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Fund Forum

This issue of Venable's Fund Forum:

  • Reviews the SEC's recent report on initial coin offerings and the federal securities laws;
  • Discusses the New York State Attorney General's recent lawsuit against a Queens-based investment adviser;
  • Summarizes a Tax Court decision regarding a long-standing IRS approach to taxing gain and loss on disposition of partnership interests; and
  • Discusses recent efforts to legalize medical marijuana in the workplace.
coins and pens

Is the Token Booth Closing? Initial Coin Offerings and the Federal Securities Laws

Initial coin offerings (ICOs or "Token Sales") typically involve the offer and sale of digital assets utilizing distributed ledger or blockchain technology. In the past seven months, over $1 billion has been raised through ICOs, which many have predicted would lead to regulatory scrutiny. This prediction recently came true as the SEC's Division of Corporation Finance and Division of Enforcement issued a joint statement regarding emerging technologies, specifically citing the SEC's Report of Investigation regarding the Decentralized Autonomous Organization (the DAO) and its use of distributed ledger or blockchain technology to operate as a "virtual entity".

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financial crime

New York State Attorney General Files Lawsuit Against Queens Investment Adviser

Eric Schneiderman, the Attorney General for the State of New York, recently announced a lawsuit against a Queens-based investment adviser for allegedly defrauding elderly investors. Over the course of time, the adviser grew his business to over 120 advisory clients with over $11 million in assets under management. The complaint asserts that, as an investment adviser, the defendant owed a fiduciary duty to his clients and was therefore obligated to recommend suitable investments to his clients consistent with their "investment objectives, risk tolerances and time horizons . . ."

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lending laws

Tax Court Rejects Long-Standing IRS Approach to Taxing Gain and Loss on the Disposition of Partnership Interests

On July 13, 2017, the Tax Court, in a reviewed opinion of the court in Grecian Magnesite Mining, Industrial & Shipping Co., SA v. Commissioner, 149 T.C. No. 3, rejected the long-standing IRS approach (as articulated in Revenue Ruling 91-32) to determining both the source of gain or loss from the disposition of a partnership interest, and whether such gain or loss is effectively connected with the conduct of a U.S. trade or business. Under the approach espoused by the Tax Court, the source and effectively connected status of such gain or loss would be determined using an "entity" approach, rather than the "aggregate" approach historically employed by the IRS.

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for medical use only

Rock, Meet Hard Place: Accommodating Medical Marijuana

Until recently, employers had no duty to accommodate an employee's use of medical marijuana unless a state statute said otherwise—they could rely on their drug-free workplace policy and just say no. Indeed, the Drug-Free Workplace Act of 1988 required federal contractors to maintain drug-free workplaces, and many state laws followed. Many private employers not subject to the Act adopted drug-free workplace policies anyway. Such policies became the norm in the private and public sectors. But efforts to legalize medical marijuana also have taken hold.

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Read past issues of Venable's Fund Forum.