SRC

State Policy

 Development of the capital market by supporting securitization by providing a legal and

regulatory framework for securitization and by creating favorable market environment for a
range of asset-backed securities.

Blue skies laws

Seek to prevent the public from being victimized into investing into speculative schemes that have no
basis than so many feet of the blue skies.

Securities

Are shares, participation, or interests in a corporation or in a commercial enterprise or profit-making

venture and evidenced by a certificate contract, or instrument, whether written or electronic.

Family resemblance test

To be a security unless it bears a strong resemblance, determined by examining four specific factors.

1. The motivation that would prompt a reasonable seller and buyer, to enter into a transaction. If
the seller’s purpose is to raise money for the general use of the business enterprise or to finance
substantial investments and the buyer is interested primarily for profit the note is expected to
generate.
2. The plan of distribution of the investment. Speculation or investment
3. The reasonable expectation of the investing public
4. Whether some factors such as the existence of another regulatory scheme significantly reduces
the risk of the instrument

Investment contract is a contract, transaction or scheme whereby a person invests his money in a
common enterprise and is led to expect primarily from the efforts of others.

Howey Test
1. Makes an investment of money

2. in a common enterprise

3. with the expectation of profits

4. to be derived solely from the efforts of others

Materiality Test = information is material if a fact or information that may result in a change in the
market price or value of any of the issuer’s securities, or may potentially affect the investment decision
of an investor.