Comments on: Club-FX Trader - Rate Changes to 14% WEF June

By: katzenhai2

katzenhai2 — Wed, 25 Apr 2007 17:30:10 +0000

Sure, if you have a company and don’t accept US citizens, SEC has nothing to do with your business. Then you are in the jurisdiction of other FSA’s (Financial Security Agencies).

By: katzenhai2

katzenhai2 — Wed, 25 Apr 2007 17:28:00 +0000

Somewhere on the SEC site is a document which states, that a club of 100 people or $100,000 would be ok and be seen as a private offer.

By: ScottT

ScottT — Wed, 25 Apr 2007 11:32:56 +0000

Thanks for the info Sharon. The Treasury quote is an interesting/concerning one. Also, you indicated “If you did not have knowledge of what they were doing with the funds, then they are not securing the loan….”. This may be why Greg at Legisi is not particularly forthcoming with what is done with the funds…. Thanks again.

By: JoseLeon

JoseLeon — Wed, 25 Apr 2007 10:19:31 +0000

So, may I understand that not accepting funds from USA people avoid SEC rules?,
Could it be the cause why e-gold placed that new feature in its control panel to choose refusing money from USA accounts?

By: sharonsopinion

sharonsopinion — Wed, 25 Apr 2007 05:46:41 +0000

This is interesting information that I came across on the Legisi thread at scam.com. It’s from the Treasury Department…

“In the leading opinion, the Supreme Court of the United States, held that the definition of a security includes an investment contract, which is “a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or third party…” Designating such instruments as “loans” does not alter their legal status as securities. SEC v. W.J. Howey Co., et. al, 328 U.S. 293, 66 S. Ct.1100, 90 L.Ed. 1244 (1946).”

- Sharon

By: sharonsopinion

sharonsopinion — Wed, 25 Apr 2007 01:54:35 +0000

Hi Scott,

As I understand it a secured interest loan is one where you loan money to a company, who secures the interest with inventory, a physical thing (like real estate), or an investment intrument. In this case, loaning money to Club FX for them to invest it in Forex fits the definition. You are loaning to a company. The company is securing it with the intvestment vehicle Forex. Also, they are offering the security across state lines.

If you did not have knowledge of what they were doing with the funds, then they are not securing the loan.

In your example of loaning a friend money for a motorcycle, that does not fit the definition. First, you were loaning to a person, not a company. Second, that friend probably lives in the same state as you. Third, your friend wasn’t directly using the motorcycle to generate returns for the interest that they paid you. You didn’t say if they used the motorcycle as collateral, but it really doesn’t matter in your example.

So, yes, Club FX, Legisi, and Global Online Depository are all selling securities and/or a secured interest loan across state lines.

From http://www.sec.gov/about/whatwedo.shtml
“Not all offerings of securities must be registered with the Commission. Some exemptions from the registration requirement include:

* private offerings to a limited number of persons or institutions;

* offerings of limited size;

* intrastate offerings; and

* securities of municipal, state, and federal governments. ”

What I don’t know is what “limited size” means. Just try reading http://www.sec.gov/about/laws/sea34.pdf to see if you can get a clear idea of “limited size.” I even tried to find “limit” in the document and there are 268 instances of the word. I got lost trying to read through it all.

Does anyone else know what the criteria is for the SEC in a nutshell?

JMO,
Sharon

PS A related article is “Is It a Duck?“

By: ScottT

ScottT — Wed, 25 Apr 2007 00:39:01 +0000

Sharon - Please clarify “secured interest loan”. Seems to me there is nothing “secured” about any of it. To me it seems it is nothing more than an unsecured loan - I provide money and terms are outlined which will be followed to repay that loan - no collateral, no guarantees, etc. What is done with the money I loan is not of any direct consequence to me - other than obviously I hope whatever is done with it allows for full repayment of the load according to the terms as outlined. You mention “it is interstate and selling securities….”. Who’s selling securities? What if real estate transactions were used? What if sales of pencils were used? I once loaned money to a friend with which he purchased a motorcycle. He repaid the full amount with interest. Where did this fall as far as jurisdiction? By the way, I’ll deny it ever happened if some agency comes knocking on my door…. :o) Thanks in advance.

By: Maes

Maes — Tue, 24 Apr 2007 23:01:35 +0000

Yeah, looks like another Legisi to me.

By: sharonsopinion

sharonsopinion — Tue, 24 Apr 2007 19:51:04 +0000

Changing the wording from investment to loan does not change the rules. Instead of investing, it will be offering secured interest loans, which means it is still a financial service and still needs to be registered as such. Since it is inter-state and selling securities, it falls within the SEC jurisdication.

A duck is still a duck.

JMO - Sharon

By: Sing

Sing — Tue, 24 Apr 2007 18:39:04 +0000

Hmm Peter,

How come I have not received this update? Can I assume that the website is back in order? If so, must we re-register? Because I have not re-register and am now unsure of the status of my account?

Hope to get an answer….

many thanks

Sing