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Commissioner Ponders Whether To Exempt Real Estate Brokers From Investment Adviser Registration

Last week, the Commissioner of Business Oversight issued an invitation for comment on whether to exempt real estate brokers from the investment adviser certification requirement under the Corporate Securities Law of 1968.  The exemption would require a real estate broker to be operating under the scope of a license issued by the Bureau of Real Estate and be:

  • certified as a broker-dealer under the Corporate Securities Law; or
  • only offer or sell securities qualified by permit pursuant to Corporations Code Section 25113.

To qualify for the exemption, the broker would be required to file a notice with the Department.  The full text of the proposed text is available here.

The proposal is an attempt to address an issue created by the elimination of the 15-or-fewer clients exemption formerly found in Rule 260.204.9.  That rule was amended following the enactment of the Dodd-Frank Act in 2010.

The obvious whole in the doughnut is that it appears to be of no benefit to real estate brokers who are not-licensed as securities broker-dealers and who manage funds that acquire either exempt securities or securities in transactions that are exempt from qualification.

Professors Continue To Debate Grundfest/Gallagher Article

The release of a draft article by Stanford Law School Professor Joseph Grundfest and Commissioner Daniel Gallagher has catalyzed a fierce debate about whether the now moribund Shareholder Rights Project at Harvard violated the securities law in presenting shareholder proposals seeking board declassification.  Others, including Professor Tamar Frankel, have criticized Commissioner Gallagher for speaking out on the issue.  Now, Professor Richard W. Painter has published this rebuttal: If A SEC Commissioner Thinks Someone Is Violating the Securities Laws, He Should Say So.

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