Which of the following options qualifies as a security?

Which of the following options qualifies as a security?

• A. Single family homes in an investment pool
• B. More than six separate lots for sale
• C. Land owned by a corporation
• D. Single-family home listed by an LLC

Answer: (A)

A single-family home in an investment pool qualifies as a security because it involves the pooling of funds from multiple investors with the expectation of profits primarily from the efforts of others. This scenario aligns with the definition of a security, particularly under the criteria established by the Howey Test, which evaluates whether an investment contract exists. In this case, the investors are entrusting their money to a manager or promoter who is responsible for the operation and potential profitability of the investment pool, thus meeting the criteria of a security. In contrast, the other options do not embody the characteristics of a security as effectively. More than six separate lots for sale may not indicate an investment for profit based on the efforts of others but could simply be a matter of typical real estate transactions. Land owned by a corporation, while it may represent an ownership interest, does not necessarily mean that it functions as a security unless it is part of an investment scheme. A single-family home listed by an LLC may involve an ownership interest but does not inherently indicate an investment opportunity relying on the efforts of a managing party, thus distinguishing it from the requirements of security classification.

A single-family home in an investment pool qualifies as a security because it involves the pooling of funds from multiple investors with the expectation of profits primarily from the efforts of others. This scenario aligns with the definition of a security, particularly under the criteria established by the Howey Test, which evaluates whether an investment contract exists. In this case, the investors are entrusting their money to a manager or promoter who is responsible for the operation and potential profitability of the investment pool, thus meeting the criteria of a security.

In contrast, the other options do not embody the characteristics of a security as effectively. More than six separate lots for sale may not indicate an investment for profit based on the efforts of others but could simply be a matter of typical real estate transactions. Land owned by a corporation, while it may represent an ownership interest, does not necessarily mean that it functions as a security unless it is part of an investment scheme. A single-family home listed by an LLC may involve an ownership interest but does not inherently indicate an investment opportunity relying on the efforts of a managing party, thus distinguishing it from the requirements of security classification.