Security (USA Definition) & the Howey Test

Stocks, bonds, investment contracts and more - but not fixed insurance products.

Uniform Securities Act & Registration Series 65 · Section 4

What is Security (USA Definition) & the Howey Test?

Securities include stocks, bonds, notes, debentures, investment contracts, options and warrants, interests in oil, gas or mineral rights, and variable annuities. Not securities: fixed annuities, whole and term life insurance, commodity futures contracts, collectibles, and a retirement plan itself (as opposed to its holdings). Under the Howey test, an investment contract exists when there is an investment of money in a common enterprise with an expectation of profits from the efforts of others.

Security (USA Definition) & the Howey Test: a worked example

Selling interests in an orange grove operated by the promoter is a security, even though no stock changes hands.

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More terms in Uniform Securities Act & Registration

Uniform Securities Act (USA) The model state securities law most states' 'blue sky' statutes are based on. State Securities Administrator The official or agency that enforces a state's securities act. Person (USA Definition) Anyone who can be held legally responsible - individuals and organizations. Investment Adviser (USA Definition) Advises on securities, as a business, for compensation. Excluded from the Investment Adviser Definition Banks, incidental professionals, broker-dealers, and publishers are not advisers at all. Exemptions from State Adviser Registration An adviser with no office in the state and only institutional or very few clients there. De Minimis Exemption No place of business in the state and fewer than 6 clients there in 12 months. Federal Covered Adviser An adviser registered with the SEC rather than the states.

All Uniform Securities Act & Registration terms · Full glossary