September 2008
LLC Interests May Constitute ‘Securities’Federal Court Conducts Factual Analysis, Rather Than Establishing a ‘Bright-Line Rule’
By Robert S. Reder
Recently, the Second Circuit Court of Appeals, in affirming convictions for securities fraud and conspiracy to commit securities and mail fraud, ruled in U.S. v. Leonard, that interests in various limited liability companies ("LLCs") onstituted "securities" for purposes of the federal securities laws. The Leonard analysis is instructive of the process that a court will follow in considering the status of non-traditional securities, such as LLC interests, under the federal securities laws.
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