Are Financial Instruments Issued by Agricultural Cooperatives Securities? A Framework of Analysis
The Securities Act of 19332 and the Securities Exchange Act of 1934 provide the basic framework for regulation of the issuance, distribution, and trading of securities in the United States. The basic function of the Securities Acts is to shine direct light upon financial instruments through full and complete disclosure so that the investing public can make informed decisions about the purchase and sale of securities. This article is not intended to provide a comprehensive history of the treatment of cooperative equity. Nor will it provide definitive commentary on (1) the federal securities or other laws that might be deemed or determined to govern activities or instruments of agricultural cooperatives; or (2) any particular case, administrative opinion, or other determination of such. Rather, the article provides a brief recitation of the historical framework of cooperatives and their financing instruments, an overview of federal securities laws in the context of the potential liabilities they create for modern agricultural cooperatives using such instruments, and possible actions that might be taken by those cooperatives to mitigate such liabilities.