Burt and Ernie owned a corporation. Ernie seemed like he was merely an investor because Burt ran the business. Eventually, Burt began to falsify some records so that Burt could take a greater share of the profits. For years Burt mailed falsified financial statements to Ernie. When Burt got hit by a bus and was going to be in the hospital for a long time, Ernie assumed a greater role in the business. It didn't take long for Ernie to discover what Burt had been doing.

Ernie sued Burt under Rule l0b-5 of the Securities Exchange Act of 1934. Burt defended on the grounds that (1) that the business was local and had never been involved in interstate transactions of any kind, and (2) the corporation was not listed on any stock exchange, didn't have assets in excess of $10 million or 500 or more shareholders.

Address how the court would decide on both of Burt's defenses.