## Facts

- Mount Vernon Memorial Park, a California cemetery and mortuary, sold “pre-need” funeral services and burial items on installment contracts.
- After a state legal development in 1969 restricted the earlier pre-need contracting model, Mount Vernon restructured its program.
- The revised program paired (1) a funeral-service contract with (2) a subscription for $100 “funeral debentures” purchased in installments.
- The debentures bore interest (payable in cash or credited against installments) and were redeemable for funeral services or for cash at a 20-year maturity; if services were needed earlier, the debentures could be applied toward the cost.
- Following a 1976 SEC administrative decision treating similar funeral debentures as “face-amount certificates of the installment type” under the Investment Company Act of 1940 (ICA), Mount Vernon segregated program funds but did not register or comply with the ICA.
- The SEC sued Mount Vernon and its president/shareholder, seeking (Count One) relief for issuing face-amount certificates without ICA compliance and (Count Two) injunctive relief for alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934.
- The district court denied preliminary injunctive relief on both counts and dismissed Count One on the ground that Mount Vernon was not an ICA “investment company.”
- The district court certified the Count One dismissal for immediate appeal under Rule 54(b); while the appeal was pending, Count Two settled.

## Issues

1. Whether the court of appeals could review the denial of preliminary injunctive relief after settlement of Count Two and final certification of the Count One dismissal.
2. Whether Mount Vernon qualified as an “investment company” under the ICA because its funeral debentures were “face-amount certificates of the installment type.”

## Decision

- The court dismissed the appeal from the denial of preliminary injunctive relief as no longer presenting a justiciable controversy after the settlement and certified final disposition.
- The court reversed the dismissal of Count One.
- The court held Mount Vernon was subject to ICA regulation as an investment company because it issued face-amount certificates of the installment type.

## Legal Principles

- An issuer of “face-amount certificates of the installment type” falls within the ICA’s definition of an “investment company,” even if the issuer also operates a non-financial business.
- Courts assess the economic substance of the instrument; fixed-sum, interest-bearing installment obligations redeemable for cash at a stated maturity fit the statutory concept of face-amount certificates.
- Reasonable SEC interpretations of the ICA are entitled to substantial judicial deference.
- An appeal from denial of preliminary injunctive relief may be dismissed where subsequent events resolve the underlying claims such that preliminary relief is no longer appropriate.

## Conclusion

The Ninth Circuit treated Mount Vernon’s installment-purchased, interest-bearing funeral debentures—redeemable for cash at maturity or usable toward services—as face-amount certificates under the ICA, reversed the dismissal of the SEC’s ICA claim, and dismissed the preliminary-injunction appeal as nonjusticiable after settlement and final certification.


Sec. & Exch. Comm’n v. Mount Vernon Mem’l Park, 664 F.2d 1358 (9th Cir. 1982)