​​​​​​​​​​​​If you are interested in starting an investment club, the Division of Securities is unable to comment on your club’s particular circumstances and this information should not be taken as an opinion on whether the Wisconsin Uniform Securities Law, Wis. Stat. ch. 551 (ch. 551) applies to your situation. Please consult your own legal counsel for assistance in establishing an investment club that complies with the securities and business entity laws in Wisconsin.

 

This summary reviews only certain aspects of ch. 551 for starting and operating an investment club, and other laws may apply. This summary is not complete and should not be relied on for interpretation of any part of the securities law.

 

If your club is formed as a general partnership, the interests in a general partnership would not normally be considered securities so long as the members participate equally in management decision-making. If it is determined the interests are not securities, then ch. 551 would not apply to them. However, whenever management of a general partnership is delegated to or vested in one or more managers, the partnership interests may be considered securities. Please note that the way a partnership operates, rather than its legal status, will determine whether the interests sold are securities. For instance, if you set up your club as a general partnership but one partner makes the essential managerial decisions, the interests sold will be treated as securities and ch. 551 will apply to the offers and sales. 

 

If your club is formed by its members without specifying the form of the entity, the law will usually classify it as a general partnership.

If the club is set up as a limited partnership or corporation, the club’s limited partnership interests or shares of stock are securities and ch. 551 would be applicable. The interests may need to be registered with our office unless you identify an applicable exemption from registration. Generally, the smaller the club, the more likely you may qualify for an exemption from registration. For instance, if your club has its principal office in Wisconsin and no more than 25 security holders, the interests may be exempt from registration pursuant to Wis. Stat. s. 551.202(24), provided no commission or other compensation is paid or given to anyone (other than a securities broker-dealer or agent registered pursuant to ch. 551), and no advertising is published, in connection with offering or selling the interests.

  

Other registration exemptions may be available. See Wis. Stat. s. 551.201 and  551.202 or the Exemptions Menu. 

  

If the club is set up as a Wisconsin limited liability partnership (LLP) or limited liability company (LLC) and each membership interest in the club actively helps decide what investments to make, the interest would not be considered a security that falls within the definition of an “investment contract” under Wis. Stat. s. 551.102(28)(e). However, partners or members that vote or have the right to vote, or the right to information concerning the business affairs of the LLP or LLC, or the right to participate in management, does not solely establish that all partners or members are actively engaged in the management of the LLP or LLC. In addition, the interest in the club is not an “investment contract” if each holder of an interest is authorized under applicable law or under the partnership, operating, or other governing agreement to act for and bind the LLP or LLC and the total number of holders of all interests in the LLP or LLC does not exceed 15. 

For additional information regarding the forms that need to be completed, please contact the Corporations Bureau at (608) 261-7577, by email at DFICorporations@dfi.wisconsin.gov​ or check their website at Business Entity Forms​.

Any person who receives compensation for the offer or sale of your club’s membership interests, or for the actual purchases and sales of securities for your club, may fall within the definition of broker-dealer or agent and, if so, need to be registered under Wis. Stat. s. 551.401 and  551.402.

  

More information on the registration of investment advisers and broker-dealers can be found at Registration of Professionals on this website.

 

If any of your members are out-of-state, you should contact the securities regulators in those investors’ states. Here is a directory of securities regulators in other states on the North American Securities Administrators Association (NASAA) website.

For interstate offers, you may also contact the U.S. Securities and Exchange Commission (SEC) to determine if your interests require registration with that agency. See the SEC website​ for more information on investment clubs.