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Day: August 15, 2016

Third Circuit Expands “Investment Adviser” Definition


The U.S. Court of Appeals broadly defined “for compensation” for purposes of determining whether a defendant should be judged an “investment adviser.”  The Court held that, although the defendant did not charge a specific fee for investment advice, he took compensation because he stole the principal payments made on promissory notes he sold.  This taking of assets created his “economic benefit” required for a finding that he acted as an investment adviser by providing securities advice “for compensation.”  The defendant had argued that the lower court erred by applying an investment adviser enhancement to his sentence for securities fraud.

OUR TAKE: The Court applies an expansive definition of “for compensation” to include any economic benefit whether pursuant to an agreement or taken unlawfully.  The defendant did not charge an asset-based fee for providing securities advice, the traditional hallmark of “for compensation.”