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ALJ 1/2015 Observations on Judicial Approaches to Discerning Investment Adviser Status 117
raise capital by selling limited partnership interests in the partnership to investors. The capital
held by the partnership was invested by the general partners in securities, consistent with a con-
servative investment policy. The general partners were authorized to decide what securities to
purchase, hold and sell, while the limited partners did not participate in investing in securities.
The general partners were compensated primarily124 by receiving a percentage of the profits and
net capital gains earned by the investment partnership.
In Abrahamson, the court held that the general partners provided investment advice because they
were charged with âexercising control over what purchases and sales are made with their clientsâ
funds.â125 In support of its interpretation, the court relied on the plain language of § 202(a)(11),
15 U.S.C. § 80b-2(a)(11),126 the statutory structure of the Advisers Act,127 and the legislative in-
tent128 and âbroad remedial purposes of the Act.â129
Supported by this analysis, Abrahamson has proven to be noteworthy because it held that an
adviser providing impersonal advice to an investment partnership under discretionary authority
satisfies the investment advice element.130 Under this form of impersonal investment advice, the
advice need not be tailored to an individual investorâs needs (like personal advice), but is provid-
ed directly to the investment partnership, which typically explains its investment strategy to po-
tential investors and leaves it to them to decide whether investing in the partnership is appropri-
ate.131 It stands in contrast to the traditional personal advice approach with an adviser providing
124 See id. at 870 (âIn addition, the partnership agreement of October 1, 1968, provided for an annual salary of $ 25,000
for each general partner who managed the partnershipâs investments.â).
125 See id. at 871 (in addition to finding managing investment partnership securities to be investment advice, court
noted that adviser provided limited partner investors with a monthly report stating the percentage increase or
decrease in value of the investment partnership holding and compared this performance with Standard and
Poor 500 stock average, consistent with Report Adviser language of § 202(a)(11), 15 U.S.C. § 80b-2(a)(11); see also,
Sec. & Exch. Comm. v. Saltzman, 127 F. Supp. 2d 660, 669â70 (E.D. Pa. 2000) (applying Abrahamson in holding
that adviser sending limited partnership investors a copy of investment fund financial statements constituted a
report under § 202(a)(11), 15 U.S.C. § 80b-2(a)(11)).
126 Abrahamson, 568 F.2d at 871.
127 Id. (The court looked to § 203, 15 U.S.C. § 80b-3, requiring disclosure of an adviserâs authority over client funds,
and § 205, 15 U.S.C. § 80b-5, setting standards for advisory contracts governing an adviser managing âinvestments
or trading accounts.â).
128 Id. at 870-71 (The court in Abrahamson reviewed numerous congressional committee reports, for example, Re-
port of the Senate Committee on Banking and Currency, reflecting that the Advisers Act was intended to cover
persons investing client funds, including âpools of liquid funds of the public.â).
129 Id. at 870. Since the Abrahamson decision was issued in 1968, the traditional cannon of statutory interpretation
that remedial statutes should be construed liberally has been criticized. See Estate of Heiser v. Islamic Republic of
Iran, 885 F. Supp. 2d 429, 440 (D.D.C. 2012) (citing Antonin Scalia, Assorted Cannards of Contemporary Legal Analy-
sis, 40 CASE W. RES. L. REV. 581, 581-82 (1990)) (In discussing remedial statute cannon: âJustice Scalia describes this
cannon as âsurely among the prime examples of lego-babble.ââ).
130 See, e.g., U.S. v. Elliott, 62 F.3d 1304, 1310 (11th Cir. 1996) (applying Abrahamson to definition of investment ad-
viser); Wang v. Gordon, 715 F.2d 1187 (7th Cir. 1983) (applying Abrahamson to definition of investment adviser);
Sec. & Exch. Commân v. Montana, 2005 WL 645143 1, 2 (S.D. Ind. 2005) (applying Abrahamson to definition of in-
vestment adviser); Saltzman, 127 F. Supp. 2d at 669-70 (E.D. Pa. 2000) (applying Abrahamson to definition of in-
vestment adviser); Sec. & Exch. Commân v. Smith, 1995 U.S. Dist. LEXIS 22352 (Jan. 6, 1995) (applying Abrahamson
to definition of investment adviser).
131 See Sec. & Exch. Commân v. Goldstein, 451 F.3d 873, 881 (D.C. Cir. 2006) (âAs recently as 1997, it [SEC] explained
that a âclient of an investment adviser typically is provided with individualized advice that is based on the clientâs
financial situation and investment objectives. In contrast, the investment adviser of an investment company
need not consider the individual needs of the companyâs shareholders when making investment decisions, and
thus has no obligation to ensure that each security purchased for the companyâs portfolio is an appropriate in-
vestment for each shareholder.â Status of Investment Advisory Programs Under the Investment Company Act of
1940, 62 Fed.Reg. 15,098, 15,102 (Mar. 31, 1997).â); Sec. & Exch. Commân v. Mannion, 2013 WL 5999657 1, 3 (N.D.
Ga. 2013) (âIn Goldstein, the court explained that, generally, a hedge fund managerâs client is the hedge fund it-
self, and not the investors in the fund.â). Commission rules promulgated under the Advisers Act reflect this con-
zurĂŒck zum
Buch Austrian Law Journal, Band 1/2015"
Austrian Law Journal
Band 1/2015
- Titel
- Austrian Law Journal
- Band
- 1/2015
- Autor
- Karl-Franzens-UniversitÀt Graz
- Herausgeber
- Brigitta Lurger
- Elisabeth Staudegger
- Stefan Storr
- Ort
- Graz
- Datum
- 2015
- Sprache
- deutsch
- Lizenz
- CC BY 4.0
- Abmessungen
- 19.1 x 27.5 cm
- Seiten
- 188
- Schlagwörter
- Recht, Gesetz, Rechtswissenschaft, Jurisprudenz
- Kategorien
- Zeitschriften Austrian Law Journal