Court Opinion

ID: 2809793
Source: CourtListenerOpinion
Date Created: 2015-06-18 16:04:51.237839+00
Date Added: 2024-06-11T11:30:13.722672
License: Public Domain

Cite as 2015 Ark. 272

                SUPREME COURT OF ARKANSAS
                                       No.   CV-15-18

B. EDMOND WATERS, ARKANSAS                       Opinion Delivered   June 18, 2015
SECURITIES COMMISSIONER
                    APPELLANT                    APPEAL FROM THE PULASKI
                                                 COUNTY CIRCUIT COURT
V.                                               [NO. 60CV-12-383]

                                                 HONORABLE CHRISTOPHER
ISAAC HAL MILLSAP III, GIFFORD                   CHARLES PIAZZA, JUDGE
KEITH JORDON, and CHARLES
DUANCE SOLUM
                         APPELLEES               REVERSED AND REMANDED.

                            KAREN R. BAKER, Associate Justice

       This case involves a civil regulatory action filed by the Arkansas Securities

Commissioner, B. Edmond Waters (Commissioner), in his official capacity, against three

individuals, Isaac Hal Millsap III, Gifford Keith Jordon, and Charles Duance Solum.1 The

Commissioner’s complaint alleged two violations of the Arkansas Securities Act (the Act),

codified at Arkansas Code Annotated sections 23-42-101 through -509. In his complaint, the

Commissioner alleged that the appellees engaged in the sale of unregistered securities, in the

form of notes for real estate loans with a fixed rate of interest, and offering and selling

securities despite not being licensed as a brokers or agents. The circuit court concluded that

the notes at issue were not securities based on the test announced by the Arkansas Court of

1
 The complaint in this case was filed by Waters’s predecessor, A. Heath Absure. Waters was
appointed Commissioner on February 10, 2015, and was substituted as the plaintiff in his
official capacity.
                                    Cite as 2015 Ark. 272

Appeals in Smith v. State, 266 Ark. 861, 587 S.W.2d 50 (Ark. App. 1979). On appeal, the

Commissioner contends that the circuit court erred in concluding that the notes were not

securities, that this court has never explicitly adopted the Smith test as the exclusive test of

whether a transaction is a security, and that the element of a fixed rate of interest does not

automatically preclude the notes at issue from being securities. In addition, the Commissioner

urges this court to adopt the Family Resemblance Test adopted by the United States Supreme

Court in Reves v. Ernst & Young, 494 U.S. 56 (1990). Because this case involves issues of

substantial public interest and a perceived inconsistency between opinions from this court and

the court of appeals regarding the proper test for determining what constitutes a security, our

jurisdiction is proper pursuant to Arkansas Supreme Court Rule 1-2(b)(2) and (4).

       On January 1, 2012, the Commissioner filed a complaint against the appellees in the

Pulaski County Circuit Court. In his complaint, the Commissioner alleged that from 2001

through 2009, appellee Millsap did business with the British American Group (BAG), which

purportedly matched borrowers from the United Kingdom with lenders. According to the

complaint, the borrowers would borrow money for real-estate projects at interest rates of 15%

to 17% per annum. The complaint alleged that Millsap would approach individuals and tell

them about the business and ask them to invest or loan their money as a lender to a borrower

in the United Kingdom through BAG. In doing so, Millsap relied on a page of facts and

information, referred to as the “Highlights” page, regarding the risks and returns on the

investments. The complaint further alleged that investors would write a check to BAG and

fill out some paperwork and several weeks later Millsap would send them a document entitled

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Loan Agreement, which set out a contract between the investor as the lender and the

borrower, a British business entity conducting real-estate development. This note would be

for a term of one year, the Commissioner alleged, and the annual interest rates varied from

14.5% to 17.5%. In addition, the complaint stated that investors could elect to compound

their interest or receive periodic payments and were encouraged to “roll over” their notes to

extend the term past one year. According to the complaint, Millsap was paid a commission

of .5% to 8% of the investment upon the initial investment and received an additional

commission upon rollover of the note. The complaint alleged that the appellees sold a total

of twenty notes with a total value of $1,907,881.41, and received commissions for each of

these sales.

       According to the complaint, Millsap enlisted Jordon and Solum to solicit investors with

BAG and sell the notes. Jordon and Solum also received commissions based on soliciting

investors. In addition, Millsap received a commission of .5% for Jordon’s and Solum’s sales.

