Seite - 123 - in Austrian Law Journal, Band 1/2015

ALJ 1/2015 Observations on Judicial Approaches to Discerning Investment Adviser Status 123 charged with following,167 it undercut Selzer’s precedential value, a view shared by at least one other court.168 Importantly, Smith viewed In re Loring’s exclusion of a trustee from the definition of an investment adviser as limited to situations where a trustee’s business activities are subject to an alternative oversight scheme. It noted that the Commission’s order emphasized that Loring’s trustee activi- ties were under court supervision and the amount of activities outside this court supervision was “incidental.”169 Moreover, Smith noted that the trustee in Selzer was a highly regulated foreign bank (Bank of Bermuda), while no similar alternative regulatory structure oversaw the defend- ant’s activities in Smith.170 While relying on Abrahamson, Smith did not address the legal-equitable ownership distinction relied on by Selzer. Selzer viewed a trustee as advising only itself as the legal owner of the trust corpus (securities) and therefore not as an investment adviser, while acknowledging the role of beneficiaries as equitable owners of corpus of the trust. As an equitable owner, however, a bene- ficiary generally has standing to initiate a legal proceeding against a trustee alleging violations of the trustee’s fiduciary duty, including challenging the appropriateness of the trustee’s investment advice.171 This legal standing, at the very least, recognizes that in the investment advice context beneficiaries have a separate legal status from that of the trustee, which supports viewing them as recipients of the investment advice for purpose of § 202(a)(11). Moreover, this view is supported in part by the court’s holding in SEC v. Montana.172 There, UTA-BVI, Ltd, the trustee, invested the trust’s funds of two other trusts, First National Equity Trust and P.K. Trust. In finding that UTA-BVI met the definition of an investment adviser, the court relied on relevant trust agreements that “[…] identified First National Equity Trust and P.K. Trust as beneficiaries of the trust and provide that UTA-BVI would manage the trust funds for the benefit of the beneficiaries.”173 The Montana 167 Id. at 19. See also Condon v. Haley, 21 F. Supp. 3d 572, 583 (D.S.C. 2014) (“It is axiomatic that a decision of a circuit court, not overruled by the United States Supreme Court, is controlling precedent for the district courts within the circuit.”); Cartica Management, LLC v. Corpbanca, S.A., 2014 WL 4804491 (S.D.N.Y. 2014) 6 (“District courts and other inferior courts are bound by decisions of the Circuit Court of Appeals in the appropriate circuit unless overturned by an intervening Supreme Court decision or other change in the law.”). 168 See Sec. & Exch. Commn’n v. Montana, 2005 WL 645143 1-2 (S.D. Ind. 2005) (court, without noting either In re Loring or Sec. & Exch. Comm’n v. Smith, held that under Abrahamson, a “trust management agreement” with a trustee investing trust funds met the definition of an investment adviser, without making a distinction between beneficial and legal ownership of the trust corpus). 169 1995 U.S. Dist. LEXIS 22352 (E.D. Mich.) 18. 170 The presence of an alternative oversight authority scheme plays a role determining whether an instrument meets the definition of a security. See Reves v. Ernst & Young, 494 U.S. 56 (1990); Sec. & Exch. Comm’n v. J.T. Wal- lenbrock, 313 F.3d 532, 537 (9th Cir. 2002) (“[F]our Reves factors [...]: (4) whether some factor such as the exist- ence of another regulatory scheme significantly reduces the risk of the instrument […].”); Stober v. Sec. & Exch. Comm’n, 161 F. 3d 745 (D.C. Cir. 1998) (noting other Supreme Court cases holding that the regulatory schemes imposed by the Federal Deposit Insurance Corporation and Comptroller of the Currency met alternative regula- tory scheme requirements under Reves’ fourth factor); Sec. & Exch. Comm’n v. Smart, 2011 WL 2297659 (D. Utah 2011) (noting Reves’ fourth factor as including alternative regulatory scheme); Sec. & Exch. Comm’n v. Novu Techs., LLC, 2010 WL 4180550 (D. Utah 2010) (same); Sec. & Exch. Comm’n v. Global Telecom Servs., LLC, 325 F. Supp. 2d 94 (D. Conn. 2004) (same); see also Inv. Co. Inst. v. Commodity Futures Trading Comm’n, 720 F.3d 370 (D.C. Cir. 2013) (discussing Commodity Futures Trading Commission’s authority to exclude “otherwise regulated” entities from its regulations). 171 RESTATEMENT (THIRD) OF THE LAW OF TRUSTS: REMEDYING BREACH OF TRUST: GENERAL PRINCIPLES § 94 (2012), (“(1) A suit against a trustee of a private trust to enjoin or redress a breach of trust or otherwise to enforce the trust may be maintained by only a beneficiary or by a co-trustee, successor trustee, or other person acting on behalf of one or more beneficiaries.”). 172 2005 WL 645143 (S.D. Ind. 2005). 173 Id.