Different versions of Groucho Marx’ famous remark that he would not be a member of any club that would accept people such as himself, reprised by Woody Allen, came to mind when I read today the SEC’s quasi-absurd news release warning investors about the regulation of investment clubs.

The Commission, as guardian of free markets, warns that a club in some cases may be a mutual fund (too many members and it is open to people who are not active in making joint investment decisions), may be selling securities (if every member does not actively participate), and may have someone who needs to register as an investment adviser (if a member is paid to investigate investments).  Seems the anti-fraud provisions of securities laws also may apply.

I am not sure I want to be around a securities regulator that is spending time in warning my fellow citizens about investment clubs.  Every issue of the Wall Street Journal, every day’s press release from the SEC itself, covers major frauds, lies, the material abuse of investors both retail and professional.  I just don’t see the wildfire spread of dangerous investment clubs putting America at risk. In several decades of SEC legal advice to clients, I can remember exactly one inquiry about investment clubs; my response was along the lines of ” forget about it, our government has important matters to deal with.”

Speaking of Groucho Marx (sort of), I always loved his remarks about Wall Street (Groucho was almost destroyed in the crash of ’29): “I made a killing on Wall Street.  I shot my broker.  And not a moment too soon.  He was about to commit suicide.”

Maybe he should have joined an investment club.