Series 63 practice questionhardTricky: Fractional interests in oil, gas, or mining
Which of the following is LEAST likely to be considered a security under the Uniform Securities Act when sold to investors?
- AFractional interest in an oil & gas lease managed by a sponsor on behalf of passive investors
- BA variable annuity contract providing market-based returns
- CA direct working interest in a mining operation where all investors participate in daily management✓ Correct answer
- DA collateral trust certificate
Explanation
Why C — A direct working interest in a mining operation where all investors participate in daily management
If investors are active managers, there is no 'reliance on others,' so the working interest is not a security. All other options are included as securities under the USA. This tests the boundary of 'investment contract' and direct participation. See USA Sec. 401(13); Howey test.
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