Same Sex Marriage and the Securities Laws

The securities laws often employes the term "spouse" and "marriage."  In a recent interpretive release, the Commission issued an interpretive release clarifying that the terms included same sex marriage.  The interpretation purportedly arose as a result of the Supreme Court's decision in US v. Windsor when it struck down the Defense of Marriage Act (DOMA).  As the Commission stated

  • In light of this decision, the Commission will read the terms “spouse” and “marriage,” where they appear in the federal securities statutes administered by the Commission, the rules and regulations promulgated thereunder, releases, orders, and any guidance issued by the staff or the Commission, to include, respectively, (1) an individual married to a person of the same sex if the couple is lawfully married under state law, regardless of the individual’s domicile, and (2) such a marriage between individuals of the same sex. This guidance is consistent with Windsor.

The guidance appropriately clarified the issue, although Windsor seemed more an opportunity than an explanation.  With or without the Supreme Court's interpretation, it would be hard today to interpret marriage in a way that excluded same sex couples.  

The guidance, however, still leaves an unaddressed interpretive issue.  The Commission has also occasionally used the term "spousal equivalent" in various rules. The staff has never clarified that the relationship includes civil unions or civil partnerships.    

The term “spousal equivalent” was first employed in 2000 when the Commission amended the standards for auditor independence. See Exchange Act Release No. 43602 (Nov. 21, 2000). The term was defined as “a cohabitant occupying a relationship generally equivalent to that of a spouse.” The Commission did not, however, address whether the term included civil unions or civil partnerships. 

This was not surprising. Such relationships essentially did not exist at the time the rule was adopted.  The SEC revisited the phrase in 2010. The language engendered commentary, including an inquiry about whether the term included civil unions or civil partnerships. Investment Advisers Act No. 3220 (June 22, 2011) (adopting release). The final release did not, however, address the issue. The impact of the term on civil unions and civil partnerships, therefore, remained unclear. 

The ambiguity arises out of the conventional definition of “cohabitant.” The term includes persons who “live together as if married, usually without legal or religious sanction.” To the extent limited to relationships “without legal or religious sanction,” spousal equivalent would arguably not include civil unions and civil partnerships.  The staff should, therefore, clarify that these relationships are included in any definition of family member. 

J Robert Brown Jr.