Opinion ID: 184135
Heading Depth: 4
Heading Rank: 1

Heading: Solely Incidental To

Text: Our analysis starts with the plain language of the statute. See, e.g., Wright v. Fed. Bureau of Prisons, 451 F.3d 1231, 1234 (10th Cir.2006) (citation omitted). We read the words of the statute in their context and with a view to their place in the overall statutory scheme. Id. (internal quotation marks and citations omitted). If the statutory language is clear, our analysis ends and we must apply its plain meaning. United States v. Husted, 545 F.3d 1240, 1245 (10th Cir.2008). However, [i]f the court finds the statute ambiguous, the court then looks beyond the plain text to resolve the ambiguity, examining legislative intent [and] overall statutory construction. United States v. Hinckley, 550 F.3d 926, 932 (10th Cir.2008) (footnote and citation omitted). A statute is ambiguous if it is capable of being understood by reasonably well-informed persons in two or more different senses. Id. (internal quotation marks and citation omitted). The IAA does not define the phrase solely incidental to. See 15 U.S.C. § 80b-2. Dictionary definitions of the word incidental differ somewhat. [2] However, all definitions establish that the word incidental has two components. To be considered incidental, two actions or objects must be related in a particular waythe incidental action or object must occur only as a result of or in connection with the primary. Additionally, the incidental action or object must be secondary in size or importance to the primary. Plaintiffs emphasize the second component of the definition, arguing that dictionary definitions of `incidental' universally support Plaintiffs' interpretation of the term as `inconsequential,' `non-central,' or `non-mandatory.' Aplt. Br. 25-26. Yet, the relational aspect is equally important and cannot be ignoredto be considered incidental, an action or object must be of lesser size or importance and be undertaken in connection with the primary action or object. The district court's interpretation acknowledges both components of incidental, while the Plaintiffs' proposed interpretation would have us focus on the quantum or importance of the advice without regard to its relationship with the broker-dealer's business. Further, the phrase solely incidental to, when read as a whole, makes more sense under the district court's interpretation. Solely, of course, means exclusively or only. Webster's Unabridged Dictionary 1815 (2d ed. 2001). This compliments the relational aspect of incidental: solely modifies incidental to, and the phrase as a whole renders the exemption applicable only when the broker-dealer gives advice in connection with the sale of a product. Under Plaintiffs' proposed reading, application of the exemption would hinge upon the quantum or importance of the broker-dealer's advice. Besides creating a difficult problem of line-drawinghow much advice is too much, and how could we measure the importance of the advice?under Plaintiffs' interpretation solely would not meaningfully modify incidental to and would be superfluous. We are unwilling to adopt such an interpretation. Accordingly, the plain text of the statute supports the district court's interpretation, which we adopt. Sources beyond the plain text confirm this result. The SEC is charged with implementing the IAA. See 15 U.S.C. § 80b-11(a). Therefore, we would defer to the SEC's interpretation if it were embodied in a rule or regulation that has the force of law. See Newton v. F.A.A., 457 F.3d 1133, 1136-37 (10th Cir.2006) (quoting United States v. Mead Corp., 533 U.S. 218, 226-27, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001)). However, the SEC has not promulgated such a rule or regulation. [3] Therefore, we consult the SEC's position only for its persuasive value. Via Christi Reg'l Medical Cntr., Inc. v. Leavitt, 509 F.3d 1259, 1272 (10th Cir.2007) (quoting Christensen v. Harris Cnty., 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (citing Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944))). Since its first release on the issue in 1946, the SEC's position has been consistent: in the IAA, Congress recognized that brokers and dealers commonly give a certain amount of advice to their customers in the course of their regular business, and it would be inappropriate to bring them within the scope of the [IAA] merely because of this aspect of their business. Opinion of General Counsel Relating to Section 202(a)(11)(C) of the Investment Advisers Act of 1940, Investment Company Act Release No. 2, 11 Fed.Reg. 10996, 10996 (Sept. 27, 1946). More specifically, the SEC has indicated that advice is solely incidental to a broker-dealer's business when the advisory services rendered to an account are in connection with and reasonably related to the brokerage services provided to that account. See Certain Broker-Dealers Deemed Not To Be Investment Advisers, Investment Advisers Act Release No. 2340, 70 Fed.Reg. 2716, 2726 (Jan. 14, 2005) (emphasis added) [hereinafter Vacated Rule], vacated on other grounds, Fin. Planning Ass'n, 482 F.3d 481; Interpretive Rule Under the Advisers Act Affecting Broker-Dealers, Investment Advisers Act Release No. 2652, 72 Fed.Reg. 55126 (Sept. 28, 2007) (proposed rule) [hereinafter Proposed Rule]. Thus, the SEC's position is that application of the broker-dealer exemption hinges upon whether the advice in question relates to or is connected with the broker-dealer's primary businessnot upon the quantum or importance of that advice. This position is based on the SEC's analysis and interpretation of the statutory history, as well as its knowledge of the historical practices of brokers and dealers. See Vacated Rule at 2726-27; Proposed Rule at 55127-28. The SEC has particular expertise in this area, and we find its position persuasive. Our interpretation also finds support in legislative history. The IAA was the last of a series of regulatory laws passed in response to the stock market crash of 1929. See Fin. Planning Ass'n, 482 F.3d at 483; Arthur B. Laby, Reforming the Regulation of Broker-Dealers and Investment Advisers, 65 BUS. LAW. 395, 402 (2010) [hereinafter Laby, Reforming the Regulation of Broker-Dealers ]. One of the earlier statutes, the Public Utility Holding Company Act of 1935, commissioned the SEC to conduct a study on investment trusts and investment advisers. Laby, Reforming the Regulation of Broker-Dealers, at 402. The SEC conducted the study and noted that a large number of people had begun to market themselves as professional investment counsel. See H.R. Doc. No. 477, at 28 (1939). This emerging group purported to give unbiased advice in exchange for compensation. Id. These activities were largely unregulated and, in the SEC's view, posed a substantial risk to investors. Id. Of particular concern were brokerage businesses that divided into two segments: one that acted as traditional brokers and sold securities and another that gaveand was compensated forinvestment advice as a distinct product. Amicus Curiae ACLI Br. 10-11 [hereinafter Amicus Br.]; see H.R. Doc. No. 477. In response, Congress introduced bills that became the IAA. See S. 3580, 76th Cong. (1940); H.R. 10065, 76th Cong. (1940). As the bills advanced in the House and Senate, members of Congress acknowledged that investment brokers and dealerswho were regulated under the Securities Exchange Act of 1934, see Laby, Reforming the Regulation of Broker-Dealers, at 403; Amicus Br. 7gave investment advice yet were not the target of the new regulation. See Fin. Planning Ass'n, 482 F.3d at 485; H.R. Doc. No. 477, at 3; 86 Cong. Rec. 2847 (1940); 86 Cong. Rec. 9813 (1940). Instead, the IAA targeted the emerging group of professional investment advisers: those persons who gave investment advice as a product separate and apart from the sale of securities. Our interpretation of solely incidental to comports with this historybroker-dealers meet the first prong of the exemption so long as they give investment advice only in connection with the primary business of selling securities. On the other hand, broker-dealers who give advice that is not connected to the sale of securitiesor whose primary business consists of giving advicedo not meet the first prong of the broker-dealer exemption.