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 cases decided by the Supreme Court. The Circuit Court disagreed, basing its decision on the amount of effort expended by Lino in establishing the enterprise. He claimed significant start-up expenses such as rent, salaries and marketing expenses. The court reasoned that such expenses clearly demonstrated that Lino was expected to undertake significant personal involvement in the operation of the business, and could not expect profit to be derived based on the significant efforts of others, the standard of an investment contract in the line of cases succeeding Howey. Further, his promissory note was not "purchased" by FI in the traditional sense. It was received by FI in consideration of certain rights granted to Lino, and not for their use as an investment. To hold otherwise would be to bring an enormous number of promissory notes made to insure payment, not to function as a type of profit making security, under the control of federal securities laws. The court found that this was not the intent of the securities laws, and that the note should not be regulated as a security.

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