Three shareholders of iStorage sought to sell their stock through World Trade Financial Corp. The shares were restricted securities-that is, securities acquired in an unregistered, private sale. Restricted securities typically bear a "restrictive" legend clearly stating that they cannot be resold in the public marketplace. This legend had been wrongly removed from the iStorage shares, however.
Information about the company that was publicly available included the fact that, despite a ten-year life, it had no operating history or earnings. In addition, it had net losses of about $200,000, and its stock was thinly traded. Without investigating the company or the status of its stock, World Trade sold more than 2.3 million shares to the public on behalf of the three customers. Did World Trade violate the Securities Act of 1933? Discuss.