Bulldog Loses First Amendment Case In Mass. Court

Sep 23 2011 | 12:38pm ET

Massachusetts' highest court has dealt another setback to hedge fund Bulldog Investors.

The state's Supreme Judicial Court ruled this week that Massachusetts Secretary of the Commonwealth William Galvin did not violate Bulldog's free speech rights when it fined the hedge fund three years ago for providing information about itself to a non-accredited investor. The ruling is the second defeat for Bulldog and founder Philip Goldstein before the court, which last year rejected another part of the hedge fund's appeal, challenging Galvin's jurisdiction over the New Jersey-based firm.

Goldstein argued that the Massachusetts securities law that it was found to have violated four years ago are an infringement on Bulldog's First Amendment rights. But on Tuesday, the court ruled that Bulldog's Web site was commercial speech not covered by freedom of speech following a January hearing.

"The prohibition against public offerings that Bulldog challenges as a violation of the First Amendment right to free speech is simply the means to enforce the disclosure requirements for a public offering, specifically the filing of a registration statement," Associate Justice Ralph Gants wrote. "While a registration statement is not required for a private offering of securities, a private offering, as the name suggests, is a limited exemption from the general registration requirement, permitting offers to accredited and sophisticated investors who, precisely because they are accredited and sophisticated, are deemed able to fend for themselves."

Goldstein has denied that the information Bulldog's Web site provided constituted an offering, telling Reuters two years ago, "apparently, if you live in Massachusetts, you have to be rich to read truthful material on a hedge fund Web site."

It is unclear whether Bulldog plans to further appeal the case, although Goldstein has in the past pledged to continue the fight. Last year, he sued Galvin, whom he once called a "pompous ass," accusing him of singling out Bulldog because of Goldstein's outspokenness.

Goldstein and Bulldog led the successful fight more than five years ago to have the Securities and Exchange Commission's hedge fund registration requirement struck down.


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