Series 63 practice questionmediumInvestment Contract
Which of the following is an example of an investment contract under the Howey Test and therefore a security under the USA?
- AAn investor buying shares in a music royalty pool managed by a third party✓ Correct answer
- BA person purchasing a fixed annuity from an insurance company
- CA direct purchase of farmland to farm personally
- DAn individual loaning money to a friend for a car purchase
Explanation
Why A — An investor buying shares in a music royalty pool managed by a third party
A music royalty pool, managed by others, meets the Howey Test for an investment contract: money is invested in a common enterprise with profit expected from others' efforts. The other choices do not meet these criteria.
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