A security is an investment, generally of an intangible nature, which has certain characteristics. Legislatures and courts have generally identified what will be called a security through the concept of an “investment contract.” The four requirements for an investment contract are that it:
1) is an investment of money;
2) in a common enterprise;
3) with the expectation of profit;
4) through the effort of another.
Commonly known securities include stocks, bonds, and mutual funds. Examples include investing in a 401k, brokerage account, or investing in someone else’s business with the hopes of making money. Securities must be registered or exempt from registration. Full and fair disclosures are mandatory. Learn more about securities registration through The Division of Securities.