Page - 101 - in Austrian Law Journal, Volume 1/2015

ALJ 1/2015 Observations on Judicial Approaches to Discerning Investment Adviser Status 101 qualified institutional buyer in the private resale of certain securities pursuant to Rule 144A9 of the Securities Act of 1933 (“Securities Act”).10 Under United States federal securities laws, other consequences flow from investment adviser status.11 Section 202(a)(11) defines an investment adviser and provides eight exceptions12 to this defini- tion. Section 202(a)(11), in its complete form, defines an investment adviser as “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities.”13 Some of the terms appear- ing in this definition are defined further by the Advisers Act.14 By parsing the language of § 202(a)(11), three categories of investment adviser emerge. The first category, which was identified at the beginning of this article, covers persons who are engaged in the business of providing advice to others on investment in or the value of securi- ties for compensation. Those meeting this definitional language are referred to in this article simply as investment advisers. The second category of investment adviser covers persons who provide investment advice through publications or writings, and are referred to in this article as “Publication Advisers.”15 The third category includes those who, for compensation, are in the regular business of issuing analyses or reports on securities, and are referred to as “Report 9 See Securities Act of 1933 (“Securities Act”) § 5(d), 15 U.S.C. § 77e(d); Securities Act Rule 144A, Private Resale of Securities to Institutions, 17 C.F.R. § 144A (defining a qualified institutional buyer as “[a]ny investment adviser registered under the Investment Advisers Act.”); see also Eliminating the Prohibition Against General Solicita- tion and General Advertising in Rule 506 and Rule 144A Offerings, Investment Advisers Act Release No. 3524 (July 10, 2013) 3, 78 FR 44771 (July 24, 2013) (adopting rule release) (footnote omitted) (“The term ‘Rule 144A offering’ in this release refers to a primary offering of securities by an issuer to one or more financial inter- mediaries – commonly known as the ‘initial purchasers’ – in a transaction that is exempt from registration pursuant to § 4(a)(2) or Regulation S under the Securities Act, followed by the resale of those securities by the initial purchasers to QIBs [qualified institutional buyers] in reliance on Rule 144A.”). 10 15 U.S.C. § 77a et seq. 11 See, e.g., Selective Disclosure and Insider Trading, Exchange Act Release No. 43154 (Aug. 15, 2000) 1, 65 FR 56,716 (Aug. 24, 2000) (adopting rule release) (“Regulation FD (Fair Disclosure) is a new issuer disclosure rule that ad- dresses selective disclosure. The regulation provides that when an issuer, or person acting on its behalf, dis- closes material nonpublic information to certain enumerated persons (in general, securities market profes- sionals and holders of the issuer’s securities who may well trade on the basis of the information), it must make public disclosure of that information.”); Regulation FD, 17 C.F.R. § 243.100(b)(1)(iii) (identifying invest- ment advisers as defined under § 202(a)(11) as a member of a class of recipients of material nonpublic infor- mation triggering public disclosure of that information). 12 Section 202(a)(11)(A)-(G), 15 U.S.C. § 80b-2(a)(11)(A)-(G). In addition to these exclusions under § 202(a)(11), § 202(b), 15 U.S.C. § 80b-2(b), excludes the application of the Advisers Act to certain federal and state gov- ernment agencies, instrumentalities and officers. See Sec. & Exch. Comm’n v. DiBella, 587 F.3d 553, 567-568 (2d Cir. 2009) (interpreting § 202(b)). 13 Section 202(a)(11), 15 U.S.C. § 80b-2(a)(11); see also Exchange Act § 3(a)(2), 15 U.S.C. § 78c(2) (definition of investment adviser identical to definition of investment adviser under § 202(a)(11)). But see § 2(a)(20) Invest- ment Company Act of 1940 (“Investment Company Act”), 15 U.S.C. § 80a-2(a)(20) (definition of investment ad- viser different than § 202(a)(11) definition). See U.S. Sec. & Exch. Comm’n Investment Management Staff Issue of Interest, “Persons Who Provide Advice Solely Regarding Matters Not Concerning Securities,” 4 (comparing Advisers Act § 202(a)(11) (definition of investment adviser) with Investment Company Act § 2(a)(20) (definition of investment adviser)). 14 See, e.g., § 202(a)(5), 15 U.S.C. § 80b-2(a)(5) (defining “company”); § 202(a)(16), 15 U.S.C. § 80b-2(a)(16) (defining “person”). 15 For a discussion of what is referred to in this article as a “Publication Adviser,” see Lowe v. Sec. & Exch. Comm’n, 472 U.S. 181 (1985) (application of § 202 (a)(11) to an investment adviser who publishes a newsletter offering impersonal investment advice).