Mika Meyers, PLC was recently retained as amicus-curiae counsel for the North American Securities Administrators Association, Inc. (“NASAA”) in a case pending before the Michigan Court of Appeals. The central issue in the case is whether the lower court applied the correct test when analyzing whether certain promissory notes issued by the Appellee are securities under Michigan’s codification of the Uniform Securities Act.

The case began as a regulatory enforcement action by Michigan’s securities regulator against the issuer of the notes. The presiding administrative law judge concluded that the notes are securities under the “family-resemblance test,” which was the test adopted by the U.S. Supreme Court in Reves v Ernst & Young. That decision was reversed on appeal by the Kent County Circuit Court which applied a different test after concluding that Michigan’s appellate courts had never adopted the family-resemblance test. If upheld, the circuit court’s decision would make Michigan an outlier among the states that have adopted some version of the Uniform Securities Act, undermining uniformity among state securities laws and potentially eroding the ability of other jurisdictions to enforce their securities laws. NASAA’s amicus curiae brief can be viewed here.

NASAA is the non-profit association of state, provincial and territorial securities regulators in the United States, Canada and Mexico. NASAA has 67 members, including the securities regulators in all 50 states, the District of Columbia, Puerto Rico, and the US Virgin Islands. The overriding mission of NASAA and its members is to protect investors, particularly retail investors, from fraud and abuse. The need to protect investors is especially acute with regard to promissory notes, which are consistently reported as one of the top investor threats by NASAA members. See, e.g., Press Release, NASAA, NASAA Reveals Top Investor Threats for 2022 (Jan. 10, 2022), https://www.nasaa.org/61477/nasaa-reveals-top-investor-threats-for-2022/ (fraud related to promissory notes cited as one of the top four most frequently seen investor threats); NASAA 2020 Enforcement Report, at 7 (Sept. 23, 2020), available at https://www.nasaa.org/wp-content/uploads/2020/09/2020-Enforcement-Report-Based-on-2019-Data-FINAL.pdf (“In 2019, state securities regulators overwhelmingly reported that promissory notes were the products most often associated with new investigations as well as enforcement actions.”); NASAA 2019 Enforcement Report, at 7 (Sept. 10, 2019), available at https://www.nasaa.org/wp-content/uploads/2019/11/2019-Enforcement-Report-Based-on-2018-Data-FINAL.pdf (noting that promissory notes were the “main securities product” used to facilitate the $1.2 billion Woodbridge Ponzi scheme).

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