What is a Security?

The term "security" is defined broadly to include a wide array of investments, such as stocks, bonds, notes, debentures, limited partnership interests, oil and gas interests, and investment contracts.

Generally, if an investment of money is made in a business with the expectation of a profit to come through the efforts of someone other than the investor, it is considered a security.

What is not a security?

  • Currency
  • A check (whether or not certified), draft, bill of exchange, or bank letter of credit
  • A note or other evidence of indebtedness issued in a mercantile or consumer, rather than an investment, transaction
  • An interest in a deposit account with a bank or a savings and loan association
  • An insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or for some other specified period

Note: Tennessee Securities Act of 1980, Tennessee Code Annotated Section 48-1-101, et seq.

 

Common characteristics of unregistered securities:

  • They are represented as safe investments.
  • They are represented as no risk investments.
  • They are represented as guaranteed return investments.
  • They offer returns on investment that are greater than the prevailing market.
  • The sales commissions paid to sales agents are much higher than for traditional products.