Continental, a manufacturer of cigarettes, sold to a group of 38 investors bonds with warrantsattached to purchase common stock. The sales took place in a high-pressure atmosphere in a room with...

Continental, a manufacturer of cigarettes, sold to a group of 38 investors bonds with warrantsattached to purchase common stock. The sales took place in a high-pressure atmosphere in a room with phones ringing and new orders apparently coming in. Each investor signed an agreement that she or he had received written information about the corporation, and each testified to having access to additional information if requested. The SEC brought an action claiming that Continental was in violation of the registration provisions of the 1933 Act for selling unregistered nonexempt securities. Continental argued that it qualified for a private placement exemption. What was the result? Explain.