The complaint alleged that Jordon sold BAG notes from 2008 through 2010 and that Solum

did the same in 2008 and 2009. The complaint alleged that, although some of the BAG

investors received interest payments, the “vast bulk of the money was never repaid.” Thus,

while the complaint acknowledged that the investors were “guaranteed a specific return on

their money,” it alleged that the investors had no control over the real estate projects and

“expected their profits to come solely from the efforts of the borrower.” Finally, the

complaint alleged that each note was a security, was not registered, and that Millsap, Jordon,

and Solum were not registered to sell securities. The Commissioner requested that the

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appellees be restrained and enjoined from continuing to sell the notes, be ordered to render

an accounting of all monies received and disbursed in connection with the notes, be ordered

to disgorge all monies raised, and be ordered to pay a fine.

       On August 3, 2012, the appellees filed an answer denying that notes were securities.

On April 23, 2014, the Commissioner filed separate motions for summary judgment against

Jordon and Solum. In his motion, the commissioner contended that the proper test for

determining whether an instrument constituted a security is the so-called “family resemblance

test,” which was announced by the United States Supreme Court in Reves. On May 14,

2014, Jordon filed a response and cross-motion for summary judgment. In his motion, Jordon

contended that the proper test was the test announced in Smith. Jordon contended that this

court has adopted that test but has not adopted the family resemblance test. As a result of

these two motions, the following facts were undisputed:

       1. Interested lenders and borrowers would enter into loan agreements structured with
       one-year fixed rates of interest.
       2. Lenders expected to receive interest payments reflective of the interest rates and
       principal amounts agreed to in the loans.
       3. The loans had a fixed rate of interest.
       4. The borrower’s obligation to repay the loan was not based on the financial
       performance of the borrower’s endeavor.
       5. The appellees utilized the highlights page to promote the loans.
       6. According to the highlights page, the more principal invested, the higher the
       interest rate on the loans.

       The circuit court held a hearing on the cross-motions for summary judgment on July

30, 2014. The circuit court entered a written order on September 17, 2014. In that order,

the court granted summary judgment in favor of the appellees and determined that the notes

did not constitute securities. Specifically, the court found that there were no issues of fact and

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but one issue of law, whether certain instruments entitled “loan agreements” are securities

within the meaning of the Act. The court characterized the facts of the transactions at issue

as follows:

               Jordon contends that his role was to match lenders with one borrower in the
       United Kingdom. Because the loans were secured by collateral and had a fixed interest
       rate which was payable in one year regardless of the success of the real estate
       development, and the persons making this loan had no opportunity to participate in
       the earnings of the borrower and had no opportunity to participate in the earnings of
       the borrower [sic], Jordon contends that these transactions were loans and not
       securities.
       ....
               [The Commissioner] on the other hand contends that these transactions were
       investments which were securities both as investment contracts . . . and as notes . . .
       It matters not, according to [the Commissioner] . . . that these instruments promise
       only a fixed rate of return and allow no opportunity to participate in the earnings or
       profit of the borrower in the United Kingdom.
               The Arkansas Supreme Court has not adopted the Reves family resemblance test
       or SEC v. Edwards . . . and the law in Arkansas remains Smith v. State. . . . The
       instruments here in question do not qualify as securities under that test.

       After concluding that the notes at issue did not meet the test for securities announced

in Smith, the circuit court granted summary judgment in favor of Jordon. The circuit court

also granted summary judgment in favor or Millsap and Solum on the basis that their position

was the same as Jordon’s and the Commissioner had the opportunity to respond to Jordon’s

motion. On October 10, 2014, the Commissioner filed a timely notice of appeal from the

circuit court’s ruling.

       To reiterate, on appeal the Commissioner contends that the circuit court erred in

concluding that the notes were not securities, that this court has never explicitly adopted the

Smith test as the exclusive test of whether a transaction is a security, and that the element of

a fixed rate of interest does not automatically preclude the notes at issue from being securities.

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In addition, the Commissioner urges this court to adopt the family resemblance test from

Reves.

         Generally, on appeal from a summary-judgment disposition, the evidence is viewed

in the light most favorable to the party resisting the motion, and any doubts and inferences

are resolved against the moving party. Ark. State Bd. of Election Comm’rs v. Pulaski Cnty.

Election Comm’n, 2014 Ark. 236, 437 S.W.3d 80. However, when the parties agree on the

facts, we simply determine whether the appellee was entitled to judgment as a matter of law.

