Author Question: Joan Kingman is listing the Schubach Farm for sale. In inspecting the property, Joan notes several ... (Read 203 times)

jlmhmf · **on:** Jun 24, 2018

Joan Kingman is listing the Schubach Farm for sale. In inspecting the property, Joan notes several sinking areas in the property. Joan is unsure of what they are.
A) Joan need not disclose their presence because she doesn't know what they are.
B) Joan must disclose their presence.
C) Joan must disclose them only if the Schubachs agree.
D) Joan need only ask the Schubachs what they are.

Question 2

Mark Hubbard has been very successful in the cattle business over a number of years. Hubbard has decided to establish a cattle program as an investment tool. He will purchase cattle with investors' money and then provide medical care, feed, and transportation on a service contract basis. The profits then will be divided proportionately among the investors. An investment company, Money Ventures, Inc, is interested in the entire offering of Hubbard's cattle program. Hubbard is unsure as to whether the securities acts apply to him. In addition, he wonders whether his venture, as structured, is exempt if the activity is within the securities acts. Should Hubbard be concerned?

bitingbit · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

B

Answer to Question 2

For the security acts to apply, a transaction must involve a security within the meaning of the acts. The way that the term security has been interpreted allows the inclusion of almost any investment instrument within the confines of the securities acts. Certainly, Hubbard's offering is not one of stocks or of bonds, but it is an offering of an investment contract causing application of the securities acts. Hubbard's operation involves: (1 ) an investment of money; (2 ) a common enterprise; and (3 ) an expectation of future profits from the efforts of others. Despite being subject to the securities acts, Hubbard should qualify for an exemption. Under SEC Regulation D, offerings of any amount made solely to accredited investors, such as an investment company, are exempt from the registration requirements of the act. Additional arguments could be made for exemption under SEC Rules 504, 505, or 506.