Opinion ID: 1060352
Heading Depth: 2
Heading Rank: 3

Heading: Initial Value Induced by Promises of Benefits in Excess of Initial Value

Text: The third prong of the Brewer test is that the investor had a reasonable understanding that a valuable benefit of some kind, over and above initial value, will accrue as a result of the operation of the enterprise. Brewer, 932 S.W.2d at 11. The QCI promotional materials are relevant to determining the existence of this element. The materials contain several assurances that participants will receive a benefit: I assume you are interested [in this program] because you are fed up with 3% or 4% returns on your savings; or, maybe you are uncomfortable with risking your money in the stock market? Admin. R. at 64. QCI's Telephone Equipment Lease Agreement will give you an exceptional 18% return on your principal. This is what you will earn each year for a five year term. You will receive a check for $75.00 for 60 consecutive months for each unit purchased. Admin. R. at 68 (emphasis in original). King argues that the third prong of the Brewer test is lacking because QCI's obligation was fixed and was not dependent on the enterprise making a profit. However, the Hawaii Market court rightly noted that it is irrelevant to the protective policies of the securities laws that the inducements leading an investor to risk his initial investment are founded on the promises of fixed returns rather than a share of profits. Hawaii Market, 485 P.2d at 110. Participants in this sale-leaseback program clearly expected a benefit as the result of QCI's successful operation, and the third prong is thus satisfied.