Mark Hubbard Has Been Very Successful in the Cattle Business

question 38

Essay

Mark Hubbard has been very successful in the cattle business over a number of years. Hubbard has decided to establish a cattle program as an investment tool. He will purchase cattle with investors' money and then provide medical care, feed, and transportation on a service contract basis. The profits then will be divided proportionately among the investors. An investment company, Money Ventures, Inc., is interested in the entire offering of Hubbard's cattle program. Hubbard is unsure as to whether the securities acts apply to him. In addition, he wonders whether his venture, as structured, is exempt if the activity is within the securities acts. Should Hubbard be concerned?

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Definitions:

Investment Management Process

The series of steps and decisions involved in managing an individual's or institution's investments, from setting objectives to selecting assets and monitoring performance.

Prudent Investor Rule

The prudent investor rule is a legal guideline advising trustees to manage others' funds by diversifying investments and taking a reasonable level of risk, as a prudent investor would.

Risky Investments

Investments that carry a high degree of risk of losing the principal amount invested, often associated with higher potential returns.

Liquidity Constraint

A situation where an individual or firm is unable to convert assets into cash quickly without significant losses.