## Facts

- Texas Glass Manufacturing Corporation filed a registration statement and prospectus for a public offering of common stock under the Securities Act of 1933.
- The SEC instituted a stop-order proceeding under Securities Act § 8(d), alleging the registration statement contained material misstatements and omissions.
- The prospectus included a construction-cost and use-of-proceeds chart for a proposed glass-manufacturing plant.
- The chart referenced construction arrangements without disclosing that binding contracts had not been executed.
- The cost presentation excluded interest associated with deferred payments and did not disclose that interest rates on deferred arrangements were not agreed upon.
- Two material line items in the chart were not explained, leaving the nature of those expenditures unclear.
- The prospectus did not explain how proceeds would be applied or what the company would do if the offering were not fully subscribed and the projected funds were not raised.
- The prospectus described prior sales of securities as made pursuant to an exemption from registration, implying legal compliance.
- The SEC found the issuer was not entitled to rely on the claimed exemption and that the prospectus did not disclose the potential illegality and related risks of the prior unregistered distributions.

## Issues

1. Whether the registration statement and prospectus contained untrue statements of material fact or omitted material facts necessary to make the statements not misleading within the meaning of Securities Act § 8(d).
2. Whether the SEC should issue a stop order suspending the effectiveness of the registration statement based on those deficiencies.

## Decision

- The SEC found the registration statement and prospectus materially misleading due to omissions and misleading characterizations.
- The SEC determined the construction-cost and use-of-proceeds disclosures created a misleading impression of definite, contract-supported costs while omitting significant contingencies and interest-related costs.
- The SEC held that describing prior unregistered sales as exempt, without disclosing the inapplicability of the exemption and resulting risks, was materially misleading.
- The SEC issued a stop order under Securities Act § 8(d), preventing the registration statement from becoming or remaining effective.

## Legal Principles

- Under Securities Act § 8(d), the SEC may issue a stop order if a registration statement contains any untrue statement of a material fact or omits a material fact required to be stated or necessary to make statements not misleading.
- Materiality in a registered offering includes information that would affect a reasonable investor’s assessment of the project’s feasibility, funding sufficiency, and financial risk.
- Quantitative presentations (such as cost and use-of-proceeds charts) must not omit significant cost components (including interest and unresolved financing terms) that alter the economic burden of the disclosed program.
- Use-of-proceeds disclosure must clearly explain significant categories of expenditures and material contingencies, including the plan if the offering does not raise the stated amount.
- Statements implying legal compliance with registration exemptions can be misleading if the issuer is not entitled to the exemption and the prospectus omits the related legal risk; literal accuracy is insufficient where omissions create a deceptive half-truth.
- Stop-order relief does not depend on proving scienter; the inquiry is whether the filed disclosure is materially false or misleading.

## Conclusion

The SEC suspended the registration statement because the prospectus used seemingly definite cost and use-of-proceeds disclosures while omitting key uncertainties and expenses, and it misleadingly assured investors that prior unregistered offerings were exempt without disclosing that the exemption was unavailable and created legal risk.


In re Tex. Glass Mfg. Corp., 38 S.E.C. 630 (1958)