The highest court in Massachusetts
is set to decide whether restrictions on hedge fund advertising are a violation
of the First Amendment.
Phil Goldstein, founder of Saddle Brook, N.J. activist hedge fund Bulldog
Investors, who famously overturned the Securities and Exchange Commission's
attempt to force registration on hedge funds, is now fighting William Galvin,
the Secretary of State of Massachusetts, over his right to operate a Web site
for Bulldog that he made available to the public in theoretical violation of
the private placement restrictions against advertising.
Goldstein has argued that these restrictions violate his First Amendment right
to free speech and countersued the state on those grounds. Many of his charges
were dismissed by a lower court, but the case is now set to be heard by the
state's highest court at a date that has yet to be decided.
Galvin filed an administrative enforcement action against Goldstein in January
2007 for having an open Web site and for responding to an E-mail request for
information from a non-accredited investor. Goldstein fought the action and it
was appealed to the superior court, which ruled against him. Goldstein then
appealed to the Massachusetts
appellate court. Yesterday the Supreme
Judicial Court, the state's highest court, stepped
in to decide the case.
In a parallel action, Goldstein is suing Galvin in civil court in Massachusetts for violating his right to free speech and
challenging his authority to bring the action in Massachusetts. “I did not do anything in Massachusetts. I didn't know
anything about this until after he sued us,” says Goldstein. If Goldstein wins,
he could seek damages, which he would use to cove his legal fees related
to the suit and to his defense of Galvin's administrative action. On September
30, Goldstein lost his civil rights case in the Massachusetts superior court. He plans to appeal the decision. On October 18, he issued a letter to friends and
investors responding to the decision, the full text of which is available here.
"Nobody made Galvin the sheriff of the Internet," says Goldstein.
"It's not his job to run around and police the Internet. If every dinky
state official did that, the Internet couldn't function. What gives him the
Secretary Galvin’s office declined to comment on the cases.
-- Josh Friedlander
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No Don Quixote, He
Round Two! Goldstein to sue SEC over advertising restrictions
The tables have turned on Phillip Goldstein