Series 63 practice questionhardHard: Security vs. Non-Security Analysis
A group of friends forms a general partnership to purchase and manage rental property, with all partners actively involved in management. Under the USA, the partnership interests are:
- ANot securities, because all partners are active in management✓ Correct answer
- BSecurities, because the partnership's purpose is investment
- CSecurities only if the partnership is incorporated
- DSecurities, because real estate is the underlying asset
Explanation
Why A — Not securities, because all partners are active in management
General partnership interests where all partners are actively involved do not meet the 'efforts of others' criterion of the Howey Test, so they are not securities under the USA.
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