The company was staffed by some 7,000 employees with which Ralston had a policy of encouraging stock ownership.

The record shows that in 1947, 243 employees bought stock, 20 in 1948, 414 in 1949, 411 in 1950, and the 1951 offer, interrupted by this litigation, produced 165 applications to purchase.

The company claimed that it was exempted from filing because it offered stock only to key employees' in its organization.

Ralston Purina argued on trial that ‘A key employee ... would include an individual who is eligible for promotion, an individual who especially influences others or who advises others, a person whom the employees look to in some special way, an individual, of course, who carries some special responsibility, who is sympathetic to management and who is ambitious and who the management feels is likely to be promoted to a greater responsibility.’ Whether offering stock to 'key employees' would exempt Ralston Purina from filing a registration statement under Section 4(1) [Now Section 4(a)(2)] of the Securities Act of 1933.

"The natural way to interpret the private offering exemption is in light of the statutory purpose.

Offerings must be made to individuals who have access to the kind of information that a registration statement would supply in order to be exempt from the filing requirements of Section 5 the Securities Act of 1933.