Interests involving registered limited liability partnerships (RLLPs) are contracts within the federal securities laws’ meaning, according to the U.S. Court of Appeals for the 11th Circuit. The court reversed a ruling made against the Securities and Exchange Commission (SEC) for its enforcement action against two promoters and their company, Merchant Capital LLC.
According to the appeals court, the SEC filed an enforcement action against Merchant Capital LLC, Steven Wyer, and Kurt Beasley. The commission had alleged violations of the federal securities laws’ registration and antifraud provisions. Beasley and Wyre had established Merchant to take part in buying, reselling, and collecting charged-off consumer debt from financial institutions.
Merchant started raising money in 2001 by soliciting individuals to become partners in Colorado RLLPs that were eventually sold as freestanding entities. Although Merchant had organized 28 RLLPs with 485 partners, it did not reveal that the different partnerships existed. Its RLLPs ended up with more than $26 million in total capitalization.