This section contains the nature of the case and procedural background.

Knight developed the concept of D -- an internet shopping mall offering products directly from manufacturers to consumers at no markup -- and helped form it in or about August 1999. D conducted three private placement offerings of stock. D distributed confidential offering memoranda (COM) to its investors. The COMs contained detailed information about each D stock offering. Each of the three tranches of stock stated in the COM that 'th]e offering is to be made exclusively to accredited investors, pursuant to the federal registration exemption contained in Regulation D, Rule 504 adopted under the Securities Act.' In total, D sold approximately 6,748,617 shares of stock to at least 355 investors residing in 21 different states. D obtained proceeds of more than $2.3 million. D did not file a registration statement with P with respect to any of the three sales of stock, and there was no registration statement otherwise in effect. In September 2000, D prepared and filed with P a proposed Registration Statement to bring D public. Over a period of several months, P and D traded comments and information. P then refused to approve the Registration Statement, effectively driving D out of business. P commenced this securities law enforcement action on September 20, 2004, alleging violations of the registration and anti-fraud provisions of federal securities law. P moved for partial summary judgment on its Section 5 claims.

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