Security Defined Flashcards
What is a security?
Notes, bonds, debentures, or other evidence of indebtedness
Stocks, including treasury stock and transferable shares
Options, warrants, rights
Certificates of interest or participation in a profit-
sharing agreement
Collateral trust certificates
Preorganization certificates or subscriptions
Investment contracts
Voting trust certificates
Certificates of deposit for a security (American depositary receipts)
Certificates of interest or participation in oil, gas, or mining titles or leases
Open-end fund shares
Closed-end fund shares
Unit investment trusts
Packaged real estate investments (REITs, RELPs, condominium pools)
Foreign government obligations
CMOs (collateralized mortgage obligations)
Variable life insurance and variable annuity contract separate accounts
Whiskey warehouse receipts
Multilevel distribution arrangements
Merchandising marketing programs
Viatical settlements
What are whiskey warehouse receipts?
Whiskey warehouse receipts are proof of ownership in whiskey that is being stored while aging. Owners can sell these receipts to other investors if they do not want to wait for this aging process.
what are Multilevel distribution arrangements and merchandising marketing programs
Ponzi schemes or pyramid scams with these types of arrangements.
what are Viatical settlements, or life settlements.
A viatical or life settlement occurs when a life insurance policyholder needs funds and sells the death benefit of their policy to a viatical provider.
What is the Howey test?
It must be an investment of money
In a common enterprise, with
The expectation of profits from the efforts of a third party.
What are not securities and are excluded from definition
Nonvariable life insurance policies, endowment policies, or fixed annuities where the insurance company promises to pay a fixed sum of money either in a lump sum or periodically for life or a specified period
Commodity futures contracts
Currencies
Precious metals
Antiques/collectibles
Ownership interests in credit unions
Real estate for personal residence
Bank certificates of deposits, checking and savings accounts, and money orders
Retirement plans, including pension plans, IRAs, and Keogh (HR-10) plans. However, the underlying investments within these plans may be securities
options on what are considered securities
Options on currency and futures contracts are securities.
Currencies and commodity futures contracts are not securities.
What type of insurance products are considered securities?
Variable insurance products with separate accounts indicate the product is a security.
Assume insurance products are excluded from the definition in all other cases.
