How legal is SL finances?

I posted your question here to find answers.

It's not tested.

The issue is whether these are "securities" within the meaning of the 1933 Act and the 1934 Act. There's a lot of lore about that definition, but as far as I am aware none of it directly addresses the issue of whether a stakeholding in a virtual enterprise is a covered "security". The argument that it *should* be a s security is that it is, economically, an investment in a company that is akin to what would be the case with a RL entity. The argument *against* it is that the entity does not exist in the RL, and that therefore these kinds of transactions are not the kinds of transactions that are intended to be covered by the 33 and 34 Acts. I think, on balance, you might get the SEC interested if the scale got large, and began to involve significant numbers of people and/or significant amounts of RL money.

Roughly how significant amounts would that be? More than 100k?

You are also assuming that these are US companies. Many of these are offshore, so they would fall under any rules that the country they are located in.

There is also the case of where the transaction occurs. While the companies may be in country A and country B, the transaction itself occurs in country C.

Not really no. The SEC takes the view that any solicitations of US residents directly makes that security subject to US regulation, unless an exemption applies. The SEC is concerned not about where the transaction takes place, but where the offerees/investors are. If they are in the US, it doesnt matter if the deal is closed in the Bahamas, it's still subject to US law.

As far as I know, none of the so-called financial institutions in SL are regulated, so you should never, ever hand over your your money to them. You have absolutely no legal recourse if they scarper with your hard-earneed L$.

Also - since LL is in San Francisco - do any of these funds even truly count as only "off shore" investment websites?

Or are they required to behave as Any other company using a US website hosting service?

No that's right, in fact. Everyone's "assets" and "avatars" in SL are based in the US (either SF or Texas), so there is a good jurisdictional argument that US federal and state law applies to anything that happens on the servers. Again, not tested in this context as to whether the SEC would care about a securities offering from a German owned SL entity that was limited to investors in Zimbabwe -- but there is a jurisdictional argument that if the SEC chose to express an interest in that, there would be jurisdiction to do so based on where the servers are located.

That could be said for pure money, but many transactions are based on IP instead of any monetary value.

Yeah - but all these stocks and bonds and "banks" and stuff are just money.