Glaser Weil’s Marc Indeglia Quoted in Reuters on U.S. Appeals Court’s ‘Dealer’ Definition


Glaser Weil Corporate Partner Marc Indeglia was interviewed by Reuters for an article regarding the 11th U.S. Circuit Court of Appeals’ acceptance of the SEC’s broad interpretation of securities dealer registration requirements. This decision is a blow to industry groups advocating for clarity on the differentiation between dealers and investment funds trading securities for their own accounts.

In SEC v. Justin Keener, the appeals court concluded that Keener’s company was operating as an unregistered securities dealer when it purchased convertible debt from microcap issuers, converted the debt into common stock and then sold a high volume of shares into public markets. The 11th Circuit panel in his case relied heavily on the court’s three-month-old precedent from the SEC’s case against another penny-stock trader, Ibrahim Almagarby of the Microcap Equity Group. The panel in the Almagarby case said the language of the Securities and Exchange Act does not limit the definition of a securities dealer to traders who buy and sell on behalf of customers, however, judges concluded that Almagarby was acting as an unregistered dealer and based this on the specific facts of his microcap business. In response, Kenner’s counsel argued that, unlike Almagarby, Keener did not immediately convert microcap debt into common shares to be dumped into public markets but acted more like a long-term lender to these small publicly-traded businesses.

Indeglia currently serves as president of the Small Public Company Coalition, which was an amicus in the Almagarby case, and believes the Kenner opinion is arguably more problematic for small and microcap market participants than the previous decision because the Keener court did not even acknowledge industry arguments about the overly expansive definition of a dealer.

“There are no caveats here,” said Indeglia, who also stated that “[t]here is no analysis of the impact of the decision on broader markets.” Indeglia believes that if both Almagarby and Keener’s actions require a dealership license, then the same requirement would apply to everyone else as well.

To read the full article, click here.

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