SEC v. Merchant Capital, LLC
United States Court of Appeals for the Eleventh Circuit
483 F.3d 747 (2007)
Merchant Capital (defendant) sold interests in registered limited liability partnerships to members of the public with no debt-purchasing expertise, designating them 'general partners' who could remove Merchant as managing general partner only for cause with unanimous consent, and whose actual participation was limited to checking ballot boxes with little supporting information; Merchant pooled all investor funds through its own servicer, New Vision, and never registered the interests, prompting the SEC's (plaintiff) enforcement action.
Whether an interest falls outside the definition of investment contract merely because the purchaser has some nominal involvement in operating the business.