SIE Exam Question 637: Answer and Explanation

Question: 637

Which of the following is used to determine whether an instrument qualifies as an "investment contract" for the purposes of the Securities Act of 1933?

• A. The Howey test
• B. The Knight test
• C. The Lochner test
• D. The Ralston test

Correct Answer: A

Explanation:

The Howey test is the result of the U.S. Supreme Court case, Securities and Exchange Commission v. W. J. Howey Co. from 1946. It is used to determine whether an instrument qualifies as an "investment contract" for the purposes of the Securities Act of 1933.