The 1933 Securities Act Defines the Term "Security

question 73

Essay

The 1933 Securities Act defines the term "security." The Supreme Court of the United States has adopted a two-tier analysis of what constitutes a security. Within this analysis the Court has used a three-part test to determine whether a non-traditional financial transaction constitutes an investment contract and thus a security. Explain
(a) the 1933 Act's statutory definition of security,
(b) the courts' general interpretation of the 1933 Act's definition and
(c) the Supreme Court's two-tier test. Use case law to illustrate your explanation, if appropriate. Also, why do you think the Supreme Court had to devise such an analysis?

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Definitions:

Note Payable

A formal written agreement to pay a specified amount of money, often including interest, by a certain date.

Payout Percentage

The proportion of earnings paid out to shareholders as dividends, usually expressed as a percentage of the company's total net income.

Chapter 11 Bankruptcy

A reorganization and rehabilitation form of bankruptcy for businesses, allowing them to continue operations while restructuring debts under court supervision.