Imagine if you will a guarded velvet rope in front of famed Tiffany & Co.’s flagship Fifth Avenue store, where the only way to gain access to even peek in the windows and see the shiny merchandise is to prove you have a large enough bank balance to buy something.
Don’t have six figures in the bank, or audited financial statements to prove it? Then no peeking at the goods, thank you very much.
That, in essence, is what Phil Goldstein, principal of New York-based Bulldog Investors and famed champion of sidelining the US Securities and Exchange Commission’s efforts to require all hedge fund managers to register, has been arguing is not only a violation of his and other hedge fund managers’ First Amendment rights, but outright stupid.
Goldstein has refined his analogies over the years spent fighting the SEC and other regulators, including Massachusetts Secretary of State William Galvin, to illustrate how asinine he feels various marketing and solicitation rules governing private funds are.
“You don’t have to be accredited to call up Rolls Royce and ask for a brochure or go to their Web site to get information about a car,” Goldstein has said. “Why do you need to be accredited to do the same thing with a hedge fund?”
But no analogy in the world could help him with his latest free speech case against Galvin, which a judge last month ruled that Bulldog couldn’t allow unqualified investors to access information on its Web site.
Bulldog argued in the case that an email request from an unaccredited potential investor was “insignificant” because “no actual injury occurred in that (the individual) did not purchase any securities, and was never interested in doing so,” the judge wrote in the lengthy ruling.
However, “No actual securities transaction is required to constitute injury; the injury in issue is the violation of Massachusetts law against offering unregistered securities, with its potential for erosion of regulatory protection of the capital markets that this Court discussed at length in its preliminary injunction decision.”
“On the facts alleged, Bulldog’s contact with Massachusetts was not fortuitous, attenuated, or involuntary, but was deliberate and intentional, despite notice of the potential consequences. The Secretary’s assertion of jurisdiction based on that contact imposes no unfairness.”
Bull-dog, says Goldstein, who on Sunday sent out an email noting that the case is more based on Galvin’s need to attack Bulldog, so to speak, than on any basis of fact, and who took some time out earlier this week to talk to at least one trade rag about why he is being wronged.
“Galvin’s rush to sue us without any meaningful investigation, his refusal to enter into settlement discussions even though no one was harmed, and his agreement in our separate civil rights action to stipulate that we did not say anything misleading or attempt to enter into an illegal transaction as a quid pro quo for us not deposing him or calling as a witness (presumably to avoid being subjected to potentially embarrassing questioning), suggest that his true motive from the beginning was to silence an ideological opponent,” Goldstein said, noting he will appeal the court’s decision.
Said Goldstein: “As Thomas Paine said: ‘the harder the conflict, the more glorious the triumph.’”
Perhaps being up 27% year to date is glorious enough?
Click here to read Goldstein’s full brief.
Click here to read the full court response to Galvin’s allegations.
Click here for more AllAboutAlpha.com coverage of Phil Goldstein.