United States Court of Appeals for the Eleventh Circuit
483 F.3d 747 (2007)
Merchant Capital, LLC (Merchant) (defendant) was in the business of buying and selling consumer debt. Merchant sold interests in several registered limited liability partnerships (RLLPs). The purchasers of the RLLP interests were members of the general public with no expertise in debt purchasing. These purchasers became general partners. Merchant served as managing general partner. There were no other options for managing general partner. The purchasers could only remove Merchant as managing general partner for cause and with partner unanimity. The purchasers were informed that they would participate in the partnerships and that they had the power to participate in committees and call meetings, but their participation was in fact generally limited to checking boxes on ballots with very little information as to what they were approving. Merchant pooled all of the purchasers’ interests in accounts that were owned by Merchant’s servicer, New Vision Financial (New Vision), a wholesale debt purchaser. Merchant did not register the RLLP interests with the Securities and Exchange Commission (SEC) (plaintiff). The SEC brought an enforcement action, claiming that the interests were investment contracts and Merchant’s failure to file a registration statement violated securities laws.
Rule of Law
Holding and Reasoning (Anderson, J.)
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