Opinion ID: 1058500
Heading Depth: 2
Heading Rank: 1

Heading: Similarity to Federal Securities Acts

Text: The Virginia Securities Act defines security as follows: Security means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral trust certificate; preorganization certification of subscription; transferable share; investment contract; voting-trust certificate; certificate of deposit for a security; oil, gas or other mineral lease, right or royalty, or any interest therein; or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. . . . Code § 13.1-501. This definition of security derives almost verbatim from the definition of security in the federal Securities Act of 1933 (1933 Act). George D. Gibson, The Virginia Corporation Law of 1956, 42 Va. L.Rev. 445, 483 (1956). The definition of security in the federal Securities Act of 1933, 15 U.S.C. § 77b(a)(1) (2000 & Supp. V 2005), is virtually identical to the definition of security in the federal Securities Exchange Act of 1934 (1934 Act), 15 U.S.C. § 78c(a)(10) (2000 & Supp. V 2005), and is treated as such for purposes of determining the scope of the term security. Landreth Timber Co. v. Landreth, 471 U.S. 681, 686 n. 1, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1985). The Virginia Securities Act, the 1933 Act, and the 1934 Act, are all intended to protect investors from fraud in the investment market. See Gurley v. Documation, Inc., 674 F.2d 253, 259 (4th Cir.1982) (Virginia's blue sky law shares with § 10(b) of the 1934 Act the central purpose of protecting investors from fraud in the securities markets.). The primary purpose of the Acts of 1933 and 1934 was to eliminate serious abuses in a largely unregulated securities market. United Housing Found., Inc. v. Forman, 421 U.S. 837, 849, 95 S.Ct. 2051, 44 L.Ed.2d 621 (1975). Similarly, [t]he object and purpose of [Virginia blue sky laws is] to suppress an existing and growing evil in this State. The investment market was flooded with stocks of little or no value and promoters and stock salesmen, well versed in trade talk, preyed upon an unwary public by inducing it to purchase this character of stock. Virginia Brewing Co. v. Webber, 167 Va. 67, 71-72, 187 S.E. 447, 449 (1936) (interpreting the Securities Act of 1928, which was replaced by the current Virginia Securities Act in 1956). The Virginia Securities Act, the 1933 Act, and the 1934 Act achieve their ends in similar ways: the disclosure of material information concerning issuers of stock and the regulation of sellers of securities. Pollok v. Commonwealth, 217 Va. 411, 413, 229 S.E.2d 858, 860 (1976). In light of these parallels, we have previously held that the Virginia Securities Act should receive similar construction as the 1933 and 1934 Acts. Id. When engaged in interpretation of a term used in the Virginia Securities Act, it is appropriate to look to the federal courts' interpretation of the same term in the context of the 1933 and 1934 Acts. See Tanner v. State Corp. Comm'n, 266 Va. 170, 172, 580 S.E.2d 850, 852 (2003). We have not previously addressed the use of the word stock as part of the definition of security in Code § 13.1-501. We will therefore look to federal interpretation of the word stock as part of the definition of security in the 1933 and 1934 Acts.