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ALJ 1/2015 Brian Carroll 124
courtâs acceptance of the trust beneficiaries as clients of the trusteeâs investment advice is an
important step in light of Selzer. The court in Montana, however, relied primarily not on the sepa-
rate legal status and roles of the trustee and beneficiary but on the strength of the holding in
Abrahamson. In addition to the courtâs analysis in Smith and Montana, provisions of the Advisers
Act support holding that a trustee is an investment adviser.174
E. Engaged in the Business
Section 202(a)(11) requires an investment adviser to âengage in the businessâ of providing in-
vestment advice. In interpreting this element, the Commission staff in SEC Release 1092175 and
courts176 have relied primarily on the decision in Zinn v. Parrish177. After reviewing Zinn, some
observations are offered.
1. Zinn v. Parrish
In Zinn v. Parrish, a private action, the court held that Zinn, a sports manager, provided services to
Parish, a professional football player, that did not, among other things, satisfy the engaged in the
business element. While providing sports management services, Zinn obtained a list of securities
recommendations prepared by other persons, screened it and forwarded it to Parrish. The court
acknowledged that had Zinn âmade a businessâ178 of screening securities recommendations, he
would be required to register as an investment adviser. However, this âisolated transactionâ179
with Parrish was âincidentâ180 to the main purpose of the manager-client relationship.
While Zinnâs holding has factual support, its legal analysis raises questions. The court in Zinn anal-
ogized the sport managerâs role to that of the professional trustee described in In re Loring. Zinn
characterized the trustee In re Loring as a âprofessional trustee whose advice to his clients is âsole-
ly incidentalâ to his duty as a professional trustee.â181 Also, as part of its discussion of In re Loring,
the court in Zinn noted that the âSEC further concluded that the trustee was not an investment
adviser because he did not âhold himself out as being engaged in the business of giving advice to
others as to securities.ââ182 Zinn went on to apply factors noted in Commission staff No-Action
174 Section 203, Registration of Investment Advisers, 15 U.S.C. § 80b-3, requires and exempts certain investment advis-
ers (as defined under § 202(a)(11), 15 U.S.C. § 80b-2(a)(11)) to register with the Commission. Section 203(b)(4),
15 U.S.C. § 80b-3(b)(4), exempts from registration an investment adviser that is a trustee to a charitable organiza-
tion. § 203(b)(5), 15 U.S.C. § 80b-3(b)(5), exempts from registration an investment adviser that is a trustee to a
plan described under § 414(e) of the Internal Revenue Code of 1986 that provides investment advice exclusively
to the plan.
175 SEC Release 1092, 4 & n.7 (âThe âBusinessâ Standard [...] The staff considers a person to be âin the businessâ of
providing advice if the person: [...] (iii) on anything other than rare, isolated and non-periodic instances, provides
specific investment advice. FN7 (Zinn v. Parris, 644 F.2d 360 (7th Cir. 1981)â).
176 See, e.g., Wang v. Gordon, 715 F.2d 1187, 1192-93 (7th Cir. 1983) (relying on the Zinn v. Parrish âengage in the
businessâ approach); Pozez v. Ethanol Capital Mgmt., LLC, 2009 WL 2176574 6 (D. Ariz. 2009) (relying on the Zinn
v. Parrish âisolated transactionsâ language).
177 644 F.2d 360 (7th Cir. 1981).
178 Id. at 364.
179 Zinn, 644 F.2d at 364.
180 Id.
181 Id.
182 Id.
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book Austrian Law Journal, Volume 1/2015"
Austrian Law Journal
Volume 1/2015
- Title
- Austrian Law Journal
- Volume
- 1/2015
- Author
- Karl-Franzens-Universität Graz
- Editor
- Brigitta Lurger
- Elisabeth Staudegger
- Stefan Storr
- Location
- Graz
- Date
- 2015
- Language
- German
- License
- CC BY 4.0
- Size
- 19.1 x 27.5 cm
- Pages
- 188
- Keywords
- Recht, Gesetz, Rechtswissenschaft, Jurisprudenz
- Categories
- Zeitschriften Austrian Law Journal