Lindeen v. Securities and Exchange Commission

The National Securities Markets Improvement Act of 1996 (markets-improvement act) preempted state securities registration requirements for nationwide securities offerings. Under the markets-improvement act, covered securities were exempted from state registration requirements. One type of covered security was any security sold to a qualified purchaser. The markets-improvement act explicitly granted the Securities and Exchange Commission (SEC) (defendant) with the authority to define the term qualified purchaser. Eventually, the SEC released Regulation A-Plus. Regulation A-Plus defined a qualified purchaser as any person to whom securities were offered or sold pursuant to a Tier-2 offering of Regulation A. Tier-2 offerings are securities offerings of up to $50 million with several additional requirements, such as a limitation that nonaccredited investors may not purchase securities equivalent to more than 10 percent of the investor’s annual income or net worth. Regulation A was the SEC’s regulation regarding the registration of certain securities for sale. Ultimately, the SEC had preempted all state registration and qualification requirements for Tier-2 securities purchased by an accredited investor or a nonaccredited investor purchasing securities equal to no more than 10 percent of the nonaccredited investor’s annual income or net worth. William Gavin and Monica Lindeen (plaintiffs), the chief securities regulators for Massachusetts and Montana, respectively, each petitioned for review of the SEC’s definition of qualified purchaser, arguing that the SEC’s definition violated the Chevron test.