I had to scratch my head for a moment when reading the case against Jan Atlas. The SEC accused the lawyer of issuing legal opinions in which he falsified or omitted important facts in connection with an unregistered, fraudulent offering.
“At the time he drafted the May 17 opinion letter, Atlas knew that certain facts stated in the letter on which he was basing his opinion were false, and that he was omitting from the letter other facts inconsistent with his opinion. For example, the letter based its conclusions in large part on statements that 1 Global was offering and selling nine-month notes, and only to sophisticated investors. “
“Nine-months”? What did that have to with the analysis?
Clearly, I have spent too much time looking at the Howey test and less with the statutes.
Promissory notes are presumptively considered to be securities and are listed as securities under the Securities Act § 2(a)(1). However, Section 3(a)(3) has a specially exemption for certain notes:
Any note, draft, bill of exchange, or banker’s acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited
There is that “nine months” reference. I don’t remember running into this exemption before.
In the case of Mr. Atlas, the SEC accused him of knowing that the notes subject to his opinion has an automatic renewal option. That would remove them from that exemption.
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