Opinion ID: 672857
Heading Depth: 3
Heading Rank: 3

Heading: The Reasonable Expectations of the Investing Public

Text: 29 Despite finding that the purchasers of these mortgage instruments were unsophisticated, passive investors who had simply placed their money in discretionary accounts with instructions to make conservative investments, the district court concluded that the members of the investing public would reasonably expect that the instruments in this case were not securities. Appellants argue that these findings are inconsistent, and point out that they have alleged that they believed that all of the money in their discretionary accounts was being invested, in accordance with their wishes, rather than being used in commercial loan transactions. The district court apparently believed that investors would not expect these interests to be securities because of the fixed interest rate and the Eagle guarantees. 30 We believe that the district court's analysis of this factor was erroneous. As indicated above, neither the fixed interest rate nor the personal guarantees (assuming they existed) justified characterizing appellants' motivations as anything but investment. Nor do these factors alter the reasonable expectations of investors, pursuing what they believed was a conservative investment strategy through registered professionals in the securities industry, that they were protected by the federal securities laws.