Howey Test

A reference to the US supreme court case which determined whether or not a transaction qualified as an investment contract, and therefore could be considered as stocks, bonds, or other types of securities. Under the conditions of this test, a transaction becomes a security when the transaction involves an investment of money, is a part of a common enterprise, an expectation that large profits can be made from it, and if the transaction came about as a result of works and efforts of other individuals. To be a security, it must pass all four of these qualifications.