The United States Supreme Court held
in Securities and Exchange Commission v. W.J. Howey Co. that, for an investment contract to exist, the
following elements, referred to as the Howey test must concur: (1) a contract,
transaction, or scheme; (2) an investment of money; (3) investment is made in a
common enterprise; (4) expectation of profits; and (5) profits arising
primarily from the efforts of others. Thus, to sustain the SEC position in this case,
PCI’s scheme or contract with its buyers must have all these elements.
The CA is right in ruling that the last requisite in
the Howey test is lacking in the marketing
scheme that PCI has adopted. Evidently, it is PCI that expects profit from the
network marketing of its products. PCI is correct in
saying that the US$234 it gets from its clients is merely a consideration for
the sale of the websites that it provides.
