## Facts

- A Missouri resident decided to invest in an open-end investment fund after reading a favorable article about the fund in a nationally circulated financial publication printed outside Missouri.
- From Missouri, the investor mailed the fund a purchase request and a $20,000 personal check, requesting delivery of shares to a Missouri bank.
- The fund, headquartered outside Missouri, cashed the check, recorded the transaction on its books, mailed a written confirmation of the sale to the investor in Missouri, and delivered the shares as requested.
- The fund was registered under federal investment-company law and was authorized to accept offers for purchase of its shares in its home state, but its shares were not registered under the Missouri Uniform Securities Act.
- After becoming dissatisfied with the investment, the investor sued in federal district court (diversity jurisdiction) seeking rescission under Missouri law for sale of unregistered securities.
- The case was submitted on stipulated facts; the district court entered judgment for defendants on the ground that the fund did not accept the offer in Missouri, so Missouri’s registration and rescission provisions did not apply.

## Issues

1. Whether, under the Missouri Uniform Securities Act’s special definitions of “offer,” “acceptance,” and transactions “in this state,” the fund’s sale to a Missouri purchaser constituted a sale in Missouri.
2. If the sale was in Missouri, whether the investor was entitled to rescission based on the fund’s failure to register its shares in Missouri.

## Decision

- The Eighth Circuit reversed the judgment for defendants and remanded.
- The court held that, under the Missouri Uniform Securities Act’s statutory definitions, the fund’s conduct amounted to acceptance in Missouri, bringing the transaction within the Act’s territorial scope.
- Because the securities were not registered in Missouri and the Act applied, the investor was entitled to Missouri’s statutory rescission remedy, subject to further proceedings.

## Legal Principles

- When a state securities statute supplies special-purpose definitions of “offer” and “acceptance” for determining statutory applicability, courts apply those definitions rather than general common-law contract-formation rules.
- A securities transaction may be treated as occurring “in” the purchaser’s state when the purchaser’s offer originates there and the issuer directs acceptance and consummation of the sale into that state (including confirmation and delivery into the state), as defined by the statute.
- If a non-exempt security is sold in the state without required registration and the statute provides a civil remedy, rescission may be available to the purchaser under the statute’s terms.

## Conclusion

The court held that the Missouri Uniform Securities Act governed the sale because acceptance, as defined by the statute, was directed into Missouri through the fund’s confirmation and completion of delivery, and it reversed for application of Missouri’s rescission remedy for an unregistered sale.


Kreis v. Mates Inv. Fund, Inc., 473 F.2d 1308 (8th Cir. 1973)