Commissioner’s Release: 110-C:

Withdrawal from Publication of Policy Letter No. 151 Under the Corporate Securities Law of 1968

Pete Wilson, Governor
Date: Aprill 9, 1998

Dale E. Bonner, Commissioner

It has been brought to the attention of the Department of Corporations (“Department”) that certain language contained in Policy Letter No. 151 (April 2, 1971) (“PL/151”) is being used to advance the proposition under the Corporate Securities Law of 1968 (“CSL”) that a general partner giving advice with respect to securities to a single limited partnership (or other similar entity) is in effect giving advice to itself and not to “others” as required by the definition of “investment adviser” under Corporations Code Section 25009. Consequently, it is argued, a general partner under such facts and circumstances is not an investment adviser and is not, thereby, subject to the certification and other provisions of the CSL, even though the general partner engages in the business of giving advice with respect to securities for compensation.

The proposition advanced by interpreting the language contained in PL/151 is contrary to the position of the Securities and Exchange Commission when interpreting the definition of “investment adviser” under the Investment Advisers Act of 1940, a definition that is substantially similar to the definition of “investment adviser” contained in Corporations Code Section 25009 under California law. See, Abrahamson v. Fleschner (2nd Cir. 1977) 568 F.2d 862, 869). The proposition advanced by this interpretation is also contrary to the interpretation of the definition of “investment adviser” under the CSL given by the Commissioner, moreover. The Commissioner often looks to the federal securities laws and the interpretations of the Securities and Exchange Commission and its staff for interpretive and other authoritative assistance when administering the CSL in the absence of California law on the subject. See, Commissioner’s Release No. 80-C (Revised May 25, 1993), Commissioner’s Opinion No. 87/1C, and People v. Schock (1984) 152 Cal.App.3d 379, 387.

Accordingly, the Commissioner hereby withdraws from publication PL/151 as not reflecting either the correct or the Commissioner’s interpretation of the definition of “investment adviser” under Corporations Code Section 25009. Moreover, to the extent that language found in other policy letters and interpretive opinions of the Commissioner that refer to PL/151 or are based on an interpretation derived from PL/151 to support either the proposition that a general partner under the facts and circumstances described therein is not an investment adviser or that it is the interpretation of the Commissioner that a general partner under such facts and circumstances is not an investment adviser, the language in these policy letters and interpretive opinions is incorrect and does not reflect the interpretation of the Commissioner.

WILLIAM KENEFICK
Assistant Commissioner
Office of Policy
(916) 322-3553