Week7Assignment

Week7Assignment - Chapter 41.2 Case Details: The Farmer's...

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Chapter 41.2 Case Details : cooperative with 23000 members, sold promissory notes to the investors, payable on demand  including both members and non-members. - It was advertised as an “investment program” and offered interest rate higher that which was  offered in most banks and financial institutions. - More than 1600 investors invested worth of $10 million in the offerings. - Co-Op subsequently went out of business and filed bankruptcy. have violated Rule-10(b) because they audited Co-Op’s financial statements. Co-Op was an agricultural cooperative company with 23000 members. So, its size and nature of  business qualifies it to offer securities to investors to get investments for business purposes. It  offered promissory notes to the investors to receive interest over their investment as well as  guaranteed payment upon demand. In other words, Co-Op sold investment contracts to the  investors, which qualifies as securities under the ‘Howery Test’. Both the members and non- members invested in the new venture of Co-Op, which implies there was a concrete business  plan behind the security offerings from Co-Op. But as the security trading itself involves a great  deal of risk and that was happened in the case of Co-Op. Due to any unknown reasons, Co-Op  filed bankruptcy and lost both the confidence and investments of the investors including the  members of the company. A class of investors initiated legal proceedings against the firm of  Rule10-b5.       
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Chapter 41.7
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This note was uploaded on 08/01/2009 for the course AC AC555 taught by Professor J.albright during the Spring '09 term at Dominican.

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Week7Assignment - Chapter 41.2 Case Details: The Farmer's...

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