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ALJ 1/2015 Brian Carroll 120
2. Primary v. Incidental
In U.S v. Elliott,140 the defendants argued that they, like the defendant in Wang, had not received
compensation for investment advice. They claimed that clients came to them to purchase a securi-
ty, an investment vehicle created by the defendants, not to receive investment advice. In rejecting
defendantsâ argument, the court held that investment advice to clients constituted a âsignificant
component of the âproductâ sold.â141 The defendants in Elliott assisted clients in âchoosing individ-
ually tailored investment vehicles.â142 Next, it noted that after providing advice about the invest-
ment selection, the defendants continued to advise the clients by managing the underlying in-
vestments. The court held that these two forms of advice â the assistance in choosing an invest-
ment vehicle and management of the underlying investments held by the investment vehicle â
were the âprimary,â not âincidentalâ reasons for investing in the investment vehicles. This primary
role of the advice in making a decision to invest met the investment advice element.
While Elliottâs âprimary v. incidentalâ approach was helpful in distinguishing Wang,143 Elliott did not
offer a standard to measure primary as opposed to incidental advice. In Thomas v. Metropolitan
Life Insurance Company,144 a private action, however, the court adopted a standard to measure
âsolely incidentâ conduct under the § 202(a)(11)(C) broker-dealer exception to the definition of an
investment adviser. As discussed, under this exception, a broker-dealer may offer investment
advice that is âsolely incident toâ its broker-dealer services and may not receive âspecial compen-
sationâ for this advice.145 In Thomas, the court noted that
the word âincidentalâ has two components. To be considered incidental, two actions or objects
must be related in a particular way â the incidental action or object must occur only as a result of
or in connection with the primary. Additionally, the incidental action or object must be secondary
in size or importance to the primary.146
Thomasâ approach to distinguishing between primary and incidental services may assist in devel-
oping Elliottâs distinction between primary and incidental advice.
E. Advising Others
Section 202(a)(11) requires that an adviser be engaged in advising âothers.â Typically, the adviserâs
client is the recipient of the adviserâs advice and this would satisfy that the advice had been pro-
vided to âothers.â In interpreting this advising âothersâ language, courts have addressed two issues:
1) whether the person receiving the investment advice must be in a position to act on the advice;147
and 2) whether a trusteeâs investment advice to a trust is advice to itself or âothers.â
140 62 F.3d 1304 (11th Cir. 1996), order amending opinion, 82 F.3d 989 (11th Cir. 1996).
141 Id. at 1311.
142 Id.
143 See Sec. & Exch. Commân v. Saltzman, 127 F. Supp. 2d 660 (E.D. Pa. 2000) (distinguishing application of Wang v.
Gordon, 715 F.2d 1187 (7th Cir. 1983)).
144 631 F.3d 1153 (10th Cir. 2011).
145 In addition to § 202(a)(11)(C), 15 U.S.C.§ 80b-2(a)(11)(C), § 202(a)(11)(B), 15 U.S.C. § 80b-2(a)(11)(B), exempts lawyers,
accountants, engineers and teachers who offer investment advice that is âsolely incidental.â
146 Thomas, 631 F.3d at 1162.
147 Some courts have held that the advice element is satisfied if an adviser provides advice regardless of whether
the advice is acted upon. See, e.g., U.S. v. Elia, 2014 WL 4289389 2 (11th Cir. 2014) (per curiam) (âIt [§ 202(a)(11), 15
U.S.C. § 80b-2(a)(11)] does not require that the adviser actually make an investment or act on that advice.â); see
also U.S. v. Olga, 378 F. Appâx 959, 960 (11th Cir. 2010) (per curiam) (âAlthough Ogale never actually used inves-
torsâ money to trade foreign currencies, his scheme involved âadvising others.ââ).
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