Blue Company manufactures fiber-optic switches and is located in Cupertino, California, just south of San Francisco. Blue was formed about seven years ago and now desperately needs to expand its manufacturing capacity as well as pursue certain new product development possibilities. For this, it needs to raise about $50-$70 million through a public offering of common shares. Blue contemplates that a registration statement covering the offering will be filed May 1st. For each of the problems that follow, consider whether Section 5 of the Securities Act has been violated. Blue is not a reporting company, has not previously engaged in a public offering of its security, and is an emerging growth company.

1. On February 10th, Karl, Blue's vice president of marketing, places an advertisement to appear in nine upcoming issues of Business Week. The advertisement previously had run for several months in Tech World, a computer trade magazine, and in addition to listing the full range of products manufactured by Blue, it carried a quote from a trade magazine that "Blue is the emerging industry leader in the development and design of fiber-optic switches."