See id. When parties file cross-motions for summary judgment, as was done in this case, they

essentially agree that there are no material facts remaining, and summary judgment is an

appropriate means of resolving the case. See id. As to issues of law presented, our review is

de novo. Crafton, Tull, Sparks & Assocs., Inc. v. Ruskin Heights, LLC, 2015 Ark. 1, at 5, 453
S.W.3d 667, 671. The point of law at contention in this appeal is simply stated: What is the

proper test for determining whether an instrument constitutes a security under Arkansas law?

         To answer this question, we must turn first to the Act and then to cases interpreting

that Act. At the time the Commissioner filed his complaint, the Act included “any” note

among the list of instruments constituting securities. Ark. Code Ann. § 23-42-102(15)(A)

(Supp. 2011).2 At the time the Act was adopted, Arkansas’s definition of “security” was

2
The statute defined security to mean any:
      (i) Note;
      (ii) Stock;
      (iii) Treasury stock;
      (iv) Bond;
      (v) Debenture;
      (vi) Evidence of indebtedness;

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borrowed from the Securities Act of 1933 and remains essentially the same as the federal

designation.3 Our present law was enacted during the 1979 legislative session. State securities

laws were enacted to stop the sale of stock in fly-by-night concerns, visionary oil wells, distant

gold mines, and other like fraudulent exploitations. Hall v. Geiger-Jones Co., 242 U.S. 539,

550 (1917). Notably, Arkansas’s statutory definition of “security” has included “any note”

       (vii) Certificate of interest or participation in any profit-sharing agreement;
       (viii) Collateral-trust certificate;
       (ix) Preorganization certificate or subscription;
       (x) Transferable share;
       (xi) Investment contract;
       (xii) Variable annuity contract;
       (xiii) Life settlement contract or fractionalized or pooled interest in a life settlement
       contract;
       (xiv) Voting-trust certificate;
       (xv) Certificate of deposit for a security;
       (xvi) Certificate of interest or participation in an oil, gas, or mining title or lease or in
       payments out of production under such a title or lease; or
       (xvii) 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.
Ark. Code Ann. § 23-42-102(15).
3
 Pursuant to the federal statute:
       The term “security” means any note, stock, treasury stock, security future, security-
       based swap, bond, debenture, evidence of indebtedness, certificate of interest or
       participation in any profit-sharing agreement, collateral-trust certificate,
       preorganization certificate or subscription, transferable share, investment contract,
       voting-trust certificate, certificate of deposit for a security, fractional undivided interest
       in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any
       security, certificate of deposit, or group or index of securities (including any interest
       therein or based on the value thereof), or any put, call, straddle, option, or privilege
       entered into on a national securities exchange relating to foreign currency, 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, receipt for,
       guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
15 U.S.C.A. § 77b(a)(1).

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at all times relevant to this litigation.

       Prior to the 1979 session, this court decided Schultz v. Rector-Phillips-Morse, Inc., 261
Ark. 769, 552 S.W.2d 4 (1977), and held that the definition of a security within the meaning

of the Act should not be given a narrow construction, but should be determined in each

instance from a review of all the facts whether an investment scheme or plan constitutes an

investment contract, or a certificate of interest or participation in a profit-sharing agreement,

within the scope of the statute. Id. at 781, 552 S.W.2d at 11. Although we examined

definitions from other jurisdictions, including the test applied in Securities & Exchange

Commission v. Howey Co., 328 U.S. 293 (1946) (defining an unconventional security as an

“investment contract” under the Federal Securities Laws) and Hawaii v. Hawaii Market Center,

Inc., 52 Haw. 642, 485 P.2d 105 (Haw. 1971) (holding that an “investment contract” is

created whenever: (1) An offeree furnishes initial value to an offeror; and (2) a portion of this

initial value is subjected to the risks of the enterprise; and (3) the furnishing of the initial value

is induced by the offeror’s promises or representations which give rise to a reasonable

understanding that a valuable benefit of some kind, over and above the initial value, will

accrue to the offeree as a result of the operation of the enterprise; and (4) the offeree does not

receive the right to exercise practical and actual control over the managerial decisions of the

enterprise), we declined to adopt a mechanical formula. Instead, we agreed with the more

flexible approach endorsed in Minnesota v. Investors Security Corporation, 209 N.W.2d 405

(Minn. 1973). With regard to the Minnesota view, this court stated:

       We agree with the general approach taken by the Minnesota Supreme Court that the
       definition of a security within the meaning of the Arkansas Securities Act should not

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       be given a narrow construction, and that it is better to determine in each instance from
       a review of all of the facts, whether an investment scheme or plan constitutes an
       investment contract, or a certificate of interest or participation in a profit-sharing
       agreement, within the scope of the statute.

