Control Person

Control Person

The securities laws use the term “control person” in a number of contexts and the meaning changes, depending on the context. Generally speaking, Control Person means an individual that directly or indirectly exercises control over another person. Any person that (A) is a director, general partner, or executive officer; (B) directly or indirectly has the right to vote ten percent or more of a class of any voting security or has the power to sell or direct the sale of ten percent or more of any class of voting securities; (C) in the case of a limited liability company, is a managing member; or (D) in the case of a partnership, has the right to receive upon dissolution, or has contributed, tenpercent or more of the capital, is presumed to be a control person. For purposes of this subdivision, “control” means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract or otherwise;

Rule 405 of the Securities Act of 1933, defines a control person by defining an affiliate and the word control:

An affiliate of, or person affiliated with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with, the person specified. The same rule defines the term control (including the terms controlling, controlled by and under common control with) as meaning the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.

Under the Investment Advisors Act, “Control” and Control Person means

  • The power, directly or indirectly, to direct the management or policies of a person, whether through ownership of securities, by contract, or otherwise.
    • people who are officers, partners, or directors exercising executive responsibility (or persons having similar status or functions) is presumed to control the firm.
    • A person is presumed to control a corporation if the person: (i) directly or indirectly has the right to vote 25 percent or more of a class of the corporation’s voting securities; or (ii) has the power to sell or direct the sale of 25 percent or more of a class of the corporation’s voting securities.
    • A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the partnership.
    • A person is presumed to control a limited liability company (“LLC”) if the person: (i) directly or indirectly has the right to vote 25 percent or more of a class of the interests of the LLC; (ii) has the right to receive upon dissolution, or has contributed, 25 percent or more of the capital of the LLC; or (iii) is an elected manager of the LLC.
    • A person is presumed to control a trust if the person is a trustee or managing agent of the trust.

« Back to Glossary Index
The Securities Lawyer