Both the California legislature and the U.S. Congress have enacted extensional definitions of “security” – that is Section 25019 of the Corporate Securities Law of 1968 and Section 2(a)(1) of the Securities Act each provides a list of what constitutes a security. These lists, however, are not the same.

Here’s what’s on the California list that isn’t on the federal list:

• Membership in an incorporated or unincorporated association;
• viatical settlement contract (see Section 25023) or a fractionalized or pooled interest therein;
• life settlement contract (see Section 25023) or a fractionalized or pooled interest therein;
• interest in a limited liability company and any class or series of those interests, including any fractional or other interest in that interest (note exception); and
• any beneficial interest or other security issued in connection with a funded employees’ pension, profit sharing, stock bonus, or similar benefit plan.

Here’s what’s on the federal list that isn’t on the California list:

• Security future;
• Security based swap (added by Section 768(a) of the Dodd-Frank Act).

In addition, the California statute, but not the federal statute, expressly excludes the following:

• any beneficial interest in any voluntary inter vivos trust which is not created for the purpose of carrying on any business or solely for the purpose of voting;
• any beneficial interest in any testamentary trust;
• any insurance or endowment policy or annuity contract under which an insurance company admitted in this state promises to pay a sum of money (whether or not based upon the investment performance of a segregated fund) either in a lump sum or periodically for life or some other specified period;
• any franchise subject to registration under the California Franchise Investment Law.

Notwithstanding the length and apparent specificity of these lists, the courts have had a lot to say about what is and isn’t a “security”.