CASE 212SEC V

Multiple Choice

CASE 21.2SEC v.Edwards (2004) involved sales of interests in pay telephones with a question before the U.S.Supreme Court of whether a moneymaking scheme falls outside the definition of an investment contract because the promised rate of return is fixed,rather than variable.How did the Court rule?

A) The Court held that a promise of a fixed rate of return did not prevent the arrangement from being an investment contract.
B) The Court held that a promise ofa fixed rate of return prevented the arrangement from being an investment contract.
C) The Court held that a promise of a fixed rate of return did not prevent the arrangement from being an investment contract, but only because the underlying company went into bankruptcy.
D) The Court held that a promise of a fixed rate of return prevented the arrangement from being an investment contract, but only because the underlying company went into bankruptcy.