Alert - What is a Security? Individually Negotiated Promissory Notes May Not Qualify

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This past February, California’s Court of Appeal for the 6th District directly addressed this question in People v. Black and resolved that the individualized and privately negotiated nature of an instrument is but one aspect for courts to consider when examining whether a transaction qualifies as a “security” under California’s Corporate Securities Law of 1968 (the “Corporate Securities Law”).[1] Few allegations of commercial impropriety can inflict as severe of reputational injury and generate as much public indignation as do charges of securities fraud. While allegations of securities fraud may likely conjure images of complex financial instruments and pyramid schemes, rarely does one have the occasion to contemplate the definition of a “security”, specifically as to the instruments...
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