MFA has sent a letter to the 11th Circuit Court of Appeals in support of the appellant in SEC v. Keener following their submission of an amicus brief. In the Keener brief, MFA urged the US Court of Appeals for the Eleventh Circuit to reject the lower court’s holding that an entity is a dealer under the Securities Exchange Act of 1934 if its business is based on the buying and selling of securities. MFA expressed that if the lower court’s holding stands, any professional investor or investment fund, such as a private fund or mutual fund, could potentially be considered a dealer. This would subject a professional investor or investment fund to a body of regulations that are inappropriate for their business and opens a professional investor or investment fund to potential liability for having previously engaged in ordinary investment activities.
The SEC submitted the related 11th Circuit’s decision in the SEC v. Almagarby case as supplemental authority for the Keener appeal. The letter to the court highlights aspects of the Almagarby decision that support MFA’s point of view rather than the SEC’s. These include that the 11th Circuit court’s decision:
- Acknowledges the concern that an expansive interpretation of the dealer definition “might sweep in all manner of market participants not traditionally understood as dealers, including investment advisers, mutual funds, pension funds, and other asset managers”
- Specifies that dealers are in the business of dealing (i.e., profiting from executing and intermediating transactions), not the business of investing (i.e. profiting from taking risk and from price movement)
- Emphasizes that dealer status depends on “specific conduct.”
