Document: 455 U.S. 551 102 S.Ct. 1220 71 L.Ed.2d 409 MARINE BANK, Petitionerv.Samuel WEAVER, et ux. No. 80-1562. Argued Jan. 11, 1982. Decided March 8, Syllabus After respondents purchased a $50,000 certificate of deposit, with 6-year maturity, from petitioner federally regulated bank, they pledged it to guarantee $65,000 loan made company that owed $33,000 for prior loans and was also overdrawn on its checking account. In consideration guaranteeing the new loan, company's owners entered into an agreement whereby were receive share profits other compensation. The rather than being used as working capital by petitioner's officers allegedly told would, applied pay overdue obligations petitioner. Subsequently, became bankrupt, disclosed intention claim deposit. Respondents then brought suit in Federal District Court, claiming violated, inter alia, antifraud provisions § 10(b) Securities Exchange Act 1934 (Act) soliciting while knowing, but not disclosing, borrowing financial plight or plans repay itself guaranteed loan. Court granted summary judgment favor, holding if wrong occurred, did occur "in connection purchase sale any security" required liability under 10(b). Appeals reversed, could reasonably be found either deposit between security. Held: Neither nor question is security within meaning Pp. 555-561. (a) While definition "security" quite broad, Congress, enacting securities laws, intend provide broad federal remedy all fraud. 555-556. (b) A functional equivalent withdrawable shares savings association held Tcherepnin v. Knight, 389 332, 88 548, 19 564, similar long-term debt obligation commonly purchaser virtually payment full, whereas holder ordinary assumes risk borrower's insolvency. Cf. Teamsters Daniel, 439 551, 99 790, 58 808. 556-559. (c) type instrument comes mind when term does fall "the concept security." SEC W. J. Howey, Co., 328 293, 66 1100, 90 L.Ed. 1244, C. M. Joiner Leasing Corp., 320 344, 64 120, 88, distinguished. provision giving sufficient make 559-560. 637 F.2d 157, reversed remanded. Daniel L. R. Miller, Erie, Pa., Andrew Conner, respondents. Chief Justice BURGER delivered opinion Court. 1 We certiorari decide whether two instruments, conventional business families, considered laws. 2 * Respondents, Sam Alice Weaver, Marine Bank February 28, 1978. has insured Deposit Insurance Corporation.1 Weavers subsequently 17, 1978, bank Columbus Packing Co. wholesale slaughterhouse retail meat market which at time substantially account bank. 3 bank's Columbus' owners, Raymond Barbara Piccirillo, Weavers. Under terms agreement, 50% net $100 per month long It agreed use barn pasture discretion Piccirillos, had right veto future Columbus. 4 allege them would instead immediately obligations. kept approximately $42,800 satisfy All $3,800 remainder disbursed taxes creditors; refused permit overdraw bankrupt four months later. Although yet resorted Weavers' this litigation commenced, acknowledged inadequate intended 5 These allegations asserted complaint filed Western Pennsylvania support violated 1934, 48 Stat. 891, 15 U.S.C. 78j(b). pleaded pendent claims violations common-law fraud alleged actively solicited Had known precarious condition plans, have favor concluded occurred take place security," declined exercise jurisdiction over state-law claims. 6 Third Circuit reversed. 157 (1980). divided court finder fact conclude Piccirillos security.2 therefore remanded further based Court's dismissal 7 certiorari, 452 904, 101 3029, 69 404 (1981), we reverse. hold neither remand case determine state should now entertained. II 8 19343 broad. adopted restore investors' confidence markets,4 meant include many types instruments our commercial world H.R.Rep.No.85, 73d Cong., 1st Sess., 11 (1933); quoted United Housing Foundation, Inc. Forman, 421 837, 847-848, 95 2051, 2058, 44 621 (1975). statutory excludes only currency notes maturity less nine months. includes stocks bonds, along "countless variable schemes devised those who seek money others promise . ." 299, 1103, 1244 (1946). Thus, coverage laws limited traded exchanges over-the-counter markets, extends uncommon irregular instruments. Superintendent New York Bankers Life & Casualty 6, 10, 92 165, 167, 30 128 (1971); 351, 123, (1943). repeatedly test " 'is what character given commerce offer, plan distribution, economic inducements out prospect.' Benefit Ins. 387 202, 211, 87 1557, 1562, 18 673 (1967), quoting supra, 352-353, S.Ct., 124. 