Schultz, 261 Ark. at 781, 552 S.W.2d at 10.

       Subsequently, in 1979, the Arkansas Court of Appeals decided Smith v. State, and

adopted a five-element test for identifying securities: (1) the investment of money or money’s

worth; (2) investment in a venture; (3) the expectation of some benefit to the investor as a

result of the investment; (4) contribution towards the risk capital of the venture; and (5) the

absence of direct control over the investment or policy decisions concerning the venture.4
266 Ark. at 865, 587 S.W.2d at 52. The transaction at issue in Smith involved the appellant’s

failed attempt to start a business called the Russellville Radio Telephone Company with the

appellee. The appellant, who represented himself to be part of Memphis Mobile Telephone

Company, Inc. (Memphis Mobile), sold 500 shares of stock to the appellee for a total of

$5,000. The business failed, and the appellee filed suit after being unable to recover the

$5,000 he had given to the appellant. Although the appellant characterized the enterprise as

a “joint venture” between Memphis Mobile and the appellee, the court of appeals disagreed

and concluded, after applying the five-element test, that the transaction met the test for being

4
 The court of appeals derived this test from an article in the Oklahoma Law Review:
       As stated by Professor Long in “An Attempt to Return Investment Contracts to the
       Mainstream of Regulations,” 24 Okla. L. Rev. 135 (May 1971), there are five
       significant common characteristics of traditional securities. These common factors can
       be used to establish a uniform test for the identification of all securities, whether of a
       specific type or of a general nature, intended to be covered by the act in question,
       unless a specific contrary definition is contained therein.
Smith, 266 Ark. at 864–65, 587 S.W.2d at 52.

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considered a security.     The court concluded that the “joint venture” label was not

determinative of whether the transaction constituted a security. Id. at 864, 587 S.W.2d at 52

(“This court recognizes that regardless of labels, the Arkansas Security Act was designed to

protect both investors in common stock and those persons who in substance are investors in

the disguised business venture of another.”) (citing Schultz, 261 Ark. 769, 552 S.W.2d 4).

The court of appeals summarized the definition of a security as follows: a security is an

investment of money or money’s worth in the risk capital of a venture with the expectation

of benefit to the investor where the investor has no direct control over the investment or

policy decisions of the venture. Id. at 865, 587 S.W.2d at 52.

       Since Smith, this court has addressed the question of whether particular instruments

constituted a security. For instance, in Grand Prairie Savings & Loan Association v. Worthen

Bank & Trust Co., 298 Ark. 542, 769 S.W.2d 20 (1989), which involved a commercial loan

transaction, this court discussed the five-element Smith test. We determined that the test used

in Smith is substantially the same as the test used in the federal courts. Id. (citing Union Nat’l

Bank v. Farmers Bank, 786 F.2d 881 (8th Cir. 1986) (finding no error in the trial court’s

determination that the Smith factors, which are used to identify a security under Arkansas law,

were “substantially similar” to the test in Howey, which is used to identify a security under

federal law). Despite this determination, we did not utilize the Smith factors. Instead, this

court relied on its prior statement in Schultz that the definition of what constitutes a security

must necessarily depend on an analysis of all of the factors in any given transaction. Id. at 545,

769 S.W.2d at 22. We determined that the instrument at issue did not constitute a security

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because the evidence in the lower court disclosed that the transaction was between two

sophisticated parties. Id. at 546, 769 S.W.2d at 22.

       Subsequently, in 1991, we did apply the five-factor Smith test to a transaction involving

the sale of stock. Cook v. Wills, 305 Ark. 442, 447, 808 S.W.2d 758, 761 (1991). However,

we acknowledged that, pursuant to Schultz, we analyze all of the factors in any given

transaction. Six years later, this court again acknowledged the existence of the Smith test, but

did not explicitly analyze all five factors. Carder v. Burrow, 327 Ark. 545, 940 S.W.2d 429

(1997) (holding that a transaction involving loan to corporation, which paid a fixed interest

rate of five percent per annum above the federal discount rate calculated at time of loan, did

not constitute a security). We again cited to Schultz to support our conclusion that “the trial

judge was correct in examining all of the factors involved in the execution of this transaction

in determining that the transaction . . . was an ordinary secured commercial loan between two

parties, not the sale of a security as defined in the Arkansas Securities Act.” Carder, 327 Ark.

at 550, 940 S.W.2d at 432.

