## Facts

- Amster & Co. (successor to Lafer, Amster & Co. (LACO)) was a risk-arbitrage investor that accumulated shares of Graphic Scanning Corp. after Graphic announced an intent to liquidate.
- By August 1985, LACO beneficially owned more than 5% of Graphic’s shares and filed a Schedule 13D stating it had no present intention to seek control, supported liquidation, and would reconsider if liquidation did not occur within a reasonable time.
- In January 1986, Graphic indicated it might not fully liquidate, and LACO met with Graphic’s management.
- On February 3, 1986, a LACO representative discussed the possibility of a proxy contest with another shareholder.
- On February 10, 1986 (Amendment No. 6), LACO disclosed it was considering, on a preliminary basis, a proxy contest for control.
- On February 28, 1986 (Amendment No. 7), LACO disclosed it had decided to join a shareholder group seeking control via a proxy contest.
- The SEC alleged LACO’s intent to seek control had formed earlier than disclosed, making the prior Schedule 13D materially misleading and requiring a prompt amendment sooner.

## Issues

1. When § 13(d) and SEC rules require a Schedule 13D amendment for a change in “purpose” or “plans” regarding control: upon preliminary consideration of a control effort, or only upon a material change reflecting a sufficiently definite intent.
2. Whether the record could support that LACO’s intent to seek control crystallized before its February 10 (or February 28) amendment such that earlier filings were materially false or misleading.

## Decision

- The court granted the defendant’s motion for summary judgment and dismissed the SEC’s § 13(d) enforcement action.
- The court held § 13(d) does not require disclosure of tentative or inchoate deliberations about seeking control.
- The court concluded that, on the undisputed record, LACO’s Schedule 13D and amendments were consistent with § 13(d)’s requirement to amend promptly upon a material change.

## Legal Principles

- Section 13(d) requires a beneficial owner exceeding 5% to file a Schedule 13D and to amend it promptly when there is a material change in the facts previously disclosed, including a material change in plans or purposes regarding control.
- A duty to amend is not triggered by fluctuating or preliminary thoughts; it arises when an intent or plan regarding control becomes sufficiently definite to be material to a reasonable shareholder.
- “Prompt” amendment is tethered to materiality; the statute does not impose a general obligation to disclose internal deliberations before a concrete plan or proposal forms.
- Where an original filing conditions the filer’s position on future events and reserves the right to reconsider, subsequent exploration of alternatives does not, without more, render the original disclosure materially misleading.

## Conclusion

The court ruled that § 13(d)’s amendment obligation begins when a filer’s plans for corporate control change in a material and sufficiently definite way, not when the filer merely begins considering a proxy contest, and it found no triable basis to infer LACO reached a firm control-seeking intent earlier than its disclosed amendments.


Securities & Exchange Comm’n v. Amster & Co., 762 F. Supp. 604 (S.D.N.Y. 1991)