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Sec. & Exch. Comm'n v. Wealth Mgmt. LLC, 09-4090

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By FindLaw Staff on December 01, 2010 2:22 PM

rReceiver's distribution plan of insufficient funds to repay investors, following the SEC's enforcement action against an investment firm

Sec. & Exch. Comm'n v. Wealth Mgmt. LLC, 09-4090, concerned a challenge to the district court's approval of a receiver's proposal to distribute diminished assets to investors on a pro rata basis and imposing a cutoff date after which any redemption distributions would be offset against the investor's total distribution, in the Securities and Exchange Commission's (SEC) enforcement action against a Wisconsin-based investment firm and its principals alleging a host of securities law violations arising from the failure of the firm's six unregistered investment vehicles - similar to hedge funds - for investing in unconventional and illiquid assets.


In affirming, the court held that the district court did not abuse its discretion in its oversight of the receiver's planned distribution of receivership assets as, where a receivership trust lacks sufficient assets to fully repay investors and the investors' funds are commingled, a distribution plan may properly be guided by the notion that "equality is equity," and pro rata distribution is appropriate.  The court also held that in approving the receiver's proposed plan for distribution, the district court properly considered and rejected the objectors' contrary arguments, primarily their argument that they were really creditors and not equity holders and therefore entitled to preferential treatment.

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