9 preceded, however, statement mentioned are context otherwise requires Moreover, satisfied Great Trust Kotz, 532 1252, 1253 (CA9 1976); Bellah First National Bank, 495 1109, 1114 (CA5 1974). III 10 might Examining definition, n. 3,supra, correctly noted expressly excluded since exceeding months.5 concluded, inTcherepnin 564 (1967). reasoned that, investor's standpoint, no different obligation.6 Unless distinguishing features remand, controlling. there fixed rate interest; instead, purchasers received dividends association's profits. Purchasers voting rights. short, much more like stock 556, 12 view, important difference This issued subject comprehensive set regulations governing banking industry.7 Deposits banks protected reserve, reporting, inspection requirements laws; advertising relating interest paid deposits regulated.8 addition, Corporation. Since formation 1933, nearly depositors failing FDIC even portions their above amount insured. 1980 Annual Report Corporation 18-21 (1981). 13 see, therefore, differences failed give appropriate weight longterm provides seems sweep requires. unnecessary issuers certificates holders abundantly security.9 IV 14 separate language, 3, "certificate participation profit-sharing agreement" "investment contract." stressed gave result efforts Piccirillos. Accordingly, court's fell contract" stated because scheme involves investment common enterprise come solely others." U.S., 301, 1104. Congress cover ordinarily world, Supra, 556. unusual constitute cases involved offers number potential investors, private transaction case. example, 42 persons interests citrus grove during 4-month period. 295, 1101. Leasing, sell oil leases sent 1,000 prospects. 346, 121. "common trading." Id., 123. Howey values most been publicly. 16 Here, contrast, distributed prospectus unique negotiated designed pastures underscores transaction. Similarly, measure control operation characteristic Piccirillos' profits, any, alone one-on-one parties, security.10 V 17 Whatever may consequences these transactions, "securities."11 manipulated so suffer loss borne failure Their against before treat issue entertain Reversed pays 71/2% permits early withdrawal, depositor will earn current passbook withdrawn, except three withdrawal. When up $40,000 FDIC. ceiling $100,000. Mar. 31, 1980, Pub.L. 96-221, 94 147, 308(b)(1), 1724(b) (1976 ed., Supp.IV). pledge sale, Circuits split. Rubin States, 449 424, 698, 633 purposes determining here involved. Section 3(a)(10) Act, forth 78c(a)(10), provides: "(a) chapter, unless requires— "(10) 'security' means note, stock, treasury bond, debenture, oil, gas, mineral royalty lease, collateral-trust certificate, pre-organization subscription, transferable share, contract, voting-trust security, general, 'security'; in, temporary interim for, receipt warrant subscribe purchase, foregoing; shall draft, bill exchange, banker's acceptance issuance months, exclusive days grace, renewal thereof likewise limited." consistently essentially same 2(1) 77b(1). 847, 12, Fitzgibbon, What Security? Redefinition Based Eligibility Participate Financial Markets, Minn.L.Rev. 893, 912-918 term, However, refer such purchased. Instead, refers protective committees course corporate reorganizations. Canadian Imperial Commerce Fingland, 615 465, 468 (CA7 1980). Commission taken position securities. brief amicus curiae case, jointly Corporation, Board Governors Reserve System, Office Comptroller Currency, argues 808 (1979), noncontributory, compulsory pension One reasons Employee Retirement Income Security 1974 (ERISA): "The existence legislation employee severely undercuts arguments extending Acts plans." 569-570, 801-802. ERISA regulates substantive certain disclosures, well. See, e.g., 461(b) Supp.IV) (reserve requirements); §§ 161, 324, 1817 ed. (reporting 481, 483, 1820(b) (inspection CFR 217.6 329.8 (1981) (advertising). reject respondents' argument somehow transformed pledged, though 1260-1262 1976) (Wright, J., concurring) (unsecured face-to-face, return security). follow transacting parties invariably falls outside defined statutes. Each must analyzed evaluated basis content question, served, factual setting whole.

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