an arcane creation of a provision in Section 2(11) of the Securities Act. That section defines an Underwriter to be anyone who buys from an Issuer with a view to distribution in a public offering. It also defines Issuer (for purposes of Section 2(11) only) to include Affiliates of the Issuer. This creates a technical problem for a Broker-Dealer that wants to make a market in the Securities of one of its Affiliates. Technically, regular investors who buy from a Broker-Dealer that is Affiliated with the Issuer will be treated as Underwriters for purposes of the Securities Act. That is bad news for those regular investors and doesn’t make sense. In practice, this has been solved by the Broker-Dealer delivering a Prospectus in all such market making transactions involving Securities of an Affiliate of the Broker-Dealer. That Prospectus is called a Market Maker Prospectus and must be kept up-to-date by the Issuer and its Broker-Dealer Affiliate for so long as the Broker-Dealer is making a market in the Issuer’s Securities.
Latham & Watkins is pleased to provide our Book of Jargon® — Hedge Funds. The Book of Jargon® — Hedge Funds
is a comprehensive glossary of hedge fund slang, legal and regulatory terminology, and acronyms.
For more information please visit: www.lw.com