Securities MLM / Direct Sales

Read need-to-know updates, commentary, and analysis on Securities issues written by leading professionals.
News & Analysis as of

Wright v. Schock, 571 F.Supp. 642 (1983)

Is a scheme a "common enterprise" if the factor linking the fortunes of the parties is at the option of one of the parties?

Golden State Home Loans (GSHL) was a broker and servicer of loans secured by deeds of trust on real property. The Wrights invested in GSHL's loans. GSHL had a policy of advancing payments to its investors if the mortgagee...more

Mitzner v. Cardet International , 358 F.Supp. 1262 (1973)

Is a franchise a security when the franchisor selects and controls substantially all aspect of a door-to-door marketing scheme?

he District Court held that the scheme was a security within the meaning of the Securities Act of 1933. The court found persuasive an SEC ruling declaring pyramid programs to be investment contracts, and hence securities....more

Meadow Fresh Farms v. Sandstrom

Does the sale of $25 worth of merchandise and a $3.50 literature packet satisfy the statutory standard for an "investment" under...

The North Dakota Supreme Court held that the de minimus fees involved in joining Meadow Fresh qualified the program as a franchise and as a security, subjecting it to both regulatory schemes. Meadow fresh sold milk powder...more

Villeneuve v. Advanced Business Concepts, 698 F.2d (1983)

Does a security result from an agreement where the profits come "solely" from the efforts of others, or may it instead come "from...

A panel of the Appeals Court upheld the standard from the US Supreme Court in W.J. Howey that a security's profits should come "solely" from the efforts of others. Villeneuve bought a distributorship and was given the...more

Kansas v. Colby

Did the agreement used by the defendants constitute an investment contract controlled by the Kansas Securities Act?

Big 3 Auto Products sold auto parts by purchasing directly from parts manufacturers, who would ship directly to Big 3's independent wholesalers, who in turn serviced tune-up shop accounts. The independent wholesalers would...more

Martin v. T.V. Tempo

Is an agreement granting an exclusive territory to operate a franchise in an "investment contract" for federal securities law...

The Court of Appeals upheld the district court ruling that the agreement in question was not an "investment contract". Plaintiffs paid T.V. Tempo for the right to publish a television programming guide in an exclusive...more

Piambino v. Bailey, 610F.2d 1306 (1980)

Under what circumstances is summary judgment proper securities case involving an MLM Company?

The Court of Appeals held that given the facts in the record of the District Court, the granting of summary judgment on the claim of a securities law violation was improvident because a judge or jury could reasonably view the...more

Colorado v. Blair , 579 P.2d 1133 (1978)

Colorado v. Blair

Blair was convicted of willfully selling unregistered securities in violation of Colorado law. He was director of several charitable organizations that operated as a single unit and paid out investment gains with funds...more

Crowley v. Montgomery Ward & Co., Inc. , 570 F.2d 877. (1978)

Crowley v. Montgomery Ward & Co., Inc.

Crowley sued Montgomery Ward claiming that their catalog sales agency agreement was a security sold in violation of US securities laws. The agreement allowed the agent the right to use Montgomery Ward intellectual property,...more

In Re Bestline Products Securities and Antitrust Litigation , 412 F.Supp 732 (1976)

Are the distributorships of Bestline a security for federal securities law purposes?

The District Court adopted the reasoning of the Ninth Circuit in Glen Turner and ruled that the distributorships of Bestline were securities because the profits that were derived from them were to come substantially from the...more

Raymond Lee Organization, Inc. v. Division of Securities (1976)

Are the inventors who submit their inventions and Raymond Lee engaged in a "common enterprise?"

Raymond Lee Organization, Inc. charged independent investors to bring inventions to market. Inventors could submit their inventions to Raymond Lee Organization, and in exchange for both a fee and a percentage interest in the...more

In re Turner Enterprises Litigation: Appeal of Kentucky Attorney General , 521 F.2d 775 (1975)

Does a District Court, in deciding a class action, have authority to enjoin the prosecution of a similar case in state court?

