What is a Security?

A Security is a legal instrument you “sell” to private investors in exchange for their money. Securities commonly sold by small businesses and real estate investors include:

  • Promissory notes, and
  • Investment contracts

A Promissory Note is a legal contract you provide to someone who loans you money. It’s basically a promise to pay, usually with a remedy if you don’t.

But what are Investment Contracts? In 1946, the U.S. Supreme Court defined Investment Contracts as:

  • An investment of money,
  • in a common enterprise,
  • with an expectation of profits,
  • based solely on the efforts of the promoter.

If you sell ownership interests in your company to investors who expect to share in the company’s profits, you’re selling Investment Contracts – and those are Securities.

The sale of Securities must be “registered” with Securities regulators unless an exemption applies. Each Securities exemption has its own set of rules.

That’s where we come in. We can help you select and comply with an appropriate exemption for your Securities Offering.


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