Farmer Cooperatives and the Federal Securities Laws: The Case for Non-Application
32 Pages Posted: 1 Jul 2015
Date Written: 2000
American public policy has encouraged the formation of farmer cooperatives since the early 20th century. While these efforts have been somewhat successful, certain legal questions persist which restrain the full potential of cooperatives. Lingering uncertainty about the applicability of the federal securities laws to farmer cooperatives is one such issue. This article reviews the public policies promoting cooperatives, examines judicial interpretations of securities issues, and advances the view that the federal securities laws should not apply to cooperatives. Such a conclusion, if embraced by judges, will clarify the legal status of farmer cooperatives and thereby aid farmers who are seeking to bolster their marketing institutions through cooperative ventures.
Given the extremely volatile nature of agricultural markets, farmers face immense economic uncertainty. The unpredictability of markets and the absence of control over their economic futures compounds the pain of ultimate failure, farm bankruptcy. Cooperative efforts, while they may also fail, provide farmers an important sense of inclusion in their own fates by involving them in the marketing process. Greater involvement in farmer cooperatives, which enhance farmer bargaining power with food processors or which enter the processing sector themselves, also allows farmers to avoid the dangers of vertical contracting on an individual basis with large processors and to preserve their economic independence. The strengthening of farmer cooperatives also serves social policy goals by aiding farmers' efforts to receive a just return for their products. Strong farmer cooperatives preserve farmers' independent free-hold status as well, which can potentially slow the current trend of concentrating wealth in the hands of the richest and best-educated Americans. Promoting self-organization and market participation, policies that complement the American political tradition, can achieve the goal of slowing wealth concentration without adopting unpopular redistributionist policies.
Keywords: Farmer Cooperatives, Federal Securities Law
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