Thank You For Submiting Feedback!
As a remedial statute, the Investment Advisers Act of 1940, 15 U.S.C.S. § 80b-1 et seq., must be read broadly in order to effectuate its purpose of protecting the public and investors against malpractices by persons paid for advising others about securities. At the same time, the definitional requirements of the statute must be interpreted so as not to sweep in persons whose activities Congress did not intend to regulate on the theory that they posed no national concern.
Appellant Leo Zinn brought suit against appellee Lemar Parrish to recover agent fees due him under a personal management contract pursuant to Ill. Rev. Stat., ch. 72 § 2. Defendant filed a motion for summary judgment, arguing that the contract was unenforceable because of Zinn’s failure to obtain a license under the Illinois Private Employment Agency Act, Ill.Rev.Stat., ch. 48, § 197a et seq. ("the Employment Agency Act"). United States Court of Appeals for the Seventh Circuit reversed and remanded. On remand, the district court found in favor of appellee holding that appellant's failure to register as an investment adviser under the Investment Advisers Act of 1940, 15 U.S.C.S. §§ 80b-1 et seq. (the 1940 Act), voided the contract and he had failed to perform his obligations under the contract.
Was appellant agent required to register as an investment adviser under the Investment Advisers Act of 1940, the failure of which would render the contract entered into by the appellant voidable?
On review, the court found that the activities of appellant did not place him under the requirements of the 1940 Act. The court further found that appellant had reasonably and in good faith performed his duties under the contract. The court also found that appellee had terminated his relationship with appellant after appellant negotiated a large contract in breach of the contract. Accordingly, the court reversed the judgment and remanded for calculation of damages and interest.