Opinion ID: 372623
Heading Depth: 2
Heading Rank: 1

Heading: Interpretation of the Registration Requirement.

Text: 33 7 U.S.C. § 2 defines a commodity trading advisor as any person who, for compensation or profit, engages in the business of advising others, either directly or through publications or writings . . . . This language demonstrates some concern for indirectly, as well as directly, conveyed advice. The CFTC staff has interpreted this provision liberally. 34 We do not believe that the definition of commodity trading advisor requires that the compensation or profit flow directly from the person or persons advised. It is sufficient that the compensation or profit is to result wholly or in part from the furnishing of services . . . . 35 CFTC Interpretive Letter No. 75-11 (1975-77 Transfer Binder) Comm.Fut.L.Rep. (CCH) P 20,098 (1975) at 20,763 n. 6. The exemption upon which appellant depends relieves from registration only advisors who, during the preceding twelve months, have not Furnished commodity trading advice to more than fifteen persons. Furnished implies indirect as well as direct provision. The CFTC staff in a related context has taken the position which lends support to our view, that nonpaying as well as paying clients must be joined for determining the exemption's availability. CFTC Interpretive Letter No. 76-9 (1975-77 Transfer Binder) Comm.Fut.L.Rep. (CCH) P 20,151 (1976). 36 The Act was enacted to remedy widespread abuses in commodity trading. We have recognized that (r)emedial statutes should be liberally construed and should be interpreted (when that is possible) in a manner tending to discourage attempted evasions by wrongdoers. Westinghouse Electric Corp. v. Pacific Gas & Electric Co., 326 F.2d 575, 580 (9th Cir. 1964) (quoting Scarborough v. Atlantic Coast Line R. R., 178 F.2d 253, 258 (4th Cir. 1949)). In other security law contexts courts ordinarily defer to statutory purpose and narrowly construe exemptions from registration. See, e. g., Securities & Exchange Commission v. Ralston Purina Co., 346 U.S. 119, 73 S.Ct. 981, 97 L.Ed. 1494 (1953); Abrahamson v. Fleschner, 568 F.2d 862 (2d Cir. 1977), Cert. denied, 436 U.S. 905, 98 S.Ct. 2236, 56 L.Ed.2d 403 (1978); Quinn & Co. v. Securities & Exchange Commission, 452 F.2d 943, 946 (10th Cir. 1971), Cert. denied, 406 U.S. 957, 92 S.Ct. 2059, 32 L.Ed.2d 344 (1972). We believe our interpretation of section 4m is consistent with this emphasis. 37 The registration provisions of the Act serve an important purpose; registration assures a public source of information about those upon whom customers rely and protects the public from individuals unfit to act as advisors. Advisors should not be able to circumvent the congressionally-mandated registration scheme merely by the subterfuge of advising a person or entity who then operates as a conduit for trading advice to the actual advisees. If this were possible the registration requirement would serve little protective purpose at all. On the other hand, attributing the customers of an advisee to the advisor in all contexts would stretch the Act unjustifiably. Remedial intent must not become a rationalization for bending a statute to a court's will. 38 We interpret section 4m, 7 U.S.C. § 6m, to include within the persons to whom an advisor furnishes advice customers of an advisee when the advisor knows or should know that advice he gives is directly passed to those customers. The ultimate customers should be protected from the ultimate advisor in this situation. The fee the ultimate advisor receives will reflect the value of the advice to the ultimate customers. Absent the interpretation we have given the section, mere sham arrangements would shield those unqualified to be advisors from the registration and disclosure procedures. 39