Securities & Exchange Commission v. Commonwealth Chemical Securities, Inc. (574 F.2d 90, 1978)

FRIENDLY, Circuit Judge:

This action by the Securities and Exchange Commission (SEC) in the District Court for the Southern District of New York arises from an offering of 50,000 units of common stock and redeemable purchase warrants of Beneficial Labs, Inc. (BL) made by Commonwealth Chemical Securities, Inc. (CCS) on a “best efforts — all or none basis,” and an additional 50,000 units on a “best efforts” basis in the go-go market of late 1971 and early 1972. The offering circular, issued pursuant to SEC Regulation A under the Securities Act of 1933, must be read to be believed. It described BL as having 250,000 outstanding shares of common stock, 236,000 of which were owned by officers and directors. In contrast to this impressive capitalization BL had net tangible assets of $4,750 or 2