MFA filed an amicus brief in SEC v. Carebourn urging the US Court of Appeals for the Eighth Circuit to reject the lower court’s excessively broad holding that an entity is a dealer under the securities laws if its business is based on the buying and selling of securities. The amicus brief argues that the lower court’s reasoning would have unintended consequences that reach far beyond this case.

“The lower court’s decision on what constitutes a dealer is inconsistent with the regulatory regime established by Congress and is incompatible with the business models of private funds,” said Jennifer Han, MFA Chief Legal Officer and Head of Global Regulatory Affairs. “Allowing the ruling to stand will create regulatory uncertainty. This will increase business risk, the cost of capital, and systemic risk while reducing market competition, efficiency and price discovery. The amicus brief provides recommendations for how the appeals court can remedy the issue in a manner consistent with Congressional intent and SEC precedent.”

MFA argues 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. Additionally, it opens a professional investor or investment fund to potential liability for having previously engaged in ordinary investment activities.

Read the full amicus brief here.

Source: MFA