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Good day to ya! This month, we’re looking into topics related to the stock market. It gets a ton of attention as it’s where some of the wealthiest people have built their fortunes, where the average Joe hopes to see his retirement savings grow, and where many people look when trying to gauge the state of the economy.

To kick things off for April, we’re going way back to my Securities Regulation class in law school—specifically, the SEC v. W.J. Howey Co. (1946) Supreme Court decision. Don’t worry, I won’t attempt to Bluebook cite it (if you know, you know… and if you don’t, consider yourself lucky).

TODAY ON REASONED REFLECTIONS:

• Articles 💰;

• Market Movers 📈;

• Reflection No. 29 - The Howey Test;

• Fun fact of the Reflection 🗓️;

• Quote of the Reflection 🧐.

ARTICLES 💰

Time for a bit of R&R

RETIREMENT

• 2025 Retirement Radar

• Money Moves

SAVINGS

• The Best Savings Accounts

• Financial Fitness

TAXES

• The Best Tax Moves to Make

• 2025 Tax Tips and Tricks

OTHER FINANCIAL NEWS

• 2025 Real Estate Trends

• The Latest and Greatest

• Financial Success Starts Now

📈 MARKET MOVERS 📉

Data was pulled from MarketBeat as of April 3, 2025, based on the preceding 7 days. It includes U.S. NYSE and NASDAQ companies, covering all sectors, and focusing on large-cap stocks ($10b+ market cap).

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REFLECTION No. 29: THE HOWEY TEST

I - Issue: What’s the Howey test? 

R - Rule: The Howey test establishes the four elements required for an investment contract to be classified as a security. Originating from the Supreme Court case SEC v. W. J. Howey Co. (1946), it provides the framework to determine whether a financial arrangement qualifies as a security under the Securities Act of 1933.

If a transaction meets all four elements, it is considered a security and must comply with federal securities regulations, including registration and disclosure requirements.

A - Analysis: A financial arrangement is a security if there is (1) an investment of money, (2) in a common enterprise, (3) an expectation of profit, and (4) from the effort of others. 

Investment of Money

The transaction must involve a monetary contribution or other tangible assets. This element is typically straightforward, as most investments usually involve money.

This distinguishes investment contracts from non-monetary or gratuitous transactions by ensuring that the investor has made a real commitment of value.

Common Enterprise

The investment must be part of a common enterprise, which means the investor’s success is linked to the promoter’s success or the performance of the underlying business. 

This highlights the investment’s collective nature and ensures its success depends on the group’s overall performance rather than the individual’s effort.

Expectation of Profits

The investor must enter the transaction expecting financial gain through capital appreciation, dividends, or other returns.

This differentiates investment contracts or stock purchases from transactions made purely for personal consumption. If the primary purpose is financial return, the element is satisfied.

Efforts of Others

The expected profits must primarily arise from the efforts of the promoter or a third party, not from the investor’s own activities alone. 

This ensures protection for passive investors who depend on the managerial expertise of others to generate returns.

If all of the elements from the Howey Test are met, then the investment includes the sale of securities. The securities must then be registered with the Securities and Exchange Commission or an exemption from registration should apply. 

C - Conclusion: The Howey test is essential for identifying investment contracts that fall under federal securities regulations. By assessing whether a transaction meets all four elements—investment of money, common enterprise, expectation of profits, and reliance on the efforts of others—courts (and investors like Taylor Swift questioning whether FTX was selling unregistered securities) determine whether securities laws apply.

FUN FACT

Did you know that U.S. paper currency first took on its iconic green shade in 1861 during the Civil War? The green color helped prevent counterfeiting and made the paper bills harder to replicate since cameras at the time only produced black-and-white images. 

Fast forward to 1929, and U.S. paper money got a makeover. While many design elements changed, the green color remained. Why?

• The dye was readily available in large quantities.

• It had high resistance to chemical and physical changes.

• Psychologically, green was associated with the strong and stable credit of the government.

QUOTE OF THE REFLECTION 🧐