Jimmy Jones is a go-getting business owner who recently sold "units of participation" in his plastic injection molding company, totalling $290,000, to 24 investors in State A and 15 investors in State B. Jimmy did not register the units based on his belief that they were not securities. The company has now filed for bankruptcy protection and is in receivorship. The "units of participation" have no secondary market and are deemed to be worthless. Therefore
A. investors may not pursue civil suits unless filed within 3 years of the securities offering
B. whichever state represents the majority of capital invested has sole jurisdiction in this matter
C. State A, where the majority of investors reside, has jurisdiction in this matter
D. the SEC has no authority over this matter unless the securities were registered under the Securities Act of 1933
EXPLANATION: both states could claim jurisdiction and pursue separate legal actions. The SEC could definitely get involved, since this is inter-state commerce. Investors have the right to sue as long as they file within 2 years of discovery/3 years of the cause of action. Chances are, Old Jimmy never bothered to register the "units of participation" and never disclosed any risk to investors . . . or, he presented bogus financial statements, etc. If so, they will have grounds to sue. Unfortunately, Old Jimmy appears to have no money at this time.