## Facts

- Doman Helicopters, Inc., a helicopter manufacturer, filed a Securities Act registration statement and prospectus covering: (a) a rights offering to existing shareholders, (b) issuance of shares to creditors in satisfaction of claims, and (c) a secondary offering by selling shareholders.
- The SEC instituted a public stop-order proceeding to determine whether the registration statement contained false or misleading representations or omitted material information warranting suspension.
- The SEC identified alleged disclosure deficiencies concerning: sequencing and mechanics of the multi-part offering; insider and affiliate participation; uses of proceeds and liquidity needs; operating history and prospects; Department of Defense contract negotiations; government test results and product acceptability; terms and progress under a foreign license/manufacturing arrangement; option grants and consideration; outstanding shares and recent issuances; and insider holdings.
- While the proceeding was pending, Doman filed an amended registration statement and contended the amendment superseded any deficiencies in the original filing.
- The SEC considered whether a stop order should issue as to the original registration statement notwithstanding the amendment and notwithstanding the absence of earlier staff comments before formal proceedings.

## Issues

1. Whether Doman’s registration statement contained untrue statements of material fact or omitted material facts necessary to make the statements not misleading under the Securities Act.
2. Whether filing an amended registration statement mooted or otherwise prevented issuance of a stop order directed at the original registration statement.
3. Whether the SEC’s failure to provide prior informal comments or warnings precluded or weighed against issuance of a stop order.

## Decision

- The Commission issued a stop order suspending the effectiveness of the registration statement.
- The Commission found the registration materials materially misleading due to misstatements and/or omissions in core areas of business prospects, product performance, and capitalization and insider-related matters.
- The Commission rejected the argument that a later amendment (or characterization of the initial filing as “preliminary”) eliminated the basis for a stop order as to the original filing.
- The Commission determined that prior staff silence or the absence of informal comments did not bar the institution or outcome of stop-order proceedings.

## Legal Principles

- A stop order may issue when a registration statement contains an untrue statement of a material fact or omits material facts required to be stated or necessary to make statements not misleading.
- The issuer bears primary responsibility for accurate and complete disclosure at the time of filing; intent to amend later does not excuse material deficiencies.
- Subsequent amendments do not automatically moot stop-order relief directed at an earlier materially misleading registration statement, particularly where investors may have relied on the earlier disclosures.
- SEC staff practices (including whether comments are provided before proceedings) do not condition the Commission’s statutory authority to pursue stop-order remedies.

## Conclusion

The Commission suspended Doman’s registration statement after finding material disclosure defects and held that neither later amendments nor the lack of prior staff comments prevented a stop order where the original registration materials were materially false or misleading.


Matter of Doman Helicopters, Inc., 41 S.E.C. 431 (1963)