This post is the second in a series exploring when securities laws impact business transactions.
In my previous post, I provided a general overview of the definition of a “security” under federal securities laws. The Securities Act of 1933 provides for a very far reaching definition of a security, including “any note, stock… investment contract…, or, in general, any interest or instrument commonly known as a ‘security’…” As explained in my prior post, this definition, taken literally, can result in both overinclusiveness and underinclusiveness. I’ll discuss the issue of overinclusiveness and how it is addressed in future posts; this post will discuss how the inclusion of an “investment contract” within the definition of a security allows the definition to include classes of investments that are not specifically listed, like limited liability company interests and limited partnership interests, which are both concepts that had not even been invented when the Securities Act was passed. [Read more…]