       Despite these prior cases, Waters urges this court to abandon the Schultz and Smith tests

and adopt the family resemblance test announced in Reves, a case that originated in the United

States District Court for the Western District of Arkansas. The financial transaction involved

in Reves was summarized by the Court as follows:

              The [Farmer’s Cooperative of Arkansas and Oklahoma] is an agricultural
       cooperative that, at the time relevant here, had approximately 23,000 members. In
       order to raise money to support its general business operations, the Co-Op sold
       promissory notes payable on demand by the holder. Although the notes were
       uncollateralized and uninsured, they paid a variable rate of interest that was adjusted
       monthly to keep it higher than the rate paid by local financial institutions. The Co-Op

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       offered the notes to both members and nonmembers, marketing the scheme as an
       “Investment Program.”
494 U.S. at 58–59.

       The Reves Court resolved a circuit split and held that, when determining whether an

instrument denominated a “note” is actually a “security” within the meaning of the Securities

Exchange Act, courts should apply the “family resemblance” test developed by the Second

Circuit. 494 U.S. 56. Under that test, a note is presumed to be a “security,” but that

presumption may be rebutted by showing that the note bears a strong resemblance,

determined by examining four specified factors, to a list of categories of instruments that are

not securities.5 If an instrument is not sufficiently similar to a listed item, courts must decide

whether another category should be added by examining the same four factors. The four

factors involved in the family resemblance test are:

       First, we examine the transaction to assess the motivations that would prompt a
       reasonable seller and buyer to enter into it. If the seller’s purpose is to raise money for
       the general use of a business enterprise or to finance substantial investments and the
       buyer is interested primarily in the profit the note is expected to generate, the
       instrument is likely to be a “security.” If the note is exchanged to facilitate the
       purchase and sale of a minor asset or consumer good, to correct for the seller’s cash-
       flow difficulties, or to advance some other commercial or consumer purpose, on the
       other hand, the note is less sensibly described as a “security.” Second, we examine the

5
 In order to rebut the presumption that a note is a security, there must be a showing that the
note bears a strong resemblance to one of six enumerated categories of instruments:
       (1) a note delivered in consumer financing;
       (2) a note secured by a mortgage on a home;
       (3) a short-term note secured by a lien on a small business or some of its assets;
       (4) a notice evidencing a “character” loan to a bank customer;
       (5) a short term note secured by an assignment of accounts receivable; or
       (6) a note that simply formalizes an open-account debt incurred in the ordinary course
       of business, particularly if, as in the case of the customer of a broker, it is collateralized.

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       “plan of distribution” of the instrument, to determine whether it is an instrument in
       which there is “common trading for speculation or investment.” Third, we examine
       the reasonable expectations of the investing public: The Court will consider
       instruments to be “securities” on the basis of such public expectations, even where an
       economic analysis of the circumstances of the particular transaction might suggest that
       the instruments are not “securities” as used in that transaction. Finally, we examine
       whether some factor such as the existence of another regulatory scheme significantly
       reduces the risk of the instrument, thereby rendering application of the Securities Acts
       unnecessary.

Id. at 66–67 (internal citations omitted). At this time, we decline to adopt the Reves test

because all of these factors are embraced within our flexible, all-inclusive Schultz test.

        Moreover, while we have found the Smith factors to be instructive, this court has

never relied on those factors exclusively. The unifying thread in our cases addressing whether

an instrument constitutes a security is the Schultz test, which requires a review of all of the

facts. Here, the circuit court considered only the Smith factors, concluding that “the law in

Arkansas remains Smith v. State, supra. The instruments in question here do not qualify as

securities under that test.” The circuit court did not mention Schultz and failed to consider

the sophistication of the parties, a factor that is prominent in this court’s prior cases. While

the Smith test remains instructive, we find that the all-inclusive nature of the Schultz test is

better suited to the purposes of the Act. The Act is clearly remedial and is intended to

prevent fraudulent practices and activities from becoming a burden upon unsophisticated

investors and the general public. Grand Prairie, 298 Ark. at 546, 769 S.W.2d at 22.

