unsophisticated securities, may so that he fully any purchases.” alerted to risks involved in such