Questions are raised about investors' profit expectations

By Rodney F. Tonkovic, J.D.A Fifth Circuit panel remanded a civil enforcement action after finding that there was an issue of fact as to whether partnership interests were really securities. The panel concluded that there were issues of material fact as to whether the investors had any real power over their investments, if they had relevant business experience, or if the managers were effectively irreplaceable (SEC v. Arcturus Corporation, January 7, 2019, Stewart, C.).In this case, a group of promoters, including Arcturus Corporation, sold interests in oil gas projects to investors. The interests were not registered as securities, and the SEC filed this action in December 2013, alleging violations of the antifraud and registration provisions of the securities laws. Joint ventures were securities? After about a year and a half of discovery, both parties filed for summary judgment. The district court ruled in favor of the Commission, finding that the interests qualified as…

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