Insecurity

“Sethi sold interests in an oil and gas joint venture.” The SEC then sued Sethi for selling unregistered securities, and the Fifth Circuit agreed with the SEC’s position that the joint venture interests at issue qualified as securities under federal law. That legal analysis turned on a 3-part test for whether an investment contract is a security: “(1) an investment of money; (2) in a common enterprise; and (3) on an expectation of profits to be derived solely from the efforts of individuals other than the investor,” followed by a flexible, multi-factor analysis of the term “solely,” designed “to ensure that the securities laws are not easily circumvented by agreements requiring a ‘modicum of effort’ on the part of investors.” SEC v. Sethi, No. 17-41022 (Dec. 4, 2018) (applying, inter alia, Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981)).