## Facts

- Ralston Purina Company maintained a long-standing policy encouraging employee stock ownership and, from 1947–1951, sold nearly $2,000,000 of unregistered common stock to employees using the mails.
- Annual corporate resolutions authorized sales to employees who independently inquired about purchasing shares; internal communications emphasized no solicitation and that only self-initiating employees could buy at market prices.
- Offerees were dispersed across more than fifty communities and included many non-managerial roles (e.g., clerical assistant, stock clerk, stenographer, electrician, foremen, veterinarian).
- Participation varied by year (243 purchasers in 1947; 20 in 1948; 414 in 1949; 411 in 1950; and, in 1951, litigation interrupted an offering that generated 165 applications with an estimated 500 offerees).
- Ralston Purina claimed the offers were limited to “key employees,” defining that term broadly and not limited to high-level personnel.
- The record did not show that the employee offerees had access to the type of information a registration statement would provide.

## Issues

1. Whether Ralston Purina’s sales of unregistered stock to employees qualified for the Securities Act § 4(1) exemption for “transactions by an issuer not involving any public offering,” thereby avoiding § 5 registration.

## Decision

- The Supreme Court reversed the Eighth Circuit and held the offerings were not exempt under § 4(1).
- Because the employee offerees were not shown to have access to registration-equivalent information, the transactions required registration under § 5.
- The Court rejected reliance on the “key employee” label as sufficient to establish a nonpublic offering.

## Legal Principles

- A transaction “not involving any public offering” is one made to persons who do not need the Securities Act’s registration protections.
- The number of offerees is not determinative of whether an offering is “public” under § 4(1).
- Corporate employees are not, as a class, excluded from the Act’s protections; employee status alone does not establish exemption eligibility.
- The issuer bears the burden of proving entitlement to the § 4(1) exemption, including showing that offerees had access to the kind of information registration would disclose.

## Conclusion

The Court held that unregistered employee stock offers are not exempt “private offerings” merely because recipients are labeled “key employees”; the issuer must prove that offerees do not need registration protections, chiefly by showing access to registration-type information, and Ralston Purina failed to do so.


Securities & Exchange Comm’n v. Ralston Purina Co., 346 U.S. 119 (1953)