Howey Test - Investment Contract

          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.