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 typically pay Big 3 $1000 for 10 accounts when they signed a distributorship agreement. After several independent wholesalers lost money under this arrangement, the State of Kansas charged Big 3 with selling securities without prior registration, alleging that the distributor agreement was an unregulated investment contract and therefore a security.

The case and case summary can also be viewed online at: http://www.mlmlegal.com/legal-cases/Kansas_v_Colby.php

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Published In: MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates, Securities Updates

Reference Info: | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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