Probst v. Oklahoma

Can a partnership be a regulatable security if the partner had managerial authority on paper, but was unaware or never exercised the authority?


Defendant Probst was in the business of estate planning. He advised clients to invest in a construction project undertaken by a firm he was intimately involved in, although that relationship was not divulged to the estate-planning client. Probst was convicted with Offer and Sale of Unregistered Securities. Probst appealed, claiming that the investment was not a security because the investors were partners, and had management authority and control over the venture according to the partnership documents. However, there was evidence that the investors were unaware they had any authority, had not ever seen those documents, and had no experience in managing such affairs.

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