Practice question
A corporation has a certificate of incorporation from the SEC. It then markets contracts under which purchasers place money in a common venture and expect returns primarily from the corporation's operating efforts. It calls the contracts 'business memberships' and asserts that its corporate registration alone settles the securities issue. Which analysis is correct?
- Corporate registration automatically makes every later securities offering compliant
- The membership label conclusively excludes the contracts from securities law
- Only documents titled stock certificates can be securities
- The contracts cannot be securities unless the purchasers prove actual financial loss
- The contracts must be assessed under the investment-contract elements; corporate registration alone does not establish compliance with applicable securities-offering registration requirements
Legal references
- RA8799, Securities Regulation Code, Section3.1: https://lawphil.net/statutes/repacts/ra2000/ra_8799_2000.html
- Power Homes Unlimited v. SEC, GR164182, February26 2008, main decision: https://lawphil.net/judjuris/juri2008/feb2008/gr_164182_2008.html
- SEC v. Prosperity.Com, GR164197, January25 2012, main decision: https://lawphil.net/judjuris/juri2012/jan2012/gr_164197_2012.html
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