Chapter 2 Part 1 Flashcards
SEC versus Howey Co. The four elements that must be included are:
- An investment of money 2. In a common enterprise 3. With the expectation of profits 4. Solely from the efforts of others
It is often easier to remember the investment instruments that are NOT defined as securities. These include:
• Fixed annuity • Life insurance or an endowment policy • Commodity futures contract • Individual retirement account (IRA) or Keogh plan • Currency • Collectible • Condominium (primary residence)
Stocks (equities), ADRs, Bonds (debentures, certificates of indebtedness), Rights, Warrants
securities
Options on Stocks, Options on Currencies, Options on Commodities, Options on Futures
all securities
Currencies, Commodities, Futures
not securities
Variable Life Insurance, Variable Universal Life Insurance, (Any insurance product that includes the word variable)
all securities
Whole Life Policies, Universal Life Policies, Term Life Policies, Endowments, (Any insurance product that does not include the word variable)
not securities
Variable Annuities
securities
Fixed Annuities (guaranteed contracts)
not securities
Investment Companies (Face-Amount Certificates, Unit Investment Trusts, and Management Companies)
all securities
Packaged Real Estate Investments, such as Interests in a Condominium Pool, REITs, or Real Estate Limited Partnershios
all securities
Individual Real Estate Properties and Mortgages
not securities
Participation in a Profit-Sharing Plan
securities
Keogh Plans, IRAs, 401(k) Plans, and other Retirement Plans, Art, Antiques, and other Collectibles
not securities
Investment Contracts
securities
Limited Partnerships
securities
Whiskey Warehouse Receipts, Multilevel Distribution Arrangements, Merchandise Marketing Schemes, Profit-Sharing Arrangements, Voting or Collateral Trust Certificates, Interests in Farmland or LivestockPreorganization Certificates,
all securities
Whiskey warehouse receipts
represent a beneficial interest or title to whiskey held in a warehouse for future delivery. Under state law, the transfer of a whiskey warehouse receipt is equivalent to the delivery of the property it represents, and constitutes a security.
real estate condominium
This instrument was added to the list of securities to cover investment opportunities in which a purchaser of a condominium would allow his property to be included in a rental pool that is managed by a third party. For example, the condominium might he part of a complex near a ski lodge and the buyer purchases the property for invesllnent purposes, rather than for occupancy. In this situation, offering this type of condon1iniun1 investment could be viewed as the offer of a security.
Multilevel distributorships and merchandise marketing programs are structures used to
market products to the public.
