Page - 116 - in Austrian Law Journal, Volume 1/2015

ALJ 1/2015 Brian Carroll 116 returns or losses under each investment class and rebalancing the client’s portfolio consistent with the client’s personal investment strategy.117 The WIN court relied primarily on a factual analysis of each form of advice, including a discussion of the investment adviser’s own description of the advice offered, in finding that those forms of advice satisfied the investment advice requirement. The court did not resort to an analysis of the Advisers Act or judicial interpretations of it. The first form of advice (asset allocation advice) is supported, however, by the language and structure of the Advisers Act. Section 202(a)(11) can be viewed as including two types of advice: 1) “[T]he advisability of [...] purchasing, or selling securities [...]” and 2) “advisability of investing in [...] securities [...].” Here, Congress chose to include the word “investing” in addition to the purchasing or selling securities. Invest is defined as “to commit (money) in order to earn a financial return.”118 In comparison to the specific acts of purchasing and selling, invest is a more general term that focuses on the initial decision to commit money, which could lead to pur- chasing and selling securities or some other means of earning a financial return. Arguably, asset allocation advice is a form of investing advice that is, in the context of the Advisers Act,119 a precur- sor to purchasing and selling securities. Similarly, to the extent that the third form of advice (moni- toring advice) represents an ongoing obligation to reallocate client investment funds among assets classes, it is arguably a continuous form of “investing,” as interpreted under allocation advice. The most developed analysis offered by the WIN court focused on the third form of advice, referred to here as manager selection advice: “WIN’s business of selecting particular investment managers in lieu of others had the effect of channeling client funds to particular security investments.”120 Here, the WIN court’s reliance on the “effect of channeling” client funds to securities investments is sup- ported by the statutory interpretation of the word “investing” as discussed above. In WIN, the court took a significant step in recognizing asset allocation, monitoring and manager selection advice as investment advice, a view long held by the Commission.121 3. Impersonal Advice Abrahamson v. Fleschner,122 is the seminal case in establishing impersonal advice as satisfying § 202(a)(11), 15 U.S.C. § 80b-2(a)(11).123 In Abrahamson, an investment partnership was formed to 117 Id. at 399–400. But see Pozez v. Ethanol Capital Mgmt., LLC, 2009 WL 2176574 (D. Ariz. 2009) (rejecting insufficient monitoring activities as providing investment advice under Report Adviser definition of an investment adviser). 118 WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 636 (9th ed. 1985). 119 Under § 205(d), Investment Advisory Contracts, 15 U.S.C. § 80b-5(d), the definition of an investment advisory con- tract includes “to manage any investment [...] of another person [...].” In turn, BLACK’S LAW DICTIONARY 865 (5th ed. 1979) defines “manage,” as among other things: “To control and direct, to administer, to take charge of.” The use of the word “manage” under § 205(d), 15 U.S.C. § 80b-5(d), supports interpreting “the advisability of investing” language of § 202(a)(11), 15 U.S.C. § 80b-2(a)(11), as including asset allocation advice. 120 475 F.3d. at 400. 121 Rule 203A-2(a), Pension Consultants, 17 C.F.R. § 275.3A-2(a) (defining investment advice provided by an investment adviser acting as a pension consultant as “including any advice with respect to the selection of an investment advis- er to manage such [employee benefit plan] assets.”); see SEC. & EXCH. COMM’N, STAFF REPORT CONCERNING EXAMINATION OF SELECTED PENSION CONSULTANTS, THE OFFICE OF COMPLIANCE INSPECTIONS AND EXAMINATIONS (May 16, 2005); see also Rule 204- 3(h)(5), Delivery of Brochures and Brochure Supplements, 17 C.F.R. § 275.4-3(h)(5) (“Wrap Fee program means an advisory program under which a specified fee or fees not based directly upon transactions in a client’s account is charged for investment advisory services (which may include portfolio management or advice concerning the selec- tion of other investment advisers) and the execution of client transactions.”); SEC Release 1092. 122 568 F.2d 862 (2d Cir. 1977), cert. denied, 436 U.S. 905, cert. denied, 436 U.S. 913 (1978). 123 Abrahamson, 568 F.2d at 870–71 (analysis of investment advice is couched in terms of the “engaged in the business” element of § 202(a)(11), 15 U.S.C. § 80b-2(a)(11)).