Howie test do transactions qualify as investment contracts

The Howey Test refers to a 1946 case which reached the Supreme Court, SEC v. W.J. Howey Co., a lawsuit involving the Howey Company of Florida. This company was a citrus farm which operated on a large swath of land in the southern portion of the state. When the company decided to lease out half of its large property in order to "finance an additional development," the question of whether or not the land itself could be seen as a security came into play. Purchasers of the Howey land, who themselves had none of the "knowledge, skill, and equipment necessary for the care and cultivation of citrus trees," were speculators. They purchased the land based on the assumption that it would generate a profit for them as a result of the efforts of someone else. The opinion of the Court in the Howey case indicated that "the transactions in this case clearly involve investment contracts, as so defined. The respondent companies are offering something more than fee simple interests in land...they are offering an opportunity to contribute money and to share in the profits of a large citrus fruit enterprise." In the case of Howey Co., the investors in the Florida land saw the transaction as valuable only because of the work that others would perform on the land. By the standards of the Howey Test, this classifies the transaction as an investment contract. Thus, the transaction needed to be registered, and the Howey Co. was found to have violated the law by failing to do that