Series 63 practice questionmediumSecurity vs. Non-Security Scenario
A company offers shares in a community garden, where profits are based on the manager’s expertise, and investors do no work. Under the Howey Test and the USA, these shares are:
- ASecurities, because profit comes from the efforts of others✓ Correct answer
- BNot securities, because agriculture is not covered
- CNot securities, because investors can visit the garden
- DSecurities only if registered with the SEC
Explanation
Why A — Securities, because profit comes from the efforts of others
This fits the Howey Test: investment of money, common enterprise, and profits from others' efforts, so it's a security under the USA. The nature of the underlying business does not exclude it.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,051+ Series 63 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Regulation of Securities & Issuers questions
- A business offers a pooled investment where participants contribute funds to purchase rare coins. Investors receive…
- Registration by notification (filing) is available to issuers that:
- A promoter sells tokens to fund the development of a new blockchain network, promising buyers will profit as the…
- Which of the following is NOT a security under Section 401(l) of the USA?
- A fixed indexed annuity is issued by an insurance company authorized to do business in State Q. The contract guarantees…
- Which of the following is an example of an investment contract under the Howey Test and therefore a security under the…
- Investors purchase shares in a company that owns and rents vacation homes. The company manages all rental activity and…
- A client purchases an endowment policy from a life insurance company. Under the USA, this policy is: