SEC v. Howey Co., 328 U.S. 293 (1946)

An investment contract for purposes of the Securities Act of 1933 means a contract, transaction, or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.The Court reviewed the record, which indicated that respondents, two corporations under direct common control and management, had engaged in transactions which constituted investment contracts within the meaning of the Act, 15 U.S.C.S. § 77b(1). An investment contract, for purposes of the Act, meant a contract, transaction, or scheme whereby a person invested his money in a common enterprise and was led to expect profits solely from the efforts of the promoter or a third party. It was immaterial whether the shares in the enterprise were evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise. In the case before the Court, all the elements of a profit-seeking business venture were present. Investors provided the capital and shared in the earnings and profits; respondents managed, controlled, and operated the enterprise. Because respondents failed to abide by the statutory and administrative rules in making their offerings, they violated the Act. (READ MORE: https://www.lexisnexis.com/community/casebrief/p/casebrief-sec-v-w-j-howey-co)

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