The opinion of the court was delivered by: CROAKE
CROAKE, District Judge: This is an application by the Securities and Exchange Commission (hereinafter Commission) for a preliminary injunction in the instant action. The Commission seeks to restrain certain alleged violations of Sections 5 and 17(a) of the Securities Act of 1933 as amended (hereinafter the Act) in the sale of the stock of Granco Products, Inc. (hereinafter Granco), a New York corporation.
The pertinent parts of the Act relied upon by the Commission are as follows:
"15 U.S.C. § 77e. Prohibitions relating to interstate commerce and the mails.
"(a) Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly -
(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise; or
(2) to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale."
"(c) It shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed as to such security, or while the registration statement is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding or examination under section 77h of this title. May 27, 1933, c. 38, Title I, § 5, 48 Stat. 77; June 6, 1934, c. 404, § 204, 48 Stat. 906; August 10, 1954, c. 667, Title I, § 7, 68 Stat. 684."
"15 U.S.C. 77q. Fraudulent interstate transactions.
"(a) It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly -
"(1) to employ any device, scheme, or artifice to defraud, or
(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser."
The complaint has two causes of action, the first of which alleges violation by the defendants of 15 U.S.C. 77e(a) and (c), the second, violation of 15 U.S.C. 77q(a).
All of the named defendants have been served with the moving papers of the Commission. No opposing affidavits or memoranda of law have been submitted on behalf of the defendants. A letter was submitted to the court on November 17, 1964 by the attorneys for defendant Robert Colucci (hereinafter Colucci), d/b/a Luccis & Company (hereinafter Luccis). This letter requested a hearing but did not controvert the allegations of the Commission. Counsel for Colucci also urged in this letter that the ...