The courts apply the ________ in determining whether an arrangement is an investment contract.

Question

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The Howey test is the legal criteria applied by courts in determining whether an arrangement is an investment contract. The test originated from a 1946 Supreme Court case SEC vs. W.J. Howey Co. In this case, the court defined an investment contract as "a contract, transaction or scheme whereby a person invests money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party." The Howey test has since become the standard criteria used in determining whether an investment arrangement is a security subject to SEC regulations.

The Courts Apply the ________ in Determining Whether an Arrangement