What would be some problems likely to be encountered in blue sky in the tactile offering in the following scenario:

Assume your firm has been retained by Tecto Enterprises, Inc. To assist in raising $5 to $8 million for oil exploration efforts at a yet-to-be determined location in the United States through public offering of Tecto common stock that will be made in California and Texas and traded on the OTC bulletin board.

The senior partner has just learned that four months ago senior officers purchase Tecto common shares at $10 per share and that the broker- dealer that will assist Tecto in the offering has an option to acquire 10,000 common shares at $10 per share. Tecto proposes to offer the Tecto common shares to the public at around $14 per share.