Therefore, we reverse and remand this case to the circuit court to consider all factors

surrounding the transaction, as required by Schultz.

       Reversed and remanded.

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       HANNAH, C.J., and DANIELSON and HART, JJ., dissent.

       PAUL E. DANIELSON, Justice, dissenting. I would affirm the circuit court’s ruling

that the loan transactions at issue were not securities within the purview of the Arkansas

Securities Act, currently codified at Arkansas Code Annotated §§ 23-42-101 to -509 (Repl.

2012 & Supp. 2013). Even if the circuit court’s order fails to mention any reliance on Schultz

v. Rector-Phillips-Morse, Inc., 261 Ark. 769, 552 S.W.2d 4 (1977), that decision and its all-

factor consideration was well argued before the circuit court, and I believe that under our de

novo review, the circuit court’s ruling can be affirmed as reaching the right result. See Madden

v. Aldrich, 346 Ark. 405, 58 S.W.3d 342 (2001) (recognizing that this court will affirm a trial

court when it has reached the right result, even though it may have announced the wrong

reason). I therefore respectfully dissent.

       From my review of the record, the transactions in the instant case consisted of private

loans by the Appellees’ clients that were purportedly secured and made at a fixed rate of

interest for a one-year period. As in Carder v. Burrow, 327 Ark. 545, 940 S.W.2d 429 (1997),

there was no expectation by those extending the loan to profit from the transactions as if they

were investments; instead, the sole expectation was the receipt of interest on the loaned

amount. But, in addition, even if it could be said that the initial loan was an investment of

sorts, there is no evidence that the loan rate was in any way dependent on the borrower’s

earnings. See Carder, 327 Ark. 545, 940 S.W.2d 429. Moreover, while the borrower of the

funds allegedly engaged in some type of real-estate venture, the success or failure of the

borrower’s venture really had no effect on the transaction at all; like a typical loan, the interest

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was due the Appellees’ clients regardless. Likewise, there was no benefit to be extended as

a result of the investment, no contribution to the risk capital of the venture, nor was control

an issue because the loan was not tied to the venture’s success or failure.

       By its very definition, an investment is “[a]n expenditure to acquire property or assets

to produce revenue; a capital outlay,” which is very different from a loan, defined as “[a]n act

of lending; a grant of something for temporary use” or “[a] thing lent for the borrower’s

temporary use; esp., a sum of money lent at interest.” Black’s Law Dictionary 954, 1077–78

(10th ed. 2014). Indeed, this court has recognized that “the underlying economic substance

of a security is an arrangement where the investor is a mere passive contributor of risk capital

to a venture in which he has no direct or managerial control.” Casali v. Schultz, 292 Ark.
602, 605, 732 S.W.2d 836, 837 (1987). There is no such arrangement in the instant case.

       Here, the Appellees’ clients extended sums of money with the sole expectation of

receiving interest and ultimately having their money repaid. Furthermore, their realization

of interest was in no way tied to the efforts, successes, or failures of the borrower or venture,

but was tied only to the borrower’s ability to pay. In light of these circumstances, I cannot

say that the transactions at issue were securities; they were simply nothing more than loans,

albeit in hindsight, risky ones.

       While the Commissioner urges this court to examine the transactions as notes using

the federal test set forth by the United States Supreme Court in Reves v. Ernst & Young, 494
U.S. 56 (1990), I, like the majority, see no need to do so. This court has consistently

followed Schultz, 261 Ark. 769, 552 S.W.2d 4, and looked at all of the factors in any given

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transaction, including a consideration of the Smith factors when doing so.6 See, e.g., Carder,

327 Ark. 545, 940 S.W.2d 429; Cook v. Wills, 305 Ark. 442, 808 S.W.2d 758 (1991); Grand

Prairie Sav. & Loan Ass’n v. Worthen Bank & Trust Co., 298 Ark. 542, 769 S.W.2d 20 (1989).

That has been the law in Arkansas, and it should remain so.

        For the foregoing reasons, I would affirm the circuit court’s order.

       HANNAH, C.J., and HART, J., join.

       Theodore Holder, Arkansas Securities Department, for appellant.

       Reece Moore Pendergraft LLP, by: Larry McCredy and Timothy C. Hutchinson, for

appellees.

6
 Notably, the Carder opinion made no mention of Reves even though it had been decided
almost seven years before Carder and was discussed in the parties’ briefs on appeal.

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