SEC’s Definition Of Securities Unravels In Court

Law360, New York (January 19, 2006, 12:00 AM EST) -- In the wake of a quiet defeat against a company that purchases credit card debt, the Securities and Exchange Commission has filed an appeal to rescue its definition of what constitutes securities.

The SEC’s dilemma evolved after it sued Tennessee-based Merchant Capital LLC in November 2002, alleging the small company had misled customers about risk and misrepresented the nature of its business to avoid registering its investments as securities.

Specifically, the SEC said Merchant avoided defining its investments as securities because it fraudulently claimed the investors...
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