The Conference Committee Report that accompanied the Securities Act confirms that, in addition to traditional underwriters, the definition in § 77b(a)(11) includes: -10- Persons…who participate in any underwriting transaction or who have a direct or indirect participation on such a transaction…The test is one of participation in the underwriting undertaking rather than that of a mere interest in it. H.R. Conf. Rep. No. 73-152, at 24 (1933); cf. Pinter v. Dahl, 486 U.S. 622, 650 n.26 (1988) (recognizing that liabilities and obligations expressly grounded in participation are found in numerous places in the Securities Act, including the provisions defining underwriter in § 77b(a)(11)). Courts in this Circuit and elsewhere have interpreted the term “underwriter” broadly.

In SEC v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946), the Supreme Court held that an “investment contract” is a security when: (1) individuals are led to invest money; (2) in a common enterprise; and (3) with the expectation that they would earn a profit solely through the efforts of the promoter or of someone other than themselves. See also Sections 2(a)(1), Securities Act [15 U.S.C. § 77b(a)(1)]; 3(a)(10), Exchange Act [15 U.S.C. § 78c(a)(10)]. A “joint venture” is necessarily an investment of money in a common enterprise (thus meeting the first two Howey elements), but whether it is a “security” depends on the third element of the Howey test--whether the investors were dependent on the efforts of others for their expected financial return.

These solicitation efforts included sending a Macquarie representative to accompany Ming Zhao to meet personally with Trellus to discuss investing in Puda.16 Macquarie’s direct participation in preparing the December Offering materials and soliciting the purchase of Puda shares by Trellus and others makes it a statutory seller for purposes of Section 12 liability. See 15 U.S.C. §77b(3); Pinter, 486 U.S. at 646 (citing cases); Holographics, 93 F. Supp. 2d at 438 (stating that “firm commitment” underwriters are statutory sellers, and “solicitation” includes “participating in the preparation of the false and misleading Registration Statement and Prospectus and participating in ‘road shows’ to promote the sale of [the subject] common stock”); In re WorldCom, Inc. Sec.

See Fed. R. Evid. 403; see Pryor v. Connolly, 460 F. 8 In any event, the Securities Act defines a “security” to include a “guarantee” on a security. 15 U.S.C. §77b(a)(1). Case 1:10-cv-03229-KBF Document 343 Filed 06/18/13 Page 11 of 13 8 Supp. 2d 530, 538-39 (S.D.N.Y. 2006) (holding that trial court may strike misleading opening statements).

See Goldman Sachs, 790 F. Supp. 2d at 164-65. As Mr. Tourre showed in his motion for reconsideration, when the statutory definition of “offer” is applied in context, as the statute requires, see 15 U.S.C. § 77b(a), it is clear that it cannot, for Morrison purposes, include offers to enter into consummated, foreign transactions.21 Indeed, post-Morrison courts reading the definitions in context have determined that a broad reading is unsupportable. In Plumbers’ Union, Judge Koeltl held, in applying Morrison, “purchase” could not have the expansive definition set forth in the Exchange Act, because that would make a transaction domestic simply because the purchaser placed a buy order from the United States, which would be contrary to Morrison.

Plaintiffs do not (and cannot) allege that these documents “offer[ed] any security for sale or confirm[ed] the sale of any security” within the definition of “prospectus” set forth in Section Case 1:12-cv-10552-RWZ Document 24 Filed 08/31/12 Page 17 of 27 - 12 - A/75117720.4 2(a)(10) of the Act. 15 U.S.C. § 77b(a)(10).7 Accordingly, the Complaint fails to set forth any basis for a Section 12(a)(2) claim, even if Gustafson did not control (which it does). C. Plaintiffs’ Section 12(a)(2) Claim Must Be Dismissed Because The Absence Of Loss Causation Is Apparent On The Face Of The Complaint.

The courts have long and uniformly held that the drafting of a registration statement, without more, cannot create 3 Section 11 defines “underwriter” in three parts. 15 U.S.C. § 77b(a)(11). The first two parts refer to “firm commitment” or “best efforts” forms of distribution, neither of which is applicable in this action.

Section 2 of the Securities Act defines an underwriter as: any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking. 15 U.S.C. § 77b(a)(11). “Distribution” must be in connection with a registered public offering.

; Davis v. Avco Financial Servs., Inc., 739 F.2d 1057, 1063 (6th Cir. 1984) (holding that shares in pyramidal scheme were “securities” within meaning of securities laws); SEC v. Int'l Loan Network, Inc., 770 F. Supp. 678, 931-93 (D.D.C.1991), aff'd, 968 F.2d 1304 (D.C. Cir. 1992) (finding that pyramid recruiting could be regulated as security even if other aspects of club memberships did not constitute securities).3                                                              3 An “investment contract” is included within the definition of “security” in both the Securities Act of 1933 and the Securities Exchange Act of 1934. See 15 U.S.C. §§ 77b(a)(1) and 78c(a)(10). Case 3:17-cv-00691-B Document 19 Filed 05/15/17 Page 10 of 22 PageID 317 6 The fundamental problem with Plaintiffs’ RICO claims is that such claims may not be asserted based on allegations of conduct that, if pled properly and proven, would constitute securities fraud.

See, e.g., 7 Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act define “security” to include, among other things, any bond. 15 U.S.C. §§ 77b(a)(1) & 78c(a)(10). Case 2:12-cv-08024-AB-JEM Document 98-1 Filed 09/16/16 Page 25 of 31 Page ID #:516 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SEC v. Research Automation Corp., 585 F.2d 31, 35-36 (2d Cir. 1978).