Definition of a Security - YouTube

I am attorney Laura Anthony founding partner of Legal & Compliance, a full service corporate,

securities, and business transactions law firm.

Today is the continuation in a series of LawCasts discussing, What is a Security?

The concept of defining a security is fundamental to knowing the application of the securities

laws in general and the specific ability to rely on rights and exemptions, such as the

registration and exemption requirements and Rule 144.

Both the Securities Act and the Securities Exchange Act contain definitions of a security

and both are extremely broad.

In fact, it was the congressional intent that the definition of security be very broad to

encompass all forms of investment instruments and contracts that may be used in the commercial

world.

Section 2(a)(1) of the Securities Act defines a security as any note, stock, treasury stock,

security future, security based swap, bond, debenture, evidence of indebtedness, certificate

of interest or participation in any profit sharing agreement, collateral trust certificate,

preorganization certificate or subscription, transferable share, investment contract, voting-trust

certificate, certificate of deposit for a security, fractional undivided interest in

oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any

security, certificate of deposit, or group or index of securities, including any interest

therein or based on the value thereof, or any put, call, straddle, option, or privilege

entered into on a national securities exchange related to a foreign currency, or, in general,

any instrument or interest commonly known as a security, or any certificate of interest

or participation in, temporary or interim security for, receipt for, guarantee of, or

warrant or right to subscribe to or purchase, any of the foregoing.

Section 3(a)(10) of the Exchange Act defines a security as any note, stock, treasury stock,

security future, security based swap, bond, debenture, certificate of interest or participation

in any profit sharing agreement or in any oil, gas, or other mineral royalty or lease,

any collateral trust certificate, preorganization certificate or subscription, transferable

share, investment contract, voting trust certificate, certificate of deposit for a security, any

put, call, straddle, options, or privilege on any security, certificate of deposit, or

group or index of securities, including any interest therein or based on the value thereof,

or any put, call, straddle, option, or privilege entered into on a national securities exchange

relating to foreign currency, or in general, any instrument commonly known as a security;

or any certificate of interest or participation in, temporary or interim certificate for,

receipt for, or warrant or right to subscribe to or purchase, any of the foregoing ,but

shall not include currency on any note, draft, bill of exchange, or banker’s acceptance,

which has a maturity at the time of issuance of not exceeding nine months, exclusive of

days of grace.

Although the definitions are extremely broad, case law and SEC guidance over the years have

drilled down on two particular aspects of the definition that require a fact and circumstantial

analysis.

In particular, related to an investment contract and a debt instrument.

In the next LawCast in this series, I will begin my discussion on each, starting with

an investment contract.

I am securities attorney Laura Anthony, founding partner of Legal & Compliance, and producer

of LawCast.

Should you have any questions about today’s topic, please visit SecuritiesLawBlog.com

and LawCast.com, or contact me directly.

Inquiries of a technical nature are always encouraged.