The Court of Appeals ruled that the state court action should be allowed to continue, because the parties to the state court action could opt out of the federal class action without prejudicing the federal proceeding. The...more

Sauer v. Hayes , 136 Colo. App. 190, 539 P2d 1343 (1975)

Are Master Industries distributorships securities for state law purposes?

The Colorado Court of Appeals affirmed the lower court judgment finding Master Industries Distributorships to be securities under Colorado State law. The company produced motivational courses that were sold through an MLM...more

Plum Tree v. Seligson , 383 F.Supp. 307 (1974)

What differentiates a franchise from an investment contract, a type of security?

The District Court held that, according to the US Supreme Court in Howey, an investment contract is an investment of money in an enterprise with an expectation of profit solely from the efforts of others. The agreement with...more

SEC v. Continental Commodities

Is the issuance of notes on a due debt in order to reserve funds for operations a sale of investment paper?

Continental Commodities ran afoul of the SEC, and was required to reimburse its former clients. For certain large clients, Continental issued 60% refunds and promissory notes for the remaining 40%, reserving cash for...more

SEC v. Koscot Interplanetary, 497 F.2d 473 (1974)

Can an MLM program be a considered a security if it contains two parts, one of which is undoubtedly a legitimate business...

The Court of Appeals held that the MLM program of Koscott Interplanetary consisted of two distinct parts, one of which was a security for federal securities law purposes. The court held that because prospective recruits were...more

Davis v. Avco Financial Services, 739 F2d 1057 (1984)

Davis v. Avco Financial Services, 739 F2d 1057 (1984)

he Court of Appeals held that a person is liable as a "seller" of a security if they were the proximate cause the securities sale. An Avco loan officer became involved with Dare to be Great, a program that was found to be a...more

Davis v. Avco Corp. , 371 F.Supp 782 (1974)

Davis v. Avco Corp.

The District court denied Avco's motions to dismiss for lack of subject matter jurisdiction and for failure to state a claim because the complaint properly alleged all the necessary elements of a claim of securities fraud and...more

Lino v. City Investing

Is the giving of a personal promissory note in consideration of a business enterprise the purchase of a security governed by...

The Court held that neither the underlying agreement, nor the promissory note were securities as defined by federal law. Lino claimed that the agreement should be treated as an investment contract under the Howey line of...more

In Re Holiday Magic Securities and Antitrust Litigation , 368 F.Supp 806 (1973)

Where is the proper venue to consolidate pretrial proceedings in a litigation proceeding consisting of 5 cases in 4 districts?

The Panel transferred pretrial proceeding to the Northern District of California because Holiday Magic was located there, most of the witnesses were also there, and litigation was currently pending in that court that had...more

SEC v. Koscot Interplanetary, 365 F.Supp. 588 (1973)

Is the Koscot sales program a security under current federal law?

The District court held that Koscot was not a security under the law of the circuit. The court felt compelled to follow earlier circuit precedent in deciding that profits must come "solely" from the efforts of others for an...more

SEC v. Glenn W. Turner Enterprises, 474 F.2d 476 (1973)

Is an injunction proper when a sales program is found to be a security under federal securities laws?

The Court of Appeals held that the injunction issued by the District court, prohibiting the distribution of the program "Dare to be Great" and freezing the assets of Glenn W. Turner Inc, was proper because the part of the...more

State v. Hawaii Market Center

What is the definition of an investment contract under Hawaii State Law?

The Court ruled that the scheme in question was a security, but did so by adopting a new and different test than that used by other states. Hawaii Market Center (HMC) sold "founding" memberships to promoters who could earn...more

Koscot Interplanetary Inc. v. King

Are MLM distributorships securities under Texas state law?

The Texas Court of Civil Appeals held that the Koscot Distributorships were not securities under state law. The court specifically declined to follow other states in interpreting Koscot distributorships as securities. The...more

Gallion v. Alabama Market Centers , 213 So.2d 841 (1968)

Gallion v. Alabama Market Centers

The Alabama Supreme Court held that the referral sales program in question was not an investment contract subject to regulation as a security. The state security statute was modeled after the federal statute and the Alabama...more

50 Results
|
View per page